1

International Labor Standards (ILS) & the Philippine Industrial Relations System

Prof. Jorge V. SibalUP Diliman< jvsibal@up.edu.ph >

2

Framework of Dr. Sicat’spaper

Globalization

International Labor Standards-ILS (ILO, UNDP, WTO, WHO, etc.)

Pro-Employed Labor Policies based on ILS

Powerful Labor Bureaucracy (TUs and Gov’t.)

Distorted Labor Skills Formation

Capital Intensive Industries

Rent Seeking Economic Activities (mostly services)

High Unemployment and Underemploy-ment

Large Informal Sector

Low Productivity

“Reforming the Philippine Labor Market”

3

I agree with Dr. Sicat on the following:

1. The distorted skills formation in the country left the greater bulk of the labor force lacking in needed and relevant skills.2. The existence of a powerful labor bureaucracy in the trade union movement and in the government agencies concerned with industrial relations contributed to legalism and adversarial relations between labor and management in the country.

4

I agree with Dr. Sicat on the following:

3. The high employment and underemployment contributed to the big informal sector in the economy. 4. The productivity of Philippine industries is low compared to developed and some developing Asian countries.

5

On Philippine Labor Policies

The Philippine labor policies based on international labor standards (ILS) may have contributed to the capital intensiveness of our industries (jobless growth) and the increase in rent-seeking activities particularly in the services sector. I view this effect as only in the short run and may have a reverse effect in the long run. The contents of this paper will therefore focus on this aspect.

6

Is this the trickle down policy of the 70s?

Liberalizing labor standards to encourage labor intensive enterprises to attract investments and promote employment in the country may be based on the World Bank’s traditional trickle down philosophy which was already discarded in the 1970s.

7

Possible outcomes low wage policy

Developing countries may compete intensely with one another and use low wages as their comparative advantage. This may lead to a worldwide downward wage spiral and further widen the social inequity between the developed and developing countries and the income inequity among rich and poor classes in developing countries.

8

Possible outcomes of low wage policy

Developed countries on the other hand may use ILS as a protectionist tool to preserve jobs of their workers. Both consequences were pointed out in the ministerial meeting of the WTO in Singapore in 1995 as justification for the promotion of ILS based on ILO standards.

9

Justification of ILSThe widening social inequity between the northern and southern countries and among rich and poor classes in developing countries as a consequence of the WTO’strade liberalizationAs a result, the “World Bank promoted ‘Growth with Social Justice’” aligned with Unicef’s “Development with a Human Face”, WHO’s “Health for All”, and UNDP’s emphasis on human development (Tapiola 2002).

10

Why the country adopted the ILSThe social justice provisions of our 1987 Constitution.1998 “ILO Declaration on Fundamental Principles and Rights at Work” which was the basis of the International Labor Standards (ILS).

11

Possible negative effects of the ILS

The high ILS is “pro-employed” and not in favor of the unemployed and the underemployed which comprise the bigger bulk of the labor force

12

Possible effects of ILS

ILS may lead to pro-employed labor policies because if their employers are efficient and competitive, they can afford them anyway. It may encourage capital or machine intensive production processes since the cost of machine will be justified by the high cost of labor.

13

Possible effects of ILSILS may also cause the closure of inefficient and uncompetitive firms that cannot adjust to the new environment. But those firms that have adjusted to the ILS and the new liberalized environment will become more efficient and competitive. They will eventually expand and absorb the market share of those firms that have closed down.

14

Factors for Competitiveness

It is true that many of our labor intensive industries are not prepared for liberalization and globalization (ECOP 2004, FTA 2003).Cost of labor is not the only reason for their lack of competitiveness. There are other more important economic and non-economic factors that contribute to their low productivity.

15

Factors for Competitiveness

1. Low level of knowledge and skills of both employer/management and labor, and the lack of government support in skills training;2. poor infrastructure like roads, bridges, ports (land, sea and air), telecommunications, irrigation, power, etc.

16

Factors for Competitiveness3. high cost of direct inputs of production like electricity, water, transportation, communications, interest of capital, labor, etc.; 4. high bureaucratic cost of doing business due to government inefficiency and rampant graft and corruption;5. inadequate government protection of local industries like low tariffs and dumping and smuggling of imported goods

17

Factors for Competitiveness6. low level of patronage of the local consumers (due to colonial mentality), the government (due to conditions imposed on foreign-funded projects), and the big enterprises (like the complementation systems of transnational companies whereby they use imported inputs from their affiliates); and7. other non-economic factors like political instability, peace and order, security maintenance, etc.

18

The Actors of the IR system

The employers of the country especially the members of the Employers Confederation of the Philippines (ECOP), the Philippine Chamber of Commerce and Industries (PCCI) and the Fair Trade Alliance (FTA) view ILS not a disadvantage but a competitive advantage.

19

View of the Employers/Management

If more local enterprises were able to adapt to the ILS, there will be more opportunities for them to expand both in the domestic and international markets.

20

View from Academe

ILS may also encourage rent seeking activities especially in the services sector. Inefficient local enterprises that cannot adapt the ILS may close down as a result of cheaper competitive imports. They may shift their business to just marketing, instead of producing the products.

21

View from Academe

But in the long run, if the Filipino businessperson were entrepreneurial, s/he will learn new technologies from the marketing arrangement either as agent, partner, franchisee or co-owner and will become more productive. S/He will eventually go back to manufacturing if s/he can find some comparative advantage in it.

22

Unity of IR ActorsILS have in fact caused the unity of the major actors of the Philippine IR system- the employers/management, labor (trade unions, NGOs and peoples’ organizations) and the government, as well as international agencies like the ILO, UN, WHO and WTO. Likewise, because of ILS, partnership and cooperation among big enterprises and the micro, small and medium enterprises including those in the informal sector have been formed.

23

ILS & the IR Actors

The major actors of the Philippine IR system do not believe that the ILS is one of the causes of economic stagnation, high unemployment and high underemployment.Instead, the major Philippine IR actors believe that ILS and decent work will be the basis of their unity and common advocacy.

24

ILS & the IR Actors

Wider compliance with ILS and decent work will lead to higher industry productivity and competitiveness, job preservation and job creation.ILS may help solve the problems of the Philippine economy- low production and low incomes, and inequitable distribution of incomes among classes and among regions.

25

Safety nets from the ILS

Since the country’s economy is very segmented with a large informal sector (IS) that provides jobs to 50 to 90 percent of the labor force (Tolentino, Sibal & Macaranas2001), various laws have been enacted exempting some IS enterprises from complying with selected labor standards and promoting entrepreneurship and job creation.

26

Programs spearheaded by the employers/government

Global Compact Initiative Big Brother-Small Brother ProgramSponsors- Philippine Chamber of Commerce & Industry (PCCI), Employers Confederation of the Philippines (ECOP), Philippine Business for Social Progress (PBSP), United Nations Development Programme (UNDP) and League of Cities of the Philippines

27

Programs spearheaded by employers, labor & NGOsFair Trade Alliance (FTA) zeroes in on anti-smuggling campaign, entrepreneurship promotion, tariff protection and other safety net provisions to selective industries. The objectives are the help create and preserve jobs. FTA also supports movements that promote the patronage of products and services made in the Philippines side by side with industry productivity and competitiveness.

28

Closing Statement

Labor has suffered the most out of the high unemployment and underemployment. There were many shortcomings in our industrial relations policies. Advocating, enacting and implementing laws based on international labor standards (ILS) is not one of them.

29

Thank you.