As of last weekend, organized labor was reportedly awaiting some kind of Labor Day gift from the President.
No one was talking about what it might be, but Big Labor was not shy about what they wanted in their early Christmas stocking: (i) even more radical action against contractualization, and (ii) some humongous increase in the minimum wage calculated to break the back of evil capitalist employers.
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It may be recalled that the beleaguered Labor Secretary Bello recently prohibited all forms of labor-only contractualization. This is the egregious practice of “endo” that allows employers to avoid paying legally mandated benefits (which can run as high as 30 percent of wages) by never regularizing their employees and keeping them only as contractors who are periodically fired and rehired.
But no, this reform wasn’t good enough for our Big Labor friends, especially the Reds among them. They wanted an end to ALL forms of contractualization, including those with legitimate economic reasons, such as seasonal or project-based employment.
In fact, they came right out and said that what they wanted was nothing less than for workers not to have to compete for work. Employers should not be able to obligate workers to compete with each other, based say on skills, experience, let alone wages.
In other words, command economy and not open markets. Does this make you see Red?
In vain did Secretary Bello, a former justice secretary who presumably knows the law, protest that he had already done all he could under the law. Big Red Labor went even farther and called outright for his dismissal from his post.
What makes this all the more suspicious is that Bello also doubles up as head of the peace panel talking with the NDF in Europe. The secretary famously has one of the most amiable personalities around. Unfortunately, friendliness often gets abused for ulterior agendas.
With the peace talks heading into crucial discussions about socioeconomic reforms, is the Left now using the contractualization issue to put pressure on Bello when he wears his peacemaker’s hat?
And how would you describe a group that abuses one of the President’s men, on one hand, while expecting an early Christmas gift from the Palace, on the other? The vernacular has a pithy phrase for it: “malalakas ang apog.”
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The other demand of Big Labor is a familiar slogan: higher minimum wages. Every Labor Day it comes up, again and again, like a broken record.
I’ve always wondered where our leftist friends learn their economics, or even just plain common sense. Your wages go up, the prices of goods you produce also go up, so people end up buying the same amount in real terms. You print money to cover those higher wages, the prices of EVERYTHING go up.
And who ends up with the shortest stick? The poor, of course, for whom inflation and unemployment are unfailingly their biggest concerns.
In fact, there’s growing evidence that a high minimum wage actually discourages employment. The reasoning is very simple: If my small company can only afford to pay, say, P100 an hour in wages, I can hire five people at P20 an hour. But if the minimum wage is set at P25, I can only hire four, and the fifth guy, the least desirable one, goes home unemployed.
In our country, where micro small and medium enterprises account for 99 percent of all companies, that is a lot of people being sent home jobless. No wonder unemployment is so stubborn.
But that’s not all. With high minimum wages, we of course can’t compete with lower- wage countries for job-creating investments from abroad. Again, another reason for growing unemployment.
And here’s the kicker: Despite our high minimum wages, our labor productivity is low. Put another way: In a cross-country comparison, the ratio of minimum wage to value-added per worker in Metro Manila was the second highest in the world, behind only Guatemala. Why would a foreign investor set up shop here when most of the value created by his workers ends up being retained by them as minimum wage?
So Big Labor is barking up the wrong tree, IF what they really want is to put everyone to work. The challenge on the one hand is to improve labor productivity, and on the other hand, to allow poor people to buy more with their limited wages. Improving agricultural productivity where we can, and importing where we can’t, is one way to bring down their food bills.
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Here’s a list of Labor Day gifts that would thus make more sense:
Exempt MSMEs from the minimum wage so they can grow and become bigger employers. But find ways to assist them in extending mandated benefits like SSS and Philhealth coverage.
Amend minimum wage laws to allow workers to waive their minimum wage if they want. Alternatively, should the country ever go Federal, the various new states should be allowed to set their own wage policies. Then we’ll see which policies actually work.
Restrict minimum wage increases to no more than the inflation rate, and ensure that they don’t discriminate against the low-skilled (the “fifth guy” in my example above).
Subsidize the provision of worker training, which is a social benefit that all taxpayers should cover.
Liberalized foreign investment will force the large local firms to compete for workers, while building more infrastructure will improve workers’ productivity.
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