Chapter 8 LABOR AND EMPLOYMENT See Human resources are the key to ‘economic development. What the people consider to be important goals in their lives — how they think about work, how creative or skillful they are, how intelli- gent and motivated they are — will determine whether their country will develop or not. The other economic re- sources like land and capital assume their importance only insofar as people make use of them. Oil is a very important economic resource, but as long asit remains in the bowels of the earth, it just remains dor- mant. It becomes a useful and precious resource only when man drills it out, refines it, and distributes it to the end users. Machines assumeimportance only when they are intended to function and serve man’s need. They are intended to facilitate man’s work. Thus, the notion that a country’s natural resources are the key to its development is fallacious. Laborisa very important resource. It is also important that some noted economists postulate that labor is the source of all value. This book examines some of the important hypotheses and principles economists have developed about labor. Although not all of them hhave been tested and accepted, they represent an index of what should be known about labor problems and labor markets, Labor Problems Labor problems represent conflict on social reality with social ideas that normally rise out of employment. Un- employment is a classic example. Most People agree that those who want work and are capable of working should have jobs. A problem would exist if people could not find the job that they had been preparing for. Unemployed people are thus considered part of the labor prob- Jem, When we talk of labor problem, we are referring here to working relation- ship which is considered below the ideal. Many of our workers sent to the Middle East countries are doing well in their Jobs. They can thus send part of their income to the Philippines for the sup- port of their families here. Contracts between the workers and the contrac. tors are facilitated by the government or by government approved employment agencies. Now, if some unscrupulous employment agencies fleece applicants and run away with the money intended for application fees — a labor problem occurs,156 INTRODUCTORY ECONOMICS Those who take part in employ- ment relationships must work out mu- tually satisfactory arrangements. ‘Among the things that have to be deter- ‘mined are the part individual workers havetoplay: theirresponsibilities, privi- leges, opportunities, etc., return for the payment given by the employers. The employers, in turn, mustclarify theterms of agreement. A mutually satisfactory arrangement spelled out from the very beginning would lessen labor problems. ‘The government and the private sectors have the capabilities to provide employment opportunities to members of the labor force who are looking for work, If both the government and the private sectors cannot adequately pro- vide this need, then big labor problem exists. Areas of Labor Problem Unemployment and Underemploy- ment Anindividual suffers eonomicand social dislocation if he is unemployed and underemployed. A person is consid- ered unemployed if he is a least 15 years old, willing and able to work but cannot find work. Underemployed is an em- ployed person but works for less than 40 hours a week even he wants to work for more hours. ‘There has been some misunder- standing among researchers and econo- mists regarding the definition of unem- ployment rate. As an example, consider the employment figures published by the National Census and Statistics Office (NCSO) for 1992 which showed the Philippine unemployment rate to 13 percent. Quite apart from the question of underemployment, it would seem im- plausible that in the middle ofthe reces- sion, the Philippines posted a figure close to what may be considered full employment in the United States or the United Kingdom, respectively. The ex- planation is tobe found in the definition of “employment”: anyone who worked one hour in the preceding three months is considered employed. In 1976, the reference period was changed from the “the past week” to “the past quarter.” Moreover, employment was expanded to include such activities as home gar- dening and raising poultry, as long as there was a harvest. These changes ef- fectively increased the numerator of the employment rates. The base of the em- ployment rate, which is the labor force, wasalsochanged. Where before thelabor forceincluded the population 10 years or over, who were either employed or look- ing for work, the cutoffage was changed to 15 years, thus reducing the size of the denominator. All these changes tend to reduce the unemployment figure.* For our purposes, however, we consider a person unemployed ifhe is at least 15 years old, willing and able to work, but cannot find work. Thus, @ member of the labor force is anyone who is at least 15 years old, able and willing to work. Unemployment rate in excess of 6 percent of the labor force represents an emergency situation and should be rem- edied right away. Unemployment is not only considered as economic problem, (oss of job, lack of income, inability to feed one’s family, etc.) but is also a social problem. Unemployment ean lead to petty crimes or outright holdups or rob- beries. It can also lead to social dissatisfactions. The government must, therefore, place the problem of unem- Rosa Linda P. Tidalgo and Emmanuel ‘Bsguerra, Philippine Employment in the 1970's" IDS Working Paper 82-02, 1982. ployment among its! Underemploym Jem. An underemple person who works fo per week, despite th to work for more he ment exists in some example, jeepney 4 shifts and in substan turally based jobs Underemploys divided in two: visibl and in visible und ible underemployms number of people hours per week and work. Invisible und fined as the numbs 40 hours or more ‘wanting additional’ rette vendors, for e underemployed. Th Shours per day for’ still want addition augment their me Inadequate Wag Wages and ¢ providea minimus can be regarded equate wages ant ity of wages to & creases in the pr from the inability plyhimselfwithtt intelligence to pe enterprises and fi ‘The coneept as that level af sumption of basi estimated for far teristics for the P ig also called the Jow which a fam ‘The Depat Employment (D¢LABOR AND EMPLOYMENT 187 ployment among its first priorities. Underemploymentis another prob- Jem. An underemployed is an employed person who works for less