"Deregulating the minimum wage will end contractualization."
"Deregulating the minimum wage will end contractualization."
Ending the practice of labor-only contracting can never be resolved by legislation. For Congress to resort to this is to expose its lack of understanding, it being essentially an economic than one of political problem. Even the Marxist socialist economies that guaranteed employment as their “come on” to attract followers have given up this tenet because labor, like any commodity, is subject to the immutable economic law of supply and demand.
No matter how we abhor capitalism, it will remain with us because it is embedded in the system. Socialism may have destroyed the greatest contradiction between the capitalists and the workers but it just created a new dimension called “state capitalism” where the workers remained in their status as producers of commodities and the state paying their wage with benefits under the concept of “from womb to tomb.”
Socialist countries that stubbornly persisted to this capitalist tenet deteriorated due to economic stagnation. Russia and the socialist bloc of then Eastern Europe and the brief period of China’s communalism resulted instead in dismal economic failure.
In the reforms that ensued, the first casualty was to abandon the guaranty of employment. Many reacted, saying it shackled the workers back from their status of liberated proletariat. Rightly interpreted, the workers from then on were paid according to the amount they produce. Wage remains guaranteed but measured by some kind of standards, what they can produce and according to market demand. This made many erstwhile socialist states prosperous and progressive. Russia, China and even India that once flirted with the system of regimented socialism revised and resurrected the soul of capitalism.
As a formula to ending the dehumanizing practice of contractualization, we have to take the bitter pill of deregulating the minimum wage. As said, regulated wage epitomized in the minimum wage system is anachronistic to capitalism, or to put it mildly, to free enterprise. It can operate most efficiently under an open and free market economy.
To revitalize that, socialist states have to scrap that policy of guaranteeing employment. This is different from guaranteeing wage. Putting a minimum wage is the greatest disincentive to business, and to the workers themselves. It failed to work much that it is embedded in our system of having a free market economic and a system of deregulated currency.
As we stick to this prosaic economic formula, we unduly punish our workers. The introduction of a new minimum wage has never truly satisfied our workers. Every time there is an increase in wage, it is followed by inflation or increase in the cost of living. It weakens instead the purchasing power of the workers and also the cost of production for the business community. This is almost automatic because our currency being wholly dependent on other currencies have to adjust its value. This is most apparent to import-dependent industries, and is crucial every time there is an adjustment in the minimum wage law.
As this column consistently suggested, the solution to the problem is to apply the win-win formula of deregulating the minimum wage except for the so-called non-wage benefits such as retirement benefits, social security, health and medical care, Pag-Ibig or housing loan, and other incentives given by the Labor Code such as the 13th month pay, overtime and holiday pay, night-shift differential pay, maternity leave with pay, etc. These benefits can never be reduced because we can never push back the number of years workers served in the company. This is invisible to their age and years of service to entitle them to a retirement benefit.
Deregulating the minimum wage is the greatest disincentive to contractualization. Contractualization has for its purpose the cutting off of employees’ benefits. Employer-beneficiary avail of placement agencies to avoid liability. They in turn point to the labor-only contractors as liable. Employer-beneficiary knows that benefit is added by their length of service without the workers considering that they were terminated due to retrenchment.
Instead of retrenching regular employees, deregulating wage to lower the cost of production will economically bypass labor-only contractors with a quid-pro-quo of making them permanent. Deregulating wage will defeat the profitable purpose of resorting to contractualization.
The hiring of contractual workers is the reason why trade unionism has almost been wiped out. Labor-only contractors replaced the role of labor unions. They are doing the job of pegging the wage of their labor-supplied workers, in seeing to it that they diligently observe the rules and regulations of a company they do not own, and determine who should be rehired. Labor-only contractors were far more destructive during labor unrest. The death of labor unions deprived the workers of their right to collectively bargain for better wages to improve their welfare and working condition.
More than ever, deregulating wage will allow employers to increase their work force without being hampered by increases in wage consequent to making them permanent. Remember, regular workers monitor every now and then the profit of the company where they are employed but are uncannily silent if the company suffers losses.
There is stability of employment, because instead of resorting to retrenchment to prevent company losses, employers are given the right to reduce the wage to save employment. Termination from service, being a form of death penalty to a worker, should be applied as a last resort.
Employers requiring skills in production value these workers, especially those whom they invested much through training. This explains why some skilled workers receive higher wages, and they do it to keep their loyalty. Besides, deregulated wage does not always connote reduction in wage. It can also increase as incentive to efficient and productive workers.
Finally, deregulating wage will decrease the unusually high number of underemployed which today stands at 16.4 percent as of 2018. This means they constitute the number of people who are working less than eight hours and are earning below the minimum wage. Many are forced to engage in vending or in per-piece job for either employer could not afford to hire them on regular basis and pay the right amount of salary for their day’s work. This boils down to avoiding the high cost of paying the minimum wage.
Many companies just offer their goods on consignment basis to avoid paying the minimum wage and the liabilities that go in hiring employees. Deregulating wage will reduce underemployment and force them to pay the corresponding non-wage benefits like retirement benefits.
As this column has emphasized, a family that manages to have all the members of the family of working age employed as a result of deregulated wage is economically in a much better position than in one where only a member of the family stands as breadwinner because he alone is employed under the regulated wage policy. Even if that person is earning relatively above the daily minimum wage, that amount could easily be surpassed if all are employed even if some are paid slightly below the minimum wage in the event wage is deregulated. There is less friction in the family if all are working because it is in the absence of income that often generates family problem.
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