The Effects of Globalization and Economic Restructuring on Philippine Labor Policies and the Responses of the Actors of the

Philippine Industrial Relations System1
Jorge V. Sibal
Professor University of the Philippines School of Labor and Industrial Relations E-mail:

The Philippine labor policies and standards are based on international labor standards (ILS). With the present intensification of globalization and the resulting economic restructuring, there are agitations from certain groups that these high labor standards need to be liberalized since the country is experiencing “jobless growth” in the formal industrial sector and the use of capital intensive work processes is being encouraged in the face of very high unemployment and underemployment rates of 10.8% and 17.6% respectively. This paper argues against the suggestions of liberalizing labor policies and standards which may lead to the race to the bottom lowering of wages, benefits and working conditions among workers in the underdeveloped and developing countries as their comparative advantage and the possible retaliation of developed countries through the imposition of their high labor standards as a trade protectionist device in order to protect the jobs of their local labor force earning high wages and benefits. The major actors of the Philippine IR system- government, employers, trade unions and civil society groups- have responded to the said imbalance between high labor standards in the face of high unemployment and underemployment rates. This paper advocates the retention of Philippine labor policies based on international labor standards as the correct path in the attainment of economic growth and development that will result in social equity and decent work.

Paper presented by Prof. Jorge V. Sibal, Office-in-Charge-Dean of the University of the Philippine School of Labor and Industrial Relations (UP SOLAIR) at the International Society of Labour and Social Security Law (ISLSSL) 8th Asian Regional Congress, October 31- November 3, 2005 at the Holiday Inn Asia World, Taipei, Taiwan.

Jorge V. Sibal 13

The Effects of Globalization and Economic Restructuring on Philippine Labor Policies and the Responses of the Actors of the Philippine Industrial Relations System

Globalization Trends in Asia
Globalization was more intense in Asia, particularly East Asia which contributed to the fast growth of the region today. Globalization in Asia is characterized by the increasing participation of foreign capital, including small and medium scale investors from the NICs (Taiwan, So. Korea, Singapore, Malaysia, China, etc.) in the enterprises of the developing economies including infrastructure and energy development projects which were previously monopolized by the state. These foreign investors favor the less developed countries due to cheap labor costs. The impact of globalization on employment was favorable to South Korea, Thailand, Singapore and Malaysia. It is not as successful in the Philippines.

Effects of Globalization to Philippine IR Actors
Globalization in the Philippines was accelerated since it joined the WTO and APEC in 1990s. The country was a recipient of several structural adjustment loans from the WB-IMF.

14 Jorge V. Sibal

reduction of jobs The Gove >sub-contracting/piece rates >reduction of union membership >reduction of unioninitiated wages & benefits adjustments USUAL TRADE UNION RESPONSES >strikes and mass actions >strengthened collective bargaining negotiations >cooperation w/ management >workers’ participation in management >non-traditional trade union activities or social movement unionism (SMU) Jorge V. Responses of IR Actors to Globalization A. GOVERNMENT WORLD BANK-IMF GOVERNMENT RESPONSES STRUCTURAL ADJUSTMENT PROGRAMS (SAPs) Development Strategies under Globalization >reduction of subsidies to state enterprises >reduction of tariff rates >import liberalization >foreign exchange decontrol & flotation of the peso >privatization > etc. LABOR Effects to Labor and Trade Unions >casualization of labor >redundancy. Sibal 15 .The Effects of Globalization and Economic Restructuring on Philippine Labor Policies and the Responses of the Actors of the Philippine Industrial Relations System Figure 1.internal & external >OD & HRD investments >Pro-active non-union /union-based HRD B. VARIOUS MEASURES ADOPTED BY MANAGEMENT >Reengineering & Rightsizing >TQM >Flexibilization. EMPLOYERS Economic Liberalization >> Deregulation Democratization Devolution Decentralization Cost Reduction/ Increase Productivity to Prevent Closure C.

The schematic diagram in Figure 1 illustrates the Four “D” strategies that the Philippine government initiated under former President Fidel Ramos. WHO’s “Health for All”. In the Philippines. Nos. Among the typical economic programs of the government include reduction of subsidies to state enterprises. promote full employment. Sibal .com/article2.Deregulation. import liberalization. Devolution and Decentralization. and Nos. The State shall promote a just and dynamic social order that will ensure the prosperity and independence of the nation and free the people from poverty through policies that provide adequate social services. (http://www. Globalization was not able to arrest the increasing income inequality among countries and regions of the world.htm) 16 Jorge V. and an improved quality of life for all. II.Declaration of Principles and State Policies of the 1987 Philippine Constitution. Section 10. 3 Art. in Particular its Worst Forms. 87 and 98 on Freedom of Association and Collective bargaining. 100 and 111 on Equal Remuneration and Non-Discrimination. the country failed to develop its agroindustrial base and did not create enough jobs to absorb the unemployed and the new entrants in the labor force. This strengthened private business cartels which may disadvantage the workers and consumers. The State shall promote social justice in all phases of national development. and UNDP’s emphasis on human development (Tapiola 2002). The widening social inequity as a consequence of WTO’s trade liberalization prompted the World Bank to promote “Growth with Social Justice” aligned with Unicef’s “Development with a Human Face”. 138 and 182 on the Abolition of Child Labor. 29 and 105 on the Abolition of Forced Labor. Democratization.The Effects of Globalization and Economic Restructuring on Philippine Labor Policies and the Responses of the Actors of the Philippine Industrial Relations System The Government The government adapted the development strategies prescribed by the WB-IMF whose main features are trade and investments liberalization and globalization. foreign exchange decontrol and investments liberalization. income inequality among classes and among regions remained (Sibal 2002). As will be explained later. The trickle down effect to the poor did not materialize. Nos.chanrobles. The country adopted the 1998 “ILO Declaration on Fundamental Principles and Rights at Work” which became the basis of the International Labor Standards (ILS)2. privatization. Together with the social justice provision of the 1987 Constitution3. The Employers Globalization brought “jobless growth” in the formal industrial sector of the economy since global enterprises invested in capital-intensive tertiary manufacturing processes or 2 This is based on the following ILO conventions: Nos. a rising standard of living. Section 9. this has strongly influenced the country’s labor and industrial relations policies. Privatization and build-operate-transfer (BOT) projects resulted in the decline of state ownership of big enterprises and infrastructure.

