Government News Analysis

Tough job all round

Labor Freedom: 2017 Index of Economic Freedom

According to the Philippine Statistics Authority, the employment rate for 2016 was 94.5%, meaning that there was 5.5% of the country’s workforce – some 3,778,500 individuals – without jobs. But that doesn’t exactly tell the full story because out of a potential workforce of 68.7 million, only 43.7 million had full-time employment. In other words, 30.86% of the total labour force – more than 21 million individuals – only had part-time employment.

Clearly, those are worrying figures and we’re prepared to bet that a major factor for the size of the part-time employment sector is the reluctance of employers to offer full-time jobs because of onerous labour laws which include difficulties in both hiring and firing with legally mandated notice periods, rigidity of work hours, and mandatory severance-pay packages.

Striking a balance between workers’ welfare and maintaining a healthy and competitive private sector is an extremely thorny issue faced by all democratic governments. Furthermore, there would seem to be no perfect solution; it must always come down to compromise. But from those part-timer stats it’s fairly obvious that the Philippines is a long way off finding a formula that’s acceptable to both sides.

Right now though, everyone’s losing – the workers with their part-time pay packets and lack of job security, companies that live hand-to-mouth with a bare-minimum worker intake that inhibits any real expansion, and the economy which can never reach anything like its true potential as the private sector treads water.

For investors, domestic and foreign, one of the ways of assessing the viability and long-term prospects of starting new businesses or expanding established ones is the level of a country’s ‘Regulatory Efficiency’ – and one way of gauging that is by assessing labour freedom. Let’s cut out the niceties; what that actually comes down to is the ease and cost-competitiveness of hiring and firing workers.

To that end, the 2017 Economic Freedom Index (EFI) – produced by the prestigious Washington-based think tank, The Heritage Foundation – evaluates the ‘Labor Freedom’ of 186 countries world wide. From the index we’ve extracted the global results for the 10 states of the Association of Southeast Asian Nations (Asean) to show how the Philippines ranks with its Asean peers in terms of ‘Labor Freedom’.

Here are those results. Singapore, 3rd; Brunei, 4th; Myanmar, 22nd; Malaysia, 34th; Thailand, 77th; Vietnam, 81st; Cambodia, 83rd; Philippines, 105th; Laos, 119th; Indonesia, 144th.

Obviously, third from last in Asean is not where the Philippines needs to be. In terms of the country’s overall ‘Regulatory Efficiency’, moreover, this result pulls that rating further down following the Philippines’ poor Asean showing in the EFI’s  ‘Business Freedom’ category where it came 107th globally.

The index’s labour-freedom component is a quantitative measurement that considers various aspects of the legal and regulatory framework of a country’s labour market. These include regulations concerning minimum wages, laws inhibiting lay-offs, severance requirements, and measurable regulatory restraints on hiring and hours worked.

In short, it represents a large part of the onus placed on employers and, as such, forms part of the calculus of investors in assessing the Philippines as a destination for their funds in starting new businesses and for existing businesses wishing to expand.

Labour freedom is one of the last areas where the government and the private sector need to have a Mexican standoff – and particularly at a time when the Philippines is showing its ability to grow and sustain that growth in so many other areas.

As we’ve stated, with the present handling there are no winners here. Arbitration, which in the Philippines can go on for years – pleases no more lawyers, no more courts; they’ve always been part of the problem and never the solution – is also not the answer. There has to be compromise – a meeting of minds where both sides work for the same goal not for their separate interests.

Of course, the private sector must understand that government has an obligation to ensure the protection of workers, but government must also understand that companies have obligations to their shareholders and often struggle with loan commitments to the banks.

We don’t know exactly what the formula should be, but we do know that there are seven Asean countries which are a lot closer to finding it than the Philippines is right now.

7 Comments

  • In the province most jobs are on a day by day basis. Sometimes there is work, sometime there is no work. How to make a survey under such circumstances? I believe that the survey results are far too high. I do not believe in such surveys, honestly. This evaluation perhaps has been made in Manila where you have a higher percentage of permanently employed people. This is certainly not the case in the province. An evaluation depends vastly on the survey parameters you set, hence its results may vary significantly.

  • Those surveys were conducted mostly in Urban areas…they should at least based it on PSA’s (NSO) community statistics….using marginal error is not actually an exact reality when it comes to statistics but all are based on assumptions..

  • Tough job becuz job opportunities are really hard to come by. The companies lay down criteria for hiring which are not practical or logical; they even insist on job mismatch, when in truth any job can be learned outside the academe. The academe itself does no teach these practical knowledge in classrooms. It is up for the individual to learn things from experience. The stats given, I believe, cannot be reliable becuz the source or data taken is not exhaustive, but based on surveys; surveys only give a glimpse of what the situation is, but not the hard facts. It is indeed a tough job even for college grads becuz there is also tough competition among the millions of graduates to get a job.

  • I agree that this is a certain disconnect between employee and employers. Employers tend to minimize cost by hiring less than what is ideal. Companies would find ways to maximize one personnel by requiring them to multi tasks while employees tend to slack productivity for perceiving that he/she is over exploited. Maybe we should learn more from Japan. It is really a symbiotic relationship, employees love and are proud of their companies, to the extent that they are prepared to sacrifice their salaries if the company is not making any profit., in the same way, employers are so committed to taking care of their employees until they retire and are willing the children of their retired employees to replace them. If our companies and our labor force can surmount these paradigm shift, we will more succesful companies, a booming economy then more and more citizens will be staying in the country for work. If these can be incorporated in our laws maybe we will achieve our goal. however maintime we have this situation of throwing blame on each sector as culprit. It will take a strong will to force both sides to compromise