LABOR AND EMPLOYMENT IN THE PHILIPPINES: ISSUES AND PROSPECTS

A TERM PAPER

 

SUBJECT: 인력정책 (MANPOWER POLICY)

DEPARTMENT: PUBLIC ADMINISTRATION

UNIVERSITY: CHONNAM NATIONAL UNIVERSITY

 

SUBMITTED TO: DR. D.T. LIM

PROFESSOR, DEPARTMENT OF PUBLIC ADMINISTRATION

CHONNAM NATIONAL UNIVERSITY, SOUTH KOREA

 

SUBMITTED BY: J. B. NANGPUHAN II

Master Program in Public Administration

 

DATE SUBMITTED: 19 DECEMBER 2011

FALL SEMESTER

INTRODUCTION

Global competitiveness is something that this present generation strives to achieve. For those belonging to the Generation Y[1] era, most of them are doing their best to achieve the best education from the best universities worldwide in preparation for their future employment. However, global crisis affects all facets of life including education, employment, and further gap between the rich and the poor. Developed countries are experiencing the same scenario just like those in the underdeveloped countries. The issue of unemployment is one major concern of countries like those in Europe, USA, China, and other countries.

What then is the real problem? This question is very broad, where answers differ in specific situations. In this paper, the question will be addressed by looking into the labor sector[2] where human resource management schemes are being organized and implemented. To narrow down the perspective, the situation of HRM in the Philippines will be taken into consideration. In 2010, the Philippines has a total population of more than 93 million[3]. Its total labor force was accounted to be over 37.56 million[4] employees in 2009 consisting both of public and private sectors. This translates to 40.26% of employment compared to the total population. It is then imperative to look into the situation of the Philippines and how the present administration of President Benigno S. Aquino III will strengthen the labor force in the years to come.

HRM concerns such as employment, poverty, migration, economy, and education are key indicators to be discussed. These issues are critical for developing countries in Southeast Asia like the Philippines. All these issues will be discussed further in the succeeding parts of this paper. But before that, let us look into the evolution of labor and employment in the Philippines.

HISTORY OF LABOR AND EMPLOYMENT IN THE PHILIPPINES

In 1908, a labor and employment bureau was established during the American occupation in the Philippines[5]. It later became Department of Labor and Employment (DOLE) in 1933 by virtue of Act 4121. The DOLE is the national government agency mandated to formulate and implement policies and programs in the field of labor and employment. Along with the creation of this agency, salaries and benefits were stipulated. Below are relevant Philippine laws regulating labor and employment:

A.    Labor Code of the Philippines (1974). Known as the Presidential Decree No.442 is a code protecting labor, promoting employment, developing human resources, and equitable industrial services. After its enactment into law, the labor code has undergone series of amendments. They are the following:

1.     Promotion and development of tax-exempt employees’ compensation program to include government insurance, medical benefits, disability benefits, and death benefits (Presidential Decree No. 626 series of 1975)[6].

2.    Workers were allowed by the constitution the right to self-organization, free-trade unionism, and collective bargaining (Batas Pambansa Bilang 70 series of 1980[7], Batas Pambansa Bilang 130 series of 1981[8], and Republic Act 6715 series of 1989[9]).

B.    Creation of the Home Development Mutual Fund Law to cover housing benefits for employees of both private and public sectors – known as the Pag-ibig Fund Law (Presidential Decree No. 1752 series of 1980)[10].

C.    Wage Rationalization Act was passed in 1989 setting the minimum wage for workers in different labor fields and creating the National Wages and Productivity Commission (Republic Act 6727)[11].

D.   Creation of the Social Security System to cover the insurance and retirement benefits of all employees (Social Security Act of 1997 known as RA 8292)[12].

E.    Creation of another insurance and retirement agency by the government known as Government Service Insurance System expanding the coverage of social benefits of employees mostly on the government sector (Republic Act 8291 series of 1997)[13].
 

These laws are just among several laws enacted by the Philippine government to regulate wages, insurance benefits, retirement benefits, health benefits, and some other rights of workers. It is imperative to note that most of the laws were patterned (if not completely adopted) to the laws of the United States of America and some other nations. Like for instance, the labor code of the Philippines was created during the time when U.S.A. governed the country from 1898 until its independence in 1946[14]. Onwards after its independence, the Philippines adopted a democratic state just like the U.S. although the structure is quite different. The Philippines was able to establish laws that followed the will of the people, elected Filipinos as leaders.

In 1980, the total labor force of the Philippines was 17.38 million but grows tremendously to 37.56 million in 2009 along with the growth of its population. The table below shows the history of employment and population of the Philippines. 
 