agricultural producers (vegetables. San Miguel Corporation. right sizing. particularly in other Asian countries. Since 1980. mostly owned by ethnic and Chinese Filipinos. organizational development and human capability building. Filipino employers. ports. the share of manufacturing has continued to decline as shown in Table 1. telecommunications. corn. The labor-intensive firms were not prepared for liberalization and globalization (ECOP 2004. have adjusted. The transformation of an economy from agricultural to industrial is an indication of a successful economic development. poultry). Philippine employers. Otherwise. Sibal 17 . adapted and even expanded as a result of globalization. Among these measures were:1) increase in capital intensive operations. United Laboratories. especially in the small and medium categories in agriculture and in sunset industries were among the losers in the globalization process.The Effects of Globalization and Economic Restructuring on Philippine Labor Policies and the Responses of the Actors of the Philippine Industrial Relations System outsourced marketing operations to take advantage of the country’s export quotas. Jorge V. They have to upgrade their technologies and enhance their productivity. Some of these industries are in the garments and apparel. palay.0 percent in 2000. Most of these enterprises adopted cost reduction and productivity programs in order to survive and grow. 2) work flexibility arrangement through various forms of outsourcing. Local employers were thus exposed to intense competition from global producers and importers of finished goods that included smuggled items. Agriculture’s contribution to GDP continued to decline from 33. Technological innovation and investments in HRD and new forms of labor flexibility became a must in order to offer better services at competitive prices to consumers. FTA 2003). cheap labor. especially the big enterprises have proven to be very resilient. What increased significantly was the service sector from 36 percent in 1980 to 45. Jollibee Foods and Splash Corporation have expanded operations abroad. car parts manufacturing. Local conglomerates. they may be absorbed by others that are growing due to globalization. local markets. etc. the Philippine growth pattern was characterized by the increase in services with agricultural and industrial sectors declining4. Although declining. etc.3 percent in 1967 to 20.6 percent in 2000. and 3) investments in HRD. this sector however is a very stable sector since its average annual growth rate is steady from a range of 2 to 4 percent. Most of the big enterprises were able to adjust by increasing labor productivity and competitiveness. 4 Structural changes in the economy (or growth of industry and the decline in agriculture share to GDP) are also measures of economic development. reengineering. Hence.

more than half of the country’s employed labor force which used to be in agriculture were absorbed by the service sector. National Statistics Coordination Board Over-all. electricity. unlike other developing countries and Asia’s newly industrializing economies.4% 25. Factories in developed countries can easily be transferred elsewhere via international subcontracting.0 1990 22. construction.8 9. Labor Absorption of Agriculture.4 10. Agriculture and Services to Gross Domestic Product (GDP) (in million pesos) Sector Agriculture Industry>Manufacturing >Other Industries Services 1967 33.3 5. Other industries include mining and quarrying.9 36. Table 2.0 1981 51.5% 27.0 42. industry failed to absorb an increasing labor force.0 43.6 Source of Data: National Statistics Coordination Board. The manufacturing to employment ratio over the last two decades has not changed to about 4% (Felipe and Lanzona 2005 citing Balicasan). As of 2000.3% 18. Manufacturing and Services (in percentage) Sector Agriculture Manufacturing Services Totals 1971 50.0 2000 20.2 1970 27.0 2000 37.2 11.5 38. Percent Share of Manufacturing.0 1991 45. Statistical Yearbook.1 42.4 12.6 10. Philippine Statistical Yearbook. Sibal .8 100.1 100. The decision making power in the country’s workplaces is moved away from the shop floor since global companies decide on their subcontracted operations in their corporate headquarters.The Effects of Globalization and Economic Restructuring on Philippine Labor Policies and the Responses of the Actors of the Philippine Industrial Relations System Table 1.5 7.0 37.2 43.0% 24.6 12. gas and water Labor was absorbed not by industry but by the service sector.0 10. The Workers Workers in developing and underdeveloped countries are made to compete with workers in industrialized countries.6 100. 18 Jorge V.8% 22. In recent years.7 100. This has weakened the trade union movement in the country.0 Reference: Phil.6 1980 23.6 45.3 52. industry’s labor productivity declined.

pension plans. This may be true only in the short-run. 4. etc. Multi-skilling. Entrepreneurship training and development 3. HRD and training 2. This has widened the base of operations of the trade union movement and make the trade unionists more effective leaders of the labor movement. Employees’ stock option program (ESOP) 5.The Effects of Globalization and Economic Restructuring on Philippine Labor Policies and the Responses of the Actors of the Philippine Industrial Relations System Labor cartels in the developed regions. job rotation. trade union responses to globalization outside the collective bargaining process are as follows: 5 The realistic year is 2035 since we are 15 years behind Malaysia and their NIC-hood target is 2020. codetermination and labor-management strategic alliances. joint ventures with TUs and employees associations (commonweal enterprises) or subcontracting with management assistance and subsidy 9. Cooperativization of work processes. In the Philippines. Trade unions now tend to be less ideological and are more receptive to possible strategic partnership in enterprise building through new industrial relations processes. Negotiated reduction of work hours to prevent lay-offs 7. some trade union-based party-list groups like the Anakpawis and Partido ng mga Manggagawa have been elected as lawmakers in the Philippine Congress. This will surely mean a massive growth of trade unionism in the Philippines similar to the free trade period of the 1930s. Employee cooperative formation with management support and assistance. marketing. consumers. The responses of trade unions to globalization within the collective bargaining process (or conditional demands) are as follows: 1. since globalization. early retirement provisions. if it turns around the Philippine economy to an NIC status even in years beyond 20205. Sibal 19 . etc. On the other hand. Other form of labor-management cooperation (LMC) like works’ councils. unemployment will mean transforming the vast informal sector of the economy to the formal sector. renewed political unionism and organizing the informal sector of the economy. particularly in the US and Europe were also weakened due to the decline in worker unionization and trade union initiated benefits. savings and loan association. Increased retirement benefits. producers. 6. Jorge V. Trade unions were encouraged to engage in non-traditional (sometimes non-collective bargaining) activities such as investments in labor enterprises. Trade unions and other labor organizations in the country weakened due to the widespread casualization and sub-contracting of labor. This may bring about more unity in the international labor movement. Salary hike freeze but with provisions for profit sharing and workers’ participation in management upon recovery 8.

and Employees Compensation Commission Law (Tolentino. domestic helpers. the Social Security System. PhilHealth. self-employed or own-account workers. Cooperative Code of the Philippines. processing or manufacturing of products or commodities. the labor standards are governed by the Civil Service Laws and the Government Service Insurance System. most of our workers will 6 Among those exempted from coverage are managerial employees. Social Amelioration Program in the Sugar Industry. we have a Labor Law that was focused in protecting the smaller segment of the workforce in the formal sector. Comprehensive Agrarian Reform Law (CARL). Among these laws include the Barangay MicroBusiness Enterprise (BMBE) Law7. Sibal and Macaranas 2001). a large majority of our workers were still with the informal sector. laws governing the Overseas Workers’ Welfare Administration (OWWA) and the Overseas Employment Development Board (OEDB). 7 The BMBE Law stipulates stipulates “BMBE is any business entity or enterprise engaged in the production. but their employees shall be entitled to the same benefits given to any regular employee such as social security and healthcare benefits. 2. As a consequence. Sibal . piece rate and other local and overseas contractual workers) are directly or indirectly covered by several laws affecting informal workers. Pag-ibig Fund and Employees Compensation Commission. 3. the labor standards are mostly stipulated in the Labor Code of the Philippines. Social Reform and Poverty Alleviation Act. unpaid family workers. plant and equipment are situated. Agriculture and Fisheries Modernization Act. Small and Medium Enterprises Development Council (SMED).000. many of their workers already joined their formal sector of the economy. Nonetheless. The BMBEs shall be exempt from the coverage of the Minimum Wage Law.000.00). The country has a shrinking formal sector whose wage and salaried employees (around 52% of the labor force) are covered by legislated labor standards set under the various ILO conventions6 (Leogardo 2004. trading and services. whose total assets including those arising from loans but exclusive of the land on which the particular business entity's office. including agro-processing. In the private sector. persons in personal service of another and workers paid by results.” 20 Jorge V. shall not be more than Three Million Pesos (P3.The Effects of Globalization and Economic Restructuring on Philippine Labor Policies and the Responses of the Actors of the Philippine Industrial Relations System 1. Macaraya 2005). The increasing informal sector where workers are mostly not on a formal labormanagement relations (such as unpaid family workers. SSS. In the government sector. Cooperative Development Authority (CDA) Law. Local Government Code. PhilHealth. certain provisions of the Labor Code of the Philippines. we consoled ourselves with the thought that as ‘economic development deepens. lobbying and electoral struggles Skills upgrading and retraining of workers Effects of Globalization to Philippine Labor and IR Policies A developing country. 4. field personnel. Community organizing in the informal sector Labor enterprises and labor entrepreneurship Political unionism. Magna Carta for Small Farmer. whereas in the Philippines. Bach Macayara (2005) noted: “The framer of the [Labor] Code at that time simply ignored the fact that in those developed countries. the Philippines has several sets of labor standards because of its segmented economy and industrial relations system.

571.13 20.322 3.000 30. J. Sibal 21 .460 65.706.28 Labor Force Total employed Formal sector Informal sector Wage & salary Self employed Domestic helpers Unpaid workers Source: Leogardo. The workers in the informal sector which accounted for 65 percent of the employed labor force grew by 1.Comparative Sizes of Formal and Informal Sectors.89 32.688 18.17 4. 1999 and 2003a 1999 No.312 8.228 as globalization deepened.95 9.228 65.The Effects of Globalization and Economic Restructuring on Philippine Labor Policies and the Responses of the Actors of the Philippine Industrial Relations System eventually end up with the formal sector of our economy’ an assumption that now appeared premature as this was reversed when globalization was introduced”.85 12. however.944. the formal sector workers declined by 307.68 percent and 18. Approaches in Promoting Compliance to Labor Standards Verma (2005) formulated a framework in promoting compliance to labor standards.742.4)b +3.944. using NSO Labor Force Surveys and Annual Survey of Philippine Business & Industry b Percent unemployed The workers in the formal sector and covered by the labor standards under the Labor Code for 1999 and 2003 comprise only of 21.218 15.68 5. During the same period.775.013.765. of workers 30.498. of employed workers 90. of the total employed workforce.213.000 6.32 +1.000 13.013.000 Difference % of total employed 88.63 percent.932.35 4. In the extreme poles are the “soft approach” (or do nothing) and the “hard approach” (or impose standards and sanctions).61 3. (2004). does not favor the “hard approach” especially to the informal sector of a developing country since this will lead to the North-South debates. These are the workers not covered by the Labor Code.000 1.000 27.000 3.912.813.868. a Determined through residual methodology. Verma.864.000 18. V.40 1.758. The “hard approach” forces compliance as in the case of standards imposed by TNCs and states of developed countries.000 2003 % to total No.540 31.635.000 5. Macaraya cited Table 3 below to prove his point: Table 3. Jorge V.100 +2893.19 (9.8)b 34.069.61(11.540 14.63 -307. respectively.486.000 21.