than 40 hours per week, despite the fact that he wants to work for more hours. Underemploy- ment exists in some part-time work for example, jeepney drivers who work in shifts and in substantially large agricul- turally based jobs. Underemployment is further sub- divided in two: visible underemployment and in visible underemployment. Vis- ible underemployment is defined as the number of people working less than 40 hours per week and wanting additional work. Invisible underemployment is de- fined as the number of people working 40 hours or more per week and still wanting additional work. Thestreetciga- rette vendors, for example, are invisibly underemployed. They work formorethan Shours per day for 40 hours per week yet still want additional hours of work to ‘augment their meager income. Inadequate Wages Wages and earnings that fail to providea minimum of comfortable living can be regarded as inadequate. Inad- equate wages can result from the inabil- ity of wages to catch up with the in- creases in the prices. It can also result from the inability of the worker to sup- plyhimselfwith thenecessary skills and intelligence to perform work needed by enterprises and firms. ‘The concept of subsistence income as that level affording minimum con- sumption of basic necessities has been estimated for families of given charac- teristics for the Philippines. The income is also called the poverty threshold, be- low which a family is considered poor. The Department of Labor and Employment (DOLE) defined poverty as the condition where a family receives insufficient income to purchase or meet the recommended minimum nutrient requirements and basic needs in cloth- ing, education, medical care, housing and fuel. Quoting the results of a 1985 fam- ily income and expenditure survey, the DOLE said the National Economic and Development Authority (NEDA)has set the poverty line for a family of six that receives P2,500 amonthin the National Capital Region (NCR) and P2,000 for a family outside the NCR. The DOLE’s labor statistics serv- ice reported that in 1985, there were around 4.785 million families with monthly income below P2,000 and 6.628 million families below P2,500, ‘The labor statistics service said that on the basis of the data gathered, the number of families below the pov- erty line now is about 58 percent of the total 9.566 million families.? Evidences ofinadequate wages can be seen in the deterioration of the pur- chasing power of the peso, the existence ofslumareas, and other conditions asso- ciated with poverty. Industrial and Labor Management Conflict When workers strike, or when employers resort to lockouts, inconven- ience between the two groups can follow. Prolonged strikes or lockouts could be harmful for both parties. Work stop- pages could result in less income for both sides. Violence, and even death, can occur because of strikes. ‘Olaf, Giron, “Poor-rich gap widens,” Manila Bulletin, Janay 1, 1987, p&.‘Has management been faithful to the letter and intent of the Labor Code? Have they taken the interest of their employees to heart, or have they been cheating them? A positive answer to this question will goalong way in resolv- ing labor-management conflict; a nega- tive answers will prolong the conflict. Has there been a restraint on the part of the unions in the exercise of their right to strike? If we look at the reports for the years 1984, 1985, and 1986, the answer is negative. The Bureau of Labor Relations (BLR) reports said that as of May 2, 1986, the year’s strike-count reached 197, exceeding the 182 strikes declared during the same period in 1985, and 86 declared in 1984. A total of 78,976 workers were in- volved in the 1986 strike count, surpass- ing 1985's figure of 46,663 workers and the 1984 count of 16,473 workers.* Economic Insecurities ‘Threats of interruptions in earn- ings or in one’s work can be regarded as a serious problem. A head of the family would be terribly insecure if he is not certain that his job would last long enough. Illness, accidents, retirements, threats of lockouts or strikes can also pose as problems. People have to provide funds for emergencies like illnesses, accidents, threats of lockouts and strikes. If work- ers arenot secure in their jobs, orif their wages are just enough to meet bare subsistence, provisions for emergencies just mentioned could simply not be met. WJoey Salgado, “Labor, cool to Aquino’s ap- peal for restraint”, Malaya, May 12, 1986, p.1 INTRODUCTORY ECONOMICS Inareport by aleading newspaper, businessmen and investors expressed fear of an escalation of strikes and work stoppages resulting from the “strike lib- eralization” policy outlined by President ‘Aquino in her Labor Day speech, May 1, 1986. According to the Employers Con- federation of the Philippines’ president, Raoul Inocentes, “considering the tight economic situation, business firms are hesitant to invest or expand." However, in fairness to the Presi- dent, she likewise exhorted the workers torestrain themselves from abusing the right to strike and rid themselves of labor racketeers and little dictators. Comparative Unemployment Figures ‘We have just seen the local figures andproblemsregarding employment and unemployment. Is the Philippines the only country having problems regarding unemployment? Time magazine reported that for 1986 and 1987, countries worldwide are expected to have a mixed impact on the uncomfortable levels of unemployment around the world. In Western Europe, the jobless rate will decline from its current 12.2% to 10.3% by the end of 1987. But no improvement at all is seen for the 13.3% unemployment rate in Britain. In the United States, unemploy- ment will rise slightly from 7% to 7.3% bythe year’s end andremain unchanged for 1987. Across the Pacific rim, jobless rate will remain relatively low for almost countries like Taiwan, South Korea, Japan, Indonesia, Hong Kong Rey M, Lagonsin, “Strikes, Work Stops, Worry Businessmen", Philippine Daily Inquirer, May 7, 1986, p. 9 Countries having un‘ Jems are Australia 7. pines 12.0% Table ‘Unemploym ‘on the Pac Australia Hong Kong Indonesia Japan Malaysia Philippines Singapore South Korea Taiwan Thaiiand Source: Time, July 18 Philippine Labo! The country’s tion’ in the third reported to be 38 5 increase of 2.93 per ous year’s 36.92 mi 1990, total labor fe annual average of 2 In 1990, of # population 15 years million or 63.53 p labor force while & million or 36.47 per labor force. Emplo 22.89 million and numbered 1.25 mil °Philippine Yeas