Table 1. Labor force and employment indicators: 1980-2010

Indicators	1980	1985	1990	1995	2000	2005	2010
Labor force	17,377,112	20,233,325	23,600,379	27,596,107	30,947,835	34,671,402	37,556,019*
Population	47,063,923	54,052,849	61,628,668	69,255,386	77,309,965	85,546,427	93,260,798
% of labor force	36.92	37.43	38.29	39.85	40.03	40.53	40.27

*The total labor force for 2010 is yet to be available so the 2009 data was taken into consideration for purposes of comparison.
Source: World Bank: World Development Indicators and Global Development Finance. 2011

Based on Figure 1 above, the trend on the increase of labor force is quite parallel to the increase of population. As the population increases, the total number of employees also tends to increase from 1980 until 2010.

In 2009, the total labor force of the Philippines reached 37.56 million workers and is expected to grow even larger year-by-year with an estimated annual growth rate of 2.9%. In terms of Gross Domestic Product (GDP), the average annual growth of GDP is higher than the average annual growth on employment as can be observed in Table 2. Hence, there is a need to restructure the labor and employment in the Philippines to have a synchronized development.
 

Table 2. Annual growth rates in GDP and employment: 2001-2010 (in %)[15]

Indicator	Ave.	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010
GDP	4.7	1.8	4.4	4.9	6.4	5.0	5.3	7.1	3.7	1.1	7.3
Employment	2.9	6.2	3.1	1.9	3.2	2.2	2.0	2.8	1.6	2.9	2.8

On the other hand, the distribution of employment varies in every sector. The service sector accounts the largest share of employment, followed by the agriculture sector, and then industry sector. Table 3 shows the trend on the distribution of employment in the Philippines.
 

Table 3. Sectoral share on employment: 2001 and 2010 (in %)

Sector	Employment
	2001	2010
Agriculture	37.2	33.2
Industry	16.2	15.0
Services	46.6	51.8
Total	100.00	100.00

 

In the 1980s, while every nation has its own issues when it comes to employment, the Philippines focused more in maintaining productivity in the agriculture and services sectors. But the focus changed over the years due to the influence of industrialization as can be seen in the table above. The trend in the employment seems to divert into the services sector as more and more people engage in communications and technology. However, along with the effect of economic crisis, issues continue to pose problems in the service sector. Let us look into the issues and challenges on labor and employment.

 

ISSUES AND CHALLENGES ON LABOR AND EMPLOYMENT (2001-2010)

Labor and employment were severely affected by the world economic crisis in 1997 and in 2008[16]. Following the slowdown in GDP growth, the Philippines maintained a modest growth rate of 4.7% per annum from 2001 to 2010, lower compared to other countries. The employment growth rate is lower at 2.9% annually on the same period[17]. This follows the global trend of employment lagging behind economic growth productivity[18]. In this scenario, employment growth is strongly correlated to the growth of the economy. It means that if the economy grows at a faster pace, employment growth also tends to follow.

There are four primary reasons for the slow economic growth in the Philippines: (a) there is slow progress on technology; (b) the country is prone to economic shocks, natural disasters and extreme weather disturbances that affect the agriculture sector; (c) inadequate infrastructure resulting to poor logistics; and (d) deterioration of the environment. All these issues result to low economic and employment growths although there are other externalities perceived to affect growth in general. The administration of President Aquino dissected these issues and came up with core strategies: employment issues, rights at work issues, social protection issues, and social dialogue issues.

 

A.   Employment Issues

In the employment of workers, the government pointed out some issues that need to be addressed so that it will result to a decent and productive work environment. They are the following:

1.     Vulnerable employment. Two out of every five employed workers have no formal work arrangements, no access to benefits or social protection, and more at risks to adverse impact of economic cycles[19]. This means that out of 37.56 million employees in 2009, over 15 million are vulnerable to risks.

2.     Youth unemployment. Globally, one out four in the working age population is between 15 and 24 years old. About half of them are unemployed. This is also the case in the Philippines. In 2010, of the total 2.9 million unemployed, more than half were in the age range of 15-24.

3.     Educated unemployed. Unemployment among the educated is also high. From 2005 to 2010, an average of 39.8% of the unemployed or 1.1 million reached college.

4.     Job and skill mismatch. Due to inadequate employment opportunities in the formal economy, limited labor market information and inadequate academic preparation, the mismatch between jobs and skills compounds the problem of high levels of unemployment of youth and the educated. Employers had difficulty filling up their vacancies because of shortage of applicants with the right competencies and qualifications for the jobs.

