One of my readers e-mailed to me to say something about our low labor productivity and high wage rate mentioned by ADB Senior Economist Norio Usui in his talk in Cebu last Friday. I discussed Usui’s observations here last Wednesday.
The reader said that low productivity is caused by the contract work system presently practiced in the Philippines. He asks: why would a contract worker do his best when he knows he would be thrown out of work again after six months? I fully agree because without job security one is really prone to think of many things first when at work other than his work. It goes without saying that workers under the contract system are also paid the lowest wage possible or the minimum wage, which is not enough to provide sufficient food, decent clothing and shelter for a worker and his family, who along with the rest of the poor in the country happens to have 6 to 10 members.
The reader also mentioned that in many firms, especially in ubiquitous fast foods chains and related service oriented establishments, he could not see (or rarely see) older workers, that is people in their 40s, 50s or 60s. That is true. Why discriminate against the older ones? Or why are the older ones living, if they have not been discriminated? If one really thinks about it, this also speaks volume about the nature of work, pay plan or kind of management that we have today in the service sector where more than 50 percent of workers are engaged.
On the country’s high wage rate driving investors away, the reader said this is not true. I agree with his observation that the cause is graft and corruption, which he pointed out starts right upon one’s arrival at the airport in Manila.
The problem is not the Filipino workforce, said the reader. It lies in the fact that the Philippines can’t seem to have a good work model. Contract work, while good for business owners, is not necessarily good for workers.
Pressing on the issue, I ask the people at the Department of Labor: Do you know how many contract workers there are in the country and how many firms practicing this scheme? Do you know the effect of this type of work arrangement on labor productivity and workers’ welfare? I ask this because it is very painful to see workers not getting enough compensation for their work because contract service agents take a cut from what they could have received if hired directly by their employers.
My other question is this: Do you bother to see what is going on in other countries and how they treat their workers? Is contract work also widely practiced in other countries such as our more progressive neighbors in Asia? Is the same practice also true in the developed world in the west?
Workers in the west suffered a lot during the early years of the industrial revolution in England. I know, however, that it happened because the work structure was new then and no socially acceptable work standard was available at that time. But once proper work regulations came and the rules were made clear to everyone, life among industrial workers in England and other countries that copied its capitalistic industrial model vastly improved.
It paid, of course, to also have communism flourishing fast and competing with capitalism in the initial period when it was finally introduced in Russia and its satellite Eastern European countries in the last century because that forced the capitalists to continue improving the life of their workers or they would also turn communist and confiscate their properties. Communism is already gone in many former communist countries but is still alive in the Philippines in some degree. Do we know why? I suspect, that part of the reason is the way workers are treated here.
Now many things are happening in the work place, like the contract work model. These, I am sure, are allowed to happen or intentionally done to maximize profits of the capitalist. But we should not forget that what is good for the capitalist is not necessarily good for society as a whole, especially for workers that capitalists must employ to achieve their profit objective. I grant that labor is like a commodity that is sold in the market, where the final price is determined by the forces of supply and demand. But unlike other things bought and sold in the marketplace, labor could get hungry and feel bad when not properly clothed and sheltered or not allowed at least some freedom to enjoy a few good things in life.
If a decent wage and job security are not given, a laborer is frustrated and becomes less productive. With less productive labor, how could the capitalist maximize profit? Truly, the profit of the capitalist also depends on the welfare of labor. Profit could not increase forever without wages catching up. If this does not happen, something else will in the end, and the end may not be profitable to all.
More than the relations between capitalists and laborers, there are, of course, many other factors in the growth of a nation’s wealth and how it is shared between capitalists and laborers. As can be seen in the economic history of our more progressive neighbors, much of their wealth and the way they are distributed was due also to the wise intervention of their government. Sadly, in the last six decades where we we entrusted to be governed by our own race, the kind of governance we got did not help our people much.
Do we deserve this?
If not, please join next Monday’s rally against a corrupt government!