Sibal . labour standards imposed from outside are nothing more than old wine of protectionism in a new bottle of global labor standards. developing standards either through legislation or corporate codes. and 3. Shown in Table 4 is the web of labor standards in the formal and informal sectors: 8 This was affirmed by the report of Giebels (2005) on studies in 11 countries in Asia and Eastern Europe. Verma identified three steps in promoting and developing compliance to labor standards. These recommendations are actually the milder forms of the “hard approach” as shown below. 22 Jorge V. Verma and Amante recommended that the promotion for compliance to labor standards should not be imposed from outside but initiated from within through national public policy enactment. while all three parties in developing countries uniformly oppose any attempt to impose such standards through extra-national initiatives8. 2.The Effects of Globalization and Economic Restructuring on Philippine Labor Policies and the Responses of the Actors of the Philippine Industrial Relations System To many developing countries. These are1. The level of compliance diminishes as one goes “deeper down the supply chain and in small and micro-enterprises that produce for the domestic market”. corporate codes and NGO advocacy campaigns. providing remedies when compliance is wanting through internal or external agents. All three parties [IR actors] in developed countries favor some form of regulation to increase labor standards. franchisees and large corporations with reputational risks. monitoring compliance through government inspections/sanctions or voluntary selfassessment through the stakeholders themselves. Approaches in Promoting Labor Standards Compliance “Soft approach” (do nothing) NGO advocacyCorporate Codes National public “Hard campaigns policies approach” (Good practices) (impose standards & sanctions) Web of Labor Standards Verite (2003) observed that there is high level of compliance to labor standards among exporters.

Overseas Workers’ Welfare Administration.706. etc. Macaraya 2005) Extent of >Wide coverage for TNCs. Social Accountability 8000. no linkage abroad Barangay Micro-Business Enterprise (BMBE) Law. PhilHealth.540 65. Philippine Overseas Employment Administration. Philippine Quality Awards. Social Compliance. Small and Medium Enterprises Development Council. & certain provisions of the Labor Code. Local Government Code. Magna Carta for Small Farmers. etc. etc. Global Reporting Initiative. (Amante 2005. SSS. Corporate Codes of Conduct. OECD Guidelines for MNCs. (Tolentino. Agriculture & Fisheries Modernization Act.The Effects of Globalization and Economic Restructuring on Philippine Labor Policies and the Responses of the Actors of the Philippine Industrial Relations System Table 4. good practices. ISO 14000. Civil Service Law. Government Service Insurance System. AccountAbility 1000. Sibal 23 .460 INFORMAL 20. PhilHealth. ILO. no linkage abroad Labor Labor Code. Employees Compensation Commission Law. Collective Bargaining Agreements. Coverage & firms linked with TNCs and Regulations local firms with operations abroad 9 >Purely domestic.013. Codes. Social Amelioration Program in the Sugar Industry. UN Global Compact. Global Sullivan Principles. Cooperative Development Authority Law. Corporate Social Responsibility. Cooperative Code of the Philippines.Philippine Web of Labor Standards Regulations SECTOR Workers Covered 2003 Percentage Employed Nature Production FORMAL 5. Comprehensive Agrarian Reform Law. best practices. Social Security Standards System.62% of >Production directly linked to TNCs9 >Firms supplying TNC-linked firms >Local firms with operations abroad >Purely domestic. Pag-ibig Laws. Sibal & Macaranas 2001) Low coverage and ineffective regulations due to vague laws and lack of knowledge of good practices Transnational corporations Jorge V. Social Reform and Poverty Alleviation Act. Employees Corporate Compensation Commission.32% >Local firms supplying other firms linked with TNCs and local firms with operations abroad of 18. community acceptance. Collective Negotiations Agreements. Fund.

Many local governments are still hesitant to apply the law in their own areas due to the tax exemption stipulations of the law (Banzon-Natad 2005). academe. BMBE registered enterprises are exempted from the legislated minimum wage. corporate foundations. corporate foundations. Drivers for Labor Standards Compliance 1. cooperatives. among others. cooperatives. Dole has shifted its thrust by encouraging voluntary compliance particularly in enterprises with at least 200 workers through partnership with labor. party list groups. church groups. This was a result of the country’s ratification of “30 ILO conventions. This has resulted in wide coverage and relatively effective regulations (See Table 4). trade unions. Labor and Employment. NGOs. academe. An example of these partnerships is the “Social Accord for Industrial peace and Stability” launched in October 4. etc. professional and employers’ organizations and other government agencies. employees associations. 2. there is already a new bill filed in Congress that seeks to amend the law. NGOs. The country fared better than its Asian neighbors in compliance with labor standards. The law is being implemented by the various government agencies including the Departments of Trade and Industry. Presence or absence of local labor standards laws and corporate codes There are elaborate labor standards laws and corporate codes in the formal sector.The Effects of Globalization and Economic Restructuring on Philippine Labor Policies and the Responses of the Actors of the Philippine Industrial Relations System Workers’ Organizations >Moderate coverage for firms catering to local markets Trade unions. of which 28 are in force” (Amante 2005). crafts/guilds. Interior and Local Government. Despite this. 24 Jorge V. etc. socio-civic organizations. Majority of the workers in the informal sector which comprise more than half of the labor force are not covered by the Labor Code and the Civil Service Laws. various trade union federations (TUCP. 2004 by ECOP. Finance. consumer associations. Degree of enforcement of labor standards laws by government agencies and corporate codes by industry guilds/associations. Enforcement of labor standards laws by the Department of Labor and Employment (DOLE) through the Bureau of Working Conditions (BWC) is weak primarily due to the limited number of labor inspectors (Amante 2005 and Palafox 2003). Sibal . There are many laws on labor standards that affect the bigger informal sector. Peoples’ organizations. partylist groups.

Anyway. and Social Accountability 8000. complying with the ILS makes these enterprises globally competitive and will help the nation preserve and create quality jobs. Transnational corporations (TNCs) protect their brands/product quality and jobs in home countries by requiring all its business partners and suppliers around the globe to comply with the international labor standards (ILS). Global Reporting Initiative. Global Sullivan Principles. As recommended by Amante (2005) and Verma (2005). ILO Conventions. h. Sibal 25 . OECD Guidelines for Multinational Enterprises. d. Degree of tie-ups of local firms with foreign firms or industry associations that uphold or require labor standards compliance. ISO 14000 series. particularly those in the informal sector have both low awareness and low level of compliance with labor standards. compliance with labor standards especially to the bigger informal sector and the local enterprise in the formal Jorge V.South Korea. c.The Effects of Globalization and Economic Restructuring on Philippine Labor Policies and the Responses of the Actors of the Philippine Industrial Relations System FFW. a Tripartite Assistance and Supervising Committee (TASC) was created. The Philippines is in a tight squeeze between the North-South debates on the ILS compliance. e. Strict or forced enforcement of labor standards to the informal sector may lead to dangerous consequences since we are a labor surplus economy and competing with low wages economies in Asia. This is caused by low level of enforcement and vague labor standards for the informal sector workers. Hongkong. To monitor the implementation and compliance of the Accord. These ILS and other norms are called the “Global Eight” initiatives as follows (Amante 2005): a. the country is also losing investments to low wage Asian economies like Vietnam. f. Enterprises linked to the supply chains of TNCs or local firms with operations abroad and exporting to developed countries have no other option but to comply with the imposed ILS. b. The country however has lower wage rates compared to the Asian NICs. AcountAbility 1000. g. UN Global Compact. TUPAS. etc. Bangladesh. Singapore and Malaysia. Local enterprises with no linkages abroad. China. Taiwan.) and the DOLE. etc. With relatively higher wages compared with other Asian developing countries due to higher-level compliance with labor standards. 3.

The development of local corporate codes that will be applied to the “domestic formal sector. Level of awareness of consumer groups and civil society organizations like NGOs. guilds. drivers and other workers of similar occupations. crafts unions/guilds and peoples’ organizations (P0s) The presence of trade unions in workplaces in the formal sector has contributed to the high level of compliance to labor standards. consumer groups and civil society organizations are pressuring their governments and TNCs in labor standards compliance in order to protect consumer welfare.The Effects of Globalization and Economic Restructuring on Philippine Labor Policies and the Responses of the Actors of the Philippine Industrial Relations System sector catering to the local market should not be imposed from the outside but from within through the good practices approach and continuous improvement. cooperatives. church. labor-management councils (LMCs). It was the organized reaction of Filipino producers and intellectuals during the free trade period imposed by the United States. Because of the over-all low incomes of the Filipino workers and consumers. Sibal . In the Philippines. crafts unions. cooperatives. peoples’ organizations (P0s) of vendors. P0s and cooperatives. socio-civic groups. 4. they are usually price conscious and not quality conscious. on labor standards and their effects on consumer welfare and earnings of worker-consumers. academe. jobs and purchasing power. Hence. Another way to reach the informal sector. In developed countries. 26 Jorge V. is through the NGOs. local products are easily underpriced by imported low quality products or local producers scrimp on labor standards just to lower their costs of production. Trade unions have to be reinvented and transformed by uniting with or helping organize other forms of workers’ organizations like employees associations. the advocacy campaign for new laws on labor standards based on good or best practices and the formulation of industry codes among professions and occupations can be pursued. according to Verma. trade unions. Presence or absence of workers organizations in the workplace like trade unions. etc. employees associations. their suppliers and their suppliers’ supplier” would likely reach the informal sector. From these newer forms of labor organizations. 5. But trade union membership is declining due to outsourcing and the decline of the formal sector itself. the Buy Philippine-Made Products Movement and the Fair Trade Alliance (FTA)10 are among the consumer advocates campaigning for the patronage of 10 The “Buy Filipino Movement” with the slogan “Tangkilikin at Paunlarin ang Sariling Atin” (Patronize and improve our own products) was initiated by the National Economic Protectionism Association (NEPA) in 1934. farmers.

including foreign direct investments. Sicat’s paper is written below: Philippine labor market policies. Finally. Philippine retailers do not impose compliance to local quality standards despite the presence of local standards like the Philippine Quality Awards (PQA)11 and the Philippine Products Standards under the supervision of the Bureau of Product Standards (PS) of DTI. and so on… In undertaking reforms. Such a route will create jobs and improved welfare for the working man. These policies made the country to miss the path of labor intensive development in industrial enterprises. It is only in food products and medicines under the Bureau of Food and Drugs (BFAD) that local quality standards are imposed. Dr. Sibal 27 . are highly regulated and they tend to be along standards of highly developed markets. a pattern typical of the early growth of East Asian economies. Compliance to labor standards however is not a basis in the BFAD award. Sicat’s paper is illustrated below: 11 12 PQA is the local equivalent of the Malcolm-Baldridge Award. Sicat is professor emeritus of the UP School of Economics. Gerardo P. the framework of Dr. in the presence of a high degree of excess labor supply. Critique Against High Philippine Labor Standards Dr. The summary of Dr. The policies adopted by the government are more pro-employed labor than to promote the over-all employment of the labor force. the tendency to provide an increase of emoluments without any link to productivity growth. From my understanding. These policies strengthened a powerful labor bureaucracy in the government. all sources. it is argued that the labor sector would find it in its interest to deal positively with the challenges of globalization. The welfare policies as developed have contributed to the distortion in labor skill formation. productivity change needs to be placed in the center stage of reforms. Jorge V. This further means that it emphasizes the need to accept economic liberalization would require encouraging the growth of investments from. Gerardo P. This means recognizing that labor market policies need to adjust to global competition.The Effects of Globalization and Economic Restructuring on Philippine Labor Policies and the Responses of the Actors of the Philippine Industrial Relations System locally produced products and services side-by-side with social compliance and product quality standards. Sicat in a paper “Reforming the Philippine Labor Market”12 criticized the high level of the country’s labor standards and suggested that these standards be deregulated or liberalized. Side effects of the regulations and the culture surrounding the disposition of labor management issues encouraged rent-seeking and other motivational distortions in the behavior of labor when employed. The paper was written on April 2004.

The productivity of Philippine industries is low compared to developed and some developing Asian countries. The Philippine labor policies based on international labor standards (ILS) may have contributed to the capital intensiveness of our industries in the formal sector (jobless growth) 28 Jorge V.) ProEmployed Labor Policies based on ILS Capital Intensive Industries Rent Seeking Economic Activities (mostly services) High Unemployment and Underemployment Powerful Labor Bureaucracy (TUs and Gov’t. Sibal . etc. 3. 4. WTO. Sicat’s Framework of Analysis of Philippine Industrial Relations Policies Globalization & Economic Restructuring Distorted Labor Skills Formation International Labor StandardsILS (ILO. 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. The inadequate skills formation in the country left the greater bulk of the labor force lacking in needed and relevant skills. UNDP. Sicat on the following: 1. The high employment and underemployment contributed to the big informal sector in the economy. Gerardo P. WHO.The Effects of Globalization and Economic Restructuring on Philippine Labor Policies and the Responses of the Actors of the Philippine Industrial Relations System Figure 2: Dr.) Low Productivity Large Informal Sector There is no disagreement with Dr.

Electricity in the country is one of the most expensive in Asia and almost in the same category as Japan. Among these are: 1. bridges. were discussed by various resource speakers like Joseph Francia.inq7. high cost of direct inputs of production like electricity. communications. 2 February 2004.” (Inquirer News Service 2004). including labor costs. poor infrastructure like roads.The Effects of Globalization and Economic Restructuring on Philippine Labor Policies and the Responses of the Actors of the Philippine Industrial Relations System and the increase in rent-seeking activities particularly in the services sector. 3. 4. Peter Limqueco. Low level of knowledge and skills of both employer/management and labor. water. sea and air). Some of the papers presented were published in the 2002 issue of the Philippine Journal of Labor and Industrial Relations of UP SOLAIR. 14 For example. power. “Mapping the Future: Mobilizing Business Toward Economic Growth”. This may lead to intense competition among developing countries by using low wages as their comparative advantage. A worldwide downward wage spiral may happen and further widen the social inequity between the developed and developing countries and the income inequity among rich and poor classes in developing countries. 15 “In its Corruption Perception Index 2003. interest of capital. etc. labor. telecommunications. the employers asked: “How can the Philippines become competitive and Filipino workers employable if our educational system keeps lagging behind those of China and our neighbors?” (ECOP 2004). Transparency International has placed the Philippines as the 11th most corrupt nation in the world. transportation. skills training in Singapore and South Korea is free or heavily supported by the government in partnership with the private sector. There are more important economic and non-economic factors that contribute to their low productivity13. and the lack of government support in skills training14. Antonio Garcia and this writer in a “Forum on Industrial Debacle” co-sponsored by the UP SOLAIR and the Fair Trade Alliance (FTA) which analyzed the state of the Philippine economy and the performance of industries in the last 3 decades. (Garcia 2002).net Jorge V. Sicat’s suggested policy intervention of liberalizing labor standards to encourage investments in labor intensive enterprises and promote job creation in the country may be based on the World Bank’s traditional trickle down philosophy. Sibal 29 . 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. This was already discarded in the 1970s. Developed countries on the other hand may use ILS as a protectionist tool to preserve jobs of their workers. etc. ports (land. irrigation. 2. 13 All these factors. http://www. This effect may occur only in the short run and may have a reverse effect in the long run. In the Employers’ Summit on Employment and Industrial Relations. Dr. high bureaucratic cost of doing business due to government inefficiency and rampant graft and corruption15. Factors for Competitiveness Cost of labor is not the only reason for the lack of competitiveness of the country’s labor intensive industries.

But in the long run. partner. there will be more opportunities for them to expand both in the domestic and international markets. security maintenance. South Korea was not dependent on multinational companies (MNCs) to fuel her economic program… Korean industrialization cannot be separated from the role of nationalism and Confucianism in her economic development.” (Limqueco 2002) 30 Jorge V. franchisee or co-owner and will become more productive. although catering mostly to the local market. labor (trade unions. 6. if the Filipino businessperson were entrepreneurial. as well as international agencies like the ILO. 16 “The government loses as much P175 billion a year to outright and technical smuggling (underdeclaration. If more local enterprises were able to adapt to the ILS. ILS may also encourage rent seeking activities especially in the services sector. have complied with the ILS as well as the European ISO standards although these are not required of them to operate in the local market. the Philippine Chamber of Commerce and Industries (PCCI) and the Fair Trade Alliance (FTA) view ILS not a disadvantage but a competitive advantage. International labor standards (ILS) may lead to pro-employed labor policies because if their employers are efficient and competitive.The Effects of Globalization and Economic Restructuring on Philippine Labor Policies and the Responses of the Actors of the Philippine Industrial Relations System 5. Likewise. instead of producing the products.). But those firms that have adjusted to the ILS and the new liberalized environment will become more efficient and competitive. They may shift to just marketing. S/He will eventually go back to manufacturing if s/he can find some comparative advantage in it. ILS may also cause the closure of inefficient and uncompetitive firms that cannot adjust to the new environment.”. peace and order. NGOs and peoples’ organizations) and the government. and the big enterprises (like the complementation systems of transnational companies whereby they use imported inputs from their affiliates) (Limqueco 2002)17. etc. they can afford them anyway. Inefficient local enterprises that cannot comply with the ILS may close down as a result of cheaper competitive imports. They will eventually expand and absorb the market share of those firms that have closed down. the government (due to conditions imposed on foreign-funded projects). inadequate government protection of local industries like low tariffs and dumping and smuggling of imported goods16. low level of patronage of the local consumers (due to colonial mentality).the employers/management. ILS have in fact caused the unity of the major actors of the Philippine IR system. other non-economic factors like political instability. misdeclaration. Jollibee Foods Corporation. The employers of the country especially the members of the Employers Confederation of the Philippines (ECOP). It may encourage capital or machine intensive production processes since the cost of machine will be justified by the high cost of labor. and 7. WHO and WTO. etc. s/he will learn new technologies from the marketing arrangement either as agent. UN. (ECOP 2004) 17 “Unlike the Philippines. Sibal .

various laws have been enacted exempting some IS enterprises from complying with selected labor standards and promoting entrepreneurship and job creation19. as a good example where organizations of government. employers and workers have worked together in the program’s formulation and implementation. Tapiola explained that the program was in line with the government’s medium-term national development plan 2001-2004. The ILs and the Unity of the Philippine IR Actors The major actors of the Philippine IR system do not believe that the ILS is one of the causes of economic stagnation. Citing Werner Konrad Blenk of the ILO. The government is guided by the social justice provisions of the 1987 Constitution and is a member and signatory of the following international bodies: 1. hence solve the problems of the Philippine economy. partnership and cooperation among big enterprises and the micro. Realizing that the country’s economy is very segmented with a large informal sector (IS) that provides jobs to more than 50 percent of the labor force (Tolentino. 19 The latest of these laws is the 2002 Barangay Micro Business Enterprise Law (R. Aside from the Labor Code and the various tripartite bodies in the government bodies which operationalize and monitor compliance with the labor standards based on the ILS. The 3-year program responded to “such national priorities as the reduction of mass poverty especially in the rural areas. Tapiola (2002) cited the Philippine Action Program for Decent Work. being the first in Asia. small and medium enterprises including those in the informal sector have been formed.A.The Effects of Globalization and Economic Restructuring on Philippine Labor Policies and the Responses of the Actors of the Philippine Industrial Relations System because of ILS. Instead. the major Philippine IR actors believe that ILS and decent work will be the basis of their unity and common advocacy. as well as to the enhancement of international competitiveness”18. Sibal & Macaranas 2001). 9178). job preservation and job creation. and inequitable distribution of incomes among classes and among regions. high unemployment and high underemployment. the promotion of SMEs and self-employment in urban areas. there are also various laws and legislations that help empower labor even those in the informal sector. The United Nation’s Universal Declaration of Human Rights of 1948. 18 The report of the ILO Director-General to the 1999 International Labor Conference on Decent Work took note of the prevailing low income and high un/underemployment of developing countries today.low production and low incomes. and 3. Its objective is to hasten the country's economic development and alleviate poverty by encouraging the formation and growth of Jorge V. The Rio Declaration on Environment and Development. The International Labor Organization’s Declaration of Fundamental Principles of Rights and Work of 1998. 2. Sibal 31 . hence resolving to assist member countries not only in setting labor standards but also in creating decent work opportunities to both the formal and informal sectors (ILO 2003). Wider compliance with ILS and decent work will lead to higher industry productivity and competitiveness.

More specifically. employers and NGOs zeroes in on anti-smuggling campaign.the effective abolition of child labor. entrepreneurship promotion. the United Nations Development Programme (UNDP) and the League of Cities of the Philippines in promoting not only the ILS but also human rights and environmental standards through 9 principles20. and Principle 5. Environment: Principle 7.html) 20 The nine principles include: Human Rights: Principle 1. It will also prevent low wage competition among developing countries and the widening global poverty and income inequity. The Global Compact Initiative of 2003 involved the Philippine Chamber of Commerce and Industry (PCCI). (http://www.Businesses should support a precautionary approach to environmental challenges. Labor Standards: Principle 3. composed of organizations of labor. Principle 4. Employers Confederation of the Philippines (ECOP).make sure that they are not complicit in human rights abuses.Business should support and respect the protection of internationally proclaimed human rights within their sphere of The Fair Trade Alliance (FTA). One of the incentives granted to registered BMBEs is exemption from the coverage of the Minimum Wage Law and it instead.nwpc.the elimination of all forms of forced labor and compulsory labor. small and medium enterprises in order to encourage outsourcing and backward linkaging locally. This partnership aims to promote local sustainable development in selected Philippine towns through the transfer of corporate citizenship know-how to local business community. Sibal . 32 Jorge V.Business should uphold the freedom of association and the effective recognition of the right to collective bargaining. and Principle 9. Philippine Business for Social Progress (PBSP). It is the trend in the world today as it commits not only ILO’s 175 memberstate but also the civil society at large (Tapiola 2002). The objectives are the help create and barangay-based micro and small enterprises.encourage the development and diffusion of environmentally friendly programs.eliminate discrimination with respect to employment and occupation.The Effects of Globalization and Economic Restructuring on Philippine Labor Policies and the Responses of the Actors of the Philippine Industrial Relations System Advocating compliance with the ILS and decent work will help correct the glaring defects of excessive liberalization and globalization based on the traditional trickle down concept of the World Bank.undertake initiatives to promote environmental responsibility. Some of the programs spearheaded by the employers and management organizations are the Global Compact Initiative and the Big Brother-Small Brother Program. and Principle tariff protection and other safety net provisions to selective industries.. Principle 8. and Principle 6.dole. Promoting compliance with the ILS therefore serves as a comparative advantage especially for developing countries like the Philippines since this will guide its local enterprises towards increased productivity and competitiveness. encouraged the workers and BMBE owners to set mutually accepted wage rates. the partnership will assist receptive SMEs located in poverty-stricken areas to implement proven Global Compact Initiatives with positive effects both the competitiveness of the firm and the social well-being of the its stakeholders (PCCI 2003). The Big Brother-Small Brother project of the PCCI and ECOP focuses on networking and transfer of technology in good business management and the promotion of social compliance and productivity to micro.