 

B.    Rights at Work Issues

The following are issues that need to be given rational attention:

1.     Outdated labor code and other labor and social legislations. The country’s labor code is now 37 years old which means that some of the provisions entered into the code are no longer applicable to this present generation. Likewise, other national laws are inconsistent to ratified conventions.

2.     Workers in the informal economy are not covered by the labor code of the Philippines. This means that they have no established contracts for labor and are deprived to benefits such as health, retirement, leave benefits, among others.

3.     The rights of workers to freedom of association and collective bargaining are limited. These rights are not aligned to the International Labor Organization.

4.     Lack of protection of workers through labor standards.

 

C.    Social protection Issues

Under social protection, the goal of improving quality of life has been on the sidelines as observed in the Philippines. The issues are the following:

1.     Limited social protection coverage. Only 31% of the total employed are covered by the social security schemes.

2.     Minimum wage as a social protection measure has limited coverage.

3.     Limited protection to Overseas Filipino Workers (OFWs).

4.     Children remain vulnerable as they continue to work and engage in hazardous occupations in several industries.

 

D.   Social Dialogue Issues

Social dialogue is primarily indicated by how much workers are being organized, how many collective agreement are concluded, and how labor education services are being extended. It also refers to a labor relations system which encourages less adversarial modes of setting disputes and which aims to ensure speedy disposition of labor justice. Under this core are issues that need to be addressed:

1.     Decreasing representation of workers in the trade unions and collective bargaining agreements.

2.     Old forms of representation of workers and not conducive policy environment for social dialogue.

3.     Delay in the disposition of labor cases and multiple layers in labor adjudication.

 

For the present administration to address these issues in the Philippine labor sector, they have pointed out some new and productive strategies based on international standards. The next topic will be the strategies under the Department of Labor and Employment to be followed by the administration of President Aquino.

 

STRATEGIES FOR LABOR AND EMPLOYMENT: THE PROSPECTS

The Philippine labor and employment plan for 2011 until 2016 was conceived primarily to address the issues earlier raised in this paper. The ultimate goal of the plan is to promote inclusive growth through decent and productive work. This can be achieved based on the concepts of transparency, accountability, rule of law, and effective and impartial performance of the regulatory function of the government.

It is also recognized that a big part of the solution lies outside the government itself. Active participation of the civil society and the media in governance, monitoring, and feedback will help attain the goal of the plan.  The basis in responding to the issues on labor and employment can be found in the table below. 

Table 4. Platform for Development on Philippine Labor Force

Strategy	Focus
1.   22-Point Platform and Policy Pronouncement on Labor and Employment	To address President Aquino’s social contract to the Filipino people.
2.   Philippine Development Plan 2011-2016	To develop a sustainable labor and employment.
3.   Decent Work Common Agenda Strategic Objective	To create greater opportunities for women and men by promoting decent and secure working environment.
4.   Millennium Development Goals	To eradicate extreme hunger and poverty to families of women and young workers.

Below are particular strategies in response to the issues raised in this paper. These strategies are to be attained within the period 2011 until 2016 and beyond:

 

A.    Response to Employment Issues: the goal is to improve employment levels and access to employment opportunities.

1.     Generate an average one million local employments per year to be concentrated under industry and services sector. As presented earlier, the statistics show that industry and service sectors are of great potential.

2.     Formulate national industry and investment policies through social dialogue that will pave the way for the creation of plans. This will lay down the mapping of opportunities, planning, coordinating, and promoting the growth in priority areas.

3.     Promoting better business environment with the overall goals of raising the competitiveness of the country and improving productivity and efficiency.

4.     Development of infrastructure to include irrigation, farm-to-market roads, post-harvest facilities, reforestation , river dredging, seaport development, water supply systems, drainage and sewage systems, and classroom construction. These developments will help boost employment for the unemployed.

5.     Promoting entrepreneurship by instituting public-private partnerships.

6.     Addressing the job and skill mismatch problem by better coordination between employers, academe, and the government.

7.     Enhancing human capital through education and training.

 

B.    Response to Rights at Work Issues: the goal is to improve quality of employment

1.     Instituting policy reforms and aligning labor and social legislation with the 1987 Constitution and international treaties and ILO conventions in a sound and realistic manner. This is to address the outdated Labor Code of the Philippines.

2.     Provide an enabling environment for the observance of the constitutionally protected rights of all workers particularly their right to freedom of association and collective bargaining and the right to participate in the policy-making process and dialogues.

