Monday, January 08, 2007

An unprincipled bill

This is my column today, January 8, 2007, at the op-ed section of the Manila Standard Today.

I wrote about this madness six months ago when the House of Representatives stunned the country by passing on second reading a bill mandating a P125 across-the-board wage increase.

Immediately after that foolish move of the House, the country’s foremost economists, various employer groups, and even the government sounded the alarm: A legislated wage increase, particularly one that mandated an unreasonably high amount, was counterproductive, disastrous, discriminatory, etc.

Various reasons were cited: most small and medium enterprises (which comprise 99 percent of employers in this country) would be unable to pay the mandated wages and would either go underground, forced to reduce or lay off workers, or totally close shop.

The statistics were trundled out about how a significant number of these enterprises were already unable to pay the then current minimum wages. How much more a P125 increase?
Many, including this writer, argued for more effective mechanisms to determine and grant wage increases such as empowering the various regional wage boards, providing for more state-sponsored social security programs, and putting in place equity-sensitive salary structures that link wages to productivity, industry performance, company productivity and worker capability.

Perhaps in an effort to quell the increasing agitation, some regional wage boards granted wage increases a few weeks after. Thus, in Metro Manila, minimum daily wages were raised by P25 effective July 11 last year. All’s well that ends well? Not!

The Senate has just resurrected the issue from the grave. It has started deliberations on its counterpart bill last week. Senate Bill 2030, authored by Senator Jinggoy Estrada, is proposing a P100 nationwide across-the-board wage increase. The senator declared that the proposed wage increase is "lower and more reasonable" compared to what the House mandated last year. What he and his cohorts conveniently forget is that the reduction in the amount in the proposed Senate bill simply took into account the P25 wage increase granted between the time the House passed its bill and the present. So in the final analysis, it is the same banana as the House bill.

So we’re all back to square one.

I have not made up my mind on the issue of shifting to a parliamentary system of government, but what is happening today offers tempting arguments to support it. It is as if the whole debate that happened six months ago over the same issue did not take place at all! It is as if our senators were in a parallel universe six months ago when the same arguments, the same statistics, the same dire warnings were made.

So, once again, with more feeling: Legislating wage increases, especially one that prescribes a nationwide uniform wage increase, is a foolish idea.

It runs counter to the basic tenets of a free market economy where industry competitiveness, company performance, and worker competence are supposed to be the main determinants of wage increases. It is counterproductive because a nationwide one-size-fits-all shotgun approach to increasing workers’ wages grossly penalizes small and medium enterprises in less competitive regions.

Paradoxically, it gives license to highly profitable companies particularly those in more competitive regions to limit wages to what is prescribed by law. Why give more when the law already specifies how much should be given? Why bother with the headaches of determining equitable salary structures when Congress has made it easy and convenient?

In effect, Congress is taking away from regional wage boards, employers, and even collective bargaining units the right and the responsibility to determine wages appropriate to situations that are unique and particular to specific regions, industries, and companies.

To be fair, it must be acknowledged that there are companies that are highly profitable and are therefore in a better position to grant wage increases, perhaps even more than what the Senate is prescribing.

There are also capitalists who are amassing huge profits from their various enterprises, with personal assets running into the billions of pesos. Some of them ended up in the recent Forbes list of the country’s richest. But lest we forget, these people comprise a miniscule percentage of the population. So yes, we should make sure that those who are able to pay their workers more should be compelled to do so. Congress is welcome to pass laws that mandates compulsory profit sharing if it wants and let’s see how many among them would balk at the prospect of earning the ire of their peers who own very profitable enterprises.

What is infuriating is that Estrada has publicly acknowledged that the measure is flawed and self-defeating. The prevailing belief is that the House passed the bill last June simply to appease workers and did a Pontius Pilate, i.e., passed on the dirty job of killing the measure to the Senate. The senator is on record as saying that he would prefer to have the bill passed in the Senate to avoid blame and would rather that the President be the bad person who will do the unpopular task of finally doing what is right. I guess it really is unreasonable for us to expect some semblance of principled stand from our legislators. One simply cannot squeeze blood from turnips.

As a human resource management practitioner, I do empathize with the situation of the labor sector. I really do believe that it is time for all of us to recognize the primacy of putting people at the center of all our economic efforts. After all, people are our only remaining source of national competitiveness. It is time for us to seriously rethink the traditional business paradigm that puts financial resources, technology, or equipment as the main drivers of economic growth. It is people that deliver results. Filipino workers, and in this context, the wages that they receive, should not be the end-result or mere by-product of the business chain, but the impetus or driving force of the whole equation. So yes, giving decent wages and benefits should be a top priority.

But legislating a nationwide across-the-board one-size-fits-all wage increase is just way too simplistic a solution. At the very least, the move smacks of the absence of intelligent analysis. It is as if the last 50 years wherein a wealth of scientific tools in salary determination have been invented and where human resources management has evolved into a science, have not happened at all. It begs the question, where the heck is the science in all this?

This is indicative of how common sense is truly uncommon today, particularly in Congress.
Senators, there are many other more proactive and effective options that are available to us to arrive at a win-win solution to the problem of uplifting the plight of our workers. Rather than taking the simplistic and populist but unprincipled way out by legislating that P100 wage increase, you can actually make a major difference by thinking out of the box and exploring other more effective and strategically viable options.

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