Friday, September 25, 2009

Populist but potentially disastrous

Published last August 17 at the op ed section of the Manila Standard Today. 

I have three “guests” in my house, promdi relatives who came to Manila in search of the proverbial green pasture. Two are undergraduates who dropped out of college in Tacloban City—one because he lost interest in pursuing a college degree; the other one because she got pregnant and had to get married. In typical Pinoy fashion, they cast their fortunes to fate and came to Manila to find employment. In short, they did what many Filipinos are wont to do—nakipagsapalaran.

The third is a graduate of a nautical engineering course who is in the wait-list of a maritime company. As most everyone knows, the current minimum waiting time for fresh graduates in the maritime industry before they can board a ship is at least two years—and that’s if they are lucky to have connections. That is because there is a dearth of employment opportunities in the global maritime industry on account of the global recession. There are few cargo ships circumnavigating the globe today.

With a little help from some of my friends, all three have found employment as contractual clerks. Obviously, all three are under-qualified but have been hired as extra hands to help with various odds and ends such as filing documents and processing simple tasks. They are representative of the situations many contractual workers find themselves in. They perform clerical functions that, in reality, can actually be automated or rendered unnecessary through productivity measures.

Luckily, one of the three had been deemed qualified to become a regular employee despite the lack of a college degree and her regularization is now being processed. So yes, many companies do regularize those who are found qualified during their contractual employment.

The prospects for the other two are uncertain. No company will hire a graduate of a nautical engineering course as regular office clerk even if he has shown aptitude for doing simple tasks, because companies do hire employees who can assume higher and greater responsibilities in the future and this often means having the right academic foundation. The other one clearly lacks the kind of analytical skills that can only be derived from formal academic training so he is probably going to end up doing odds and ends unless he decides to go back to school, something that I have been urging him to do. He is pinning his hopes, however, on what the union of the company he is currently connected with as a contractual employee says is already forthcoming—a law that will supposedly do away with contractualization. Instead of enhancing his competitiveness in the labor market, he prefers to wait for manna from heaven.

That manna takes the form of a bill pending in Congress, Republic Act 6482, which on the surface seeks to provide security of tenure by putting very stringent rules against contractualization of labor. This particular bill has already passed the labor committee at the House of Representatives and is now about to be scheduled for plenary. Given that the law is populist and elections are forthcoming, the probability that the bill will be passed is almost a foregone conclusion. There is a very real possibility that the bill will be passed without the benefit of a plenary debate, unless of course our representatives come to their senses and see the disastrous consequences of such a law.

The issue of labor contracting has been politicized and romanticized to great extremes such as what was depicted in that indie movie entitled Endo. Endo is colloquial term for end of contract which in this country happens at the end of a six-month period courtesy of a law that says companies are obligated to absorb employees who render more than six months of work. The consequence of this law is that companies end up hiring new contractual employees every six months and contractual employees go through a succession of six-month jobs in various companies.

This phenomenon is happening because the jobs that are contracted are really non-essential to company operations and can be done away with, or are seasonal in nature. The other reason is that the employees may have shown the aptitude for the simple tasks that they are contracted to do for the particular period but cannot be hired as regular employees because they do not have the qualifications to move up the organization in the near future. Hiring them as regular employees would mean that companies would be stuck with employees who are in dead-end jobs with no prospects of career advancement.

The obvious solution to this problem is not forcing companies to stop hiring contractual as this would mean reduction in jobs. Nor is the solution forcing companies to absorb contractual employees as regular employees because this would mean saddling business with a lot of employees who are in dead-end positions. To avoid such a situation, business would naturally protect itself by hiring only those who are qualified and in the absence of such, would resort to putting in place productivity measures such as automation. Passing a law that penalizes business for temporarily compromising on hiring standards and for providing temporary employment can only result in job contraction. It’s a loss-loss solution.

Of course there are business organizations that abuse the law allowing contractualization. I have heard of certain companies in the retail or in the food service industry who purposely hire contractual employees even for jobs that are essential to the company’s business or who purposely do not regularize employees even after the six months simply because they don’t want to pay benefits that come with regularization. Reliable sources in Congress say this was exactly the impetus that pushed the crafting of RA 6482. Unfortunately, such myopia will result in disastrous consequences.

The problem is not the absence of safeguards against such abusive practices because there are more than enough laws that can be used to penalize these employers. The problem is that employees are either unaware of their rights—a study conducted by the University of the Philippines School of Labor Relations says that 70 percent of employees are unaware of their rights precisely because they did not go through academic training where they are taught their rights—and because the implementation of laws in this country is not enforced strictly by regulators. Anyone can surmise why—many employers are politically-connected.

Let me cite a specific example why RA 6482 is potentially disastrous. The proposed bill limits the number of contractual employees a company can hire to no more than 20 percent of its total manpower complement. This provision will definitely hurt many industries, particularly the banking sector. If a bank has 5,000 employees, this would mean that the total number of contractual employees it can hire will be 1,000 employees. If a bank has 300 branches, it would need at least three security guards for each branch which would mean hiring at least 900 security guards. We’re not including yet guards for its head office and for acquired assets. And then the bank would have to hire at least one utility person and probably a messenger for each branch, bringing in additional 600 contractual employees. There would be a need for armored car drivers, etc. This would mean—for security and janitorial services alone—more than 1,000 contractual or agency employees, clearly over and above the 20 percent set as cap by the proposed law. Can you imagine the security risks that banks would face if it were to reduce its security complement to comply with the law?

There are win-win solutions to the problem of contractualization in this country. Instead of pushing for populist measures that bring short-term benefits but are disastrous in the long-term, our representatives can push for strategic solutions such as strengthening the social security system in the country, narrowing the academe-industry mismatch, and putting in place various measures to strengthen the competitiveness of industries and the labor force. Of course these would require large doses of strategic thinking, something our legislators seem short of.

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