Forum bats for reforms in labor, industrial policy to achieve inclusive growth

There’s a “glimmer of hope” for inclusive growth with the government taking steps particularly in the area of labor and industrial policy as well as human capital development.
PIDS President Gilberto Llanto made this assessment Tuesday (September 23, 2014) as he wrapped up the 12th Development Policy Research Month (DPRM) Seminar that tackled labor policy reforms, the revival of the manufacturing industry, and issues in the educational sector. The seminar was the highlight of the nationwide DPRM observance, spearheaded by PIDS in September every year.
Llanto cited the Industry Development Program being spearheaded by the Department of Trade and Industry (DTI), under which sectoral roadmaps were consolidated into a Manufacturing Industry Roadmap that seeks to hike manufacturing’s contribution to both value added and employment. “Our neighbors have relied on labor-intensive manufacture to grow their economy and have taken advantage of regional production networks. Their economy grew and their people have gotten out of the poverty trap and have enjoyed higher standard of living,” Llanto said.
Resource persons at the DPRM seminar held at NEDA sa Makati Building, titled “Forum on Addressing the Jobs Challenge toward Inclusive Growth”, included PIDS Senior Research Fellows Aniceto Orbeta and Rosario Manasan, PIDS Visiting Research Fellow Vicente Paqueo, Benjamin Dalumpines of the Institute for Labor Studies (ILS), Executive Director Ma. Corazon Dichosa of the DTI Investment Policy and Planning Service, and Executive Director Marissa Legaspi of the Technical Education and Skills Development Authority (TESDA).
Dichosa said some 50 separate roadmaps outlining measures to enhance competitiveness would be ready by next year, including the 30 earlier submitted to the DTI. “The government is pursuing an industrial policy that promotes the resurgence of an international competitive manufacturing sector,” she said. The long-term vision is to become hubs in regional and global production networks for auto, electronics, machinery, garments, food, and others.
Llanto said the consolidated roadmap, crafted by PIDS, should spur the development of small and medium enterprises (SMEs) that would help address poverty and inequality. Development of SMEs is a pillar of the envisioned ASEAN Economic Community or AEC, Llanto noted.
TESDA’s Legaspi presented the Philippine Qualifications Framework, which will facilitate mobility of labor within the region through the ASEAN mutual recognition arrangements. The framework, which aims to adopt national standards and levels of outcomes of education, is an important step toward addressing the problem of job-skills mismatch, Legaspi said.
PIDS Senior Research Fellow Rosario Manasan, for her part, called for a more efficient allocation of resources in the educational sector, pointing out that many state universities and colleges (SUCs) recorded zero board examination passing rates during the years 2005-2011, and the list of SUCs with passing rates below the national average is even longer. Fifty to 90 percent of programs offered are outside the mandates of SUCs, Manasan noted. “Faculty development is key to improving quality,” she said.
Labor policy reforms
In his remarks, NEDA Deputy Director-General Emmanuel Esguerra noted that while Philippine growth has been consistently high in the past years, labor market inefficiency has been pulling down the country’s competitiveness. The challenge, he said, was how to employ as many jobseekers as possible for every abled-bodied individual to have work and enjoy quality life, “which is what inclusive growth is all about”.
“Moderation” in minimum wage increases and co-financed training on the job, among other labor policy reforms, can help ease the glut in the labor market that is hindering job creation, according to the PIDS research team on labor policy reforms.
Assessing the impact of the minimum wage is essentially an empirical issue, said Paqueo, as he addressed critics of his team’s Jobs Expansion and Development Initiative (JEDI) study. “There’s a tension between protecting the rights to minimum wage of workers and those outside the formal sector trying to get better earnings,” he said. “Workers outside the formal sector might be better off earning below minimum wage in the formal sector than what they are earning now.”
Minimum wage compliance is at 87 percent, according to the Department of Labor and Employment (DOLE). The wage-setting scheme is a two-tiered system, according to the National Wages and Productivity Commission. This means that the minimum wage aims to meet the needs of families but not to exceed the employers’ capacity to pay.
Orbeta and Paqueo said financing socially determined wages should be looked at, as current labor regulations are asking firms to bear all the costs. The gap between the market wage and what is considered decent wage should be financed by general taxes, as firms are unable to afford high wages, Paqueo said.
Prof. Gerardo Sicat, the founding father of PIDS, pointed out that the minimum wage was originally envisioned as an entry-level compensation, and not as a tool to raise everybody’s wages. The argument is this: It’s not the job of the minimum wage to provide a living for the whole family; rather, it is meant to provide income to the person who contributes to the production effort.
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Orbeta and Paqueo stressed that the minimum wage and other current labor regulations are not the only options to address the plight of workers. Investment for better education, increasing opportunity for on the job training, and helping the poor with their subsistence needs in the form of direct and temporary income are more important. At any rate, the JEDI study calls for moderation of minimum wage increases, not abolition, Paqueo clarified.
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He allayed fears of “slavery” and a “race-to-the-bottom” situation, saying these were simply “scare tactics”. “A counter-example is the case of Singapore and Malaysia, which do not have minimum wage setting but their people enjoy just rates which allow them to live decently,” Paqueo added.
Critics have also refused to accept the results of the empirical analysis by claiming that microenterprises are already exempted from the minimum wage. But Paqueo said the exemptions were just for very small enterprises with up to five employees. It is important to help SMEs grow and expand to create more employment and help in the poverty reduction and development of the country, he said.
There’s also a need for government intervention in terms of employment insurance, with the problem of unemployment becoming even more pronounced during periods of economic crisis, said Dalumpines of the ILS, the policy think-tank of DOLE. The role of the government is to facilitate the reemployment of the unemployed, upgrade workers’ skills, and protect workers against loss of income, he said.
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For his part, Julius Cainglet, assistant vice-president of the Federation of Free Workers, called for other measures such as lower taxes and greater access to social services, which are precisely why other countries are able to rely less on minimum wages. Labor unions, he added, exist to protect workers’ rights.
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For Orbeta, however, “The best way of protecting a worker’s rights is to get him a job.”

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