FTA also supports movements that promote the patronage of products and services made in the Philippines side by side with industry productivity and competitiveness. Sibal 33 .The Effects of Globalization and Economic Restructuring on Philippine Labor Policies and the Responses of the Actors of the Philippine Industrial Relations System preserve jobs. Jorge V.

Not Free Trade. Quezon City: Fair Trade Alliance. “The Role of Government Institutions in Addressing Problems of the Domestic Industries”. Sibal . A5 Employers Confederation of the Philippines (2004). Makati City. Dusit Hotel. Gil (2005). “Overview of the Achievements in the Other 11 Countries”. March 15. “Smuggling costs RP P140 B yearly.back. sponsored by ECOP International Labor Organization (2003). business. The Challenge of Informal Work in the Philippines.micro. Multipartite Policy Dialogue in Social Accountability. 25. A Global Programme: Investing in Employment for Poverty Reduction and Local Economic growth. Geneva: ILO. “Industry Agenda on Job Creation and Industrial Peace”. p. Jessica (2005).t. A Critical Guide to Corporate Code of Conduct. Antonio (2002). 2005.sunstar. Hongkong: Asia Monitor Resource Center. A Programme Document of the Employment-Intensive Growth. “From Import Substitution to Export Promotion: Finding the Right Formula”.The Effects of Globalization and Economic Restructuring on Philippine Labor Policies and the Responses of the Actors of the Philippine Industrial Relations System References Amante.html Cabacungan Jr. 2004. Philippine Daily Inquirer. Maragtas (2005). Joseph (2002). International Labor Organization.. Makati City: ILO Manila. Mirko (2005). Sun Star. Fair Trade Alliance (2003). 2005 http://www. Fair Trade. Jan. Voices from the South. Philippine Journal of Labor and Industrial Relations. March 15. 2005. April 5. Employers’ Summit on Employment and Industrial Relations. Giebels. Dusit Hotel. sponsored by ECOP Asia Monitor Research Center (2004). Ltd. “Government Urged: Back Law to Help Micro-Business”. “Social Accountability in Philippine Enterprises: Moving Ahead in Advocacy”. Francia. Quezon City: UP SOLAIR. August Quezon City: UP SOLAIR. Philippine Journal of Labor and Industrial Relations. Garcia. Manila. Philippine Trade Training Center.. 34 Jorge 2005. Banzon-Natad. Multipartite Policy Dialogue in Social says study”. Makati

edu/openbook/0309089425/html/17. Quezon City: UP SOLAIR. http://www. Jorge V. http://www. “Labor Market and Industrial Relations Environments: Focus on Policy Issues Concerns and Options in a Globalized Economy”. Tagaytay Highlands. “Globalization.html Philippine Chamber of Commerce and Industry (2003).The Effects of Globalization and Economic Restructuring on Philippine Labor Policies and the Responses of the Actors of the Philippine Industrial Relations System Inquirer News Service (2004). UP School of Economics Jorge V. Sicat.rotman. “Philippine Employment and Labor Market Reforms”. Training Knowledge Workers. http://www. Philippine Journal of Labor and Industrial Relations. Juan Amor (2003). International Labor Standards and National Government Roles”. The National Academies Press. J. (2004).utoronto. “Training Knowledge (2004) “Addressing the Roots of Decent Work Deficits: Issues and Priorities. 2005. “Measures of Economic Development: How the Philippines Fares”. Macaraya. V. http://www. Quezon City: UP SOLAIR. Philippine Journal of Labor and Industrial Relations. (1999) “The Labor Code and the Unprotected Workers”.html Sibal. Quezon Kuruvilla. “Business Organizations Sign Global Compact Partnership Agreement”. “Six Factors to Consider in Understanding the Philippine Industrial Debacle”. “Mapping the Future: Mobilizing Business Toward Economic Growth”. Sibal 35 . Summary of a Workshop. Monitoring International Labor Standards.philcham. Gerardo P. B. (2004). Sibal. Diliman. Strategic Planning Workshop of the Employers’ Confederation of the Philippines (ECOP). ILO Auditorium. 2 December 2004 Limqueco. Jorge V. Tokyo: Asian Productivity Organization. “Implementing International Standards at the National Level”. (2002). Logics of Action.” 2nd High-Level National Policy Dialogue on the Social Dimension of Globalization. Palafox. Leogardo.inq7. Bach (2005). Proceedings of the Philippine Industrial Relations Society National Conference. Peter (2002). 2 February 2004. Sarosh and Anil Verma (2005).pdf. ILO Manila. National Legal Framework.Philippines”. Philippines. January 14-15.

gov. 2003. Catalina. http://www. http://www. Philippine Chapter. Anil (2005).dole. Philippine Journal of Development. sponsored by ECOP. http://www.The Effects of Globalization and Economic Restructuring on Philippine Labor Policies and the Responses of the Actors of the Philippine Industrial Relations System Tapiola.tripod. “A Training Course on Social Compliance in a Factory-based Setting”. 20-22. “Global Labor Standards: Can We Get from Here to There?”. Antipolo Bureau of Working Roster of Candidates for the First Party-List Elections http://members. Verma. Kari (2002). Philippine Journal of Labor and Industrial Relations. Makati City: Philippine Institute for Development Studies. Makati City. “Survey and Assessment of Laws on the Informal Sector” Bureau of Product Standards. “The ILO Declaration on Fundamental Principles and Rights at Work: A Follow Up”.html 36 Jorge V. Sibal .ph/ 1987 Philippine Constitution. March Bureau of Labor Relations. Quezon City: UP SOLAIR. http://www.htm 2002 BMBE Law (RA No.nwpc. http://www. sponsored by the ILO Association of the Philippines (ILAPI) Websites: Asian Labor Network on International Financial Institutions (IFIs). Jorge Sibal and Bonifacio Macaranas (2001). ____________. Verite (2003). ILO Conference Room. 9178). http://www. ILO and Verite.

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