3.     Pursue the process of ratification of ILO Conventions that promote the rights of workers domestic and abroad.

4.     Ensure protection of overseas Filipino workers, including those in vulnerable occupations.

 

C.    Response to Social Protection Issues: the goal is to expand access on benefits, universal coverage and accessibility on social protection for a safe working environment.

1.     Strengthen the community based on employment program particularly the emergency employment component to create jobs that provide income to vulnerable workers and their families.

2.     Develop sustainable livelihood and entrepreneurship opportunities for vulnerable workers.

3.     Intensify implementation of active labor market policies and programs that shall enhance employability of vulnerable workers (workers affected by crisis, workers in the informal economy, displaced and distressed OFWs, youth and women).

4.     Transform the brain-drain phenomenon into brain-gain benefits by enhancing capabilities and entrepreneurship of returning OFWs.

5.     Strengthen measures to prevent and eliminate the worst forms of child labor.

 

D.    Response to Social Dialogue Issues: the goal is to promote participative governance, sectoral accountability and ownership of the Philippine Labor and Employment Plan through social partnerships.

1.     Improve adjudication in the country by ensuring transparency, efficiency and integrity in the labor dispute settlement system.

2.     Provide an environment for more inclusive tripartism[20] and social dialogue to make representation of interests of sectors more broad-based and highly participatory.

3.     Promote venues for social dialogue particularly at the plant/firm, industry and local government levels.

 

PRESIDENT AQUINO’S 22-POINT PLATFORM AND POLICY PRONOUNCEMENTS ON LABOR AND EMPLOYMENT (2011-2016)

Having discussed the issues on labor and employment in the Philippines, it is imperative to include in this paper the agenda of the present administration, the 22-point platform and policy pronouncements on labor and employment agenda of President Aquino. This is a continuation of the prospects to be expected on labor and employment after five years.
 

Table 5. Platform and Policy Pronouncements on Labor and Employment

Goal: More investment in the country’s human resource for better competitiveness and employability while promoting industrial peace based on social justice.
Item no.	Platform and policy pronouncements
1	Review existing plans and programs in accordance with the principles of a “zero-based” budgeting system where budget allocations are shaped by their performance and their compliance with Commission on Audit (COA) reports.
2	Address the labor mismatch problem by promoting better coordination between employers, academia, and government through strengthening both public (e.g. Public Employment Service Offices – PESO) and private sector labor market information and exchange institutions, especially at the local levels.
3	Promote not only the constitutionally protected rights of workers but also their right to participate in the policymaking process.
4	Review and evaluate the Department of Labor and Employment (DOLE) ruling allowing the Philippine Airlines Management to outsource its critical operations, resulting in the possible mass layoff of some 3,000 employees.
5	Work with the private and labor sector to strengthen tripartite cooperation and promote industrial peace.
6	Reform labor arbitration and adjudication systems by streamlining procedures, removing red tape, and at the same time, restore integrity and fairness in the system. Ensure that 98% of all pending labor cases are disposed of with quality decisions by April of 2011.[21]
7	Align the country’s labor policies with international treaties and ILO conventions in a sound and realistic manner.
8	Work with relevant government agencies in enhancing social protection programs such as social security, workmen’s compensation, health insurance, and housing for laid off workers while strengthening the Emergency Community Employment Program (ECEP) to cease jobs immediately so people can still have income to spend for their basic needs.
9	Review the continued deployment of workers to counties, which are high- and medium-risk areas, as well as the continued deployment of workers in high-risk occupations.
10	Create an efficient “one-stop shop” for processing applications for overseas work and seeking redress for grievances.
11	Audit the Overseas Workers Welfare Administration to rationalize the management of its funds, in terms of the benefits provided as well as how the funds are invested.
12	Work with the DFA to transform Philippine embassies, consular offices, and Philippine Overseas Labor Offices (POLOs) into centers of care and service for overseas workers by assigning more foreign service officers to post where there are many OFWs and train them in the needs of the communities they serve.
13	Invest in the formal and regular skills training and upgrading of our services workers with the Technical Education and Skills Development Authority (TESDA) and utilize returning OFWs to conduct training so that they may transfer skills learned abroad.
14	Fully implement the Anti-Trafficking in Persons Act of 2003. Pursue and prosecute those engaging in illegal and predatory activities, including fixers, scammers, and especially traffickers that target women and children.
15	Assist OFWs in achieving financial stability through training, investment, and savings programs.
16	Address the social costs of migration by working closely with communities and families of OFWs to provide effective social welfare services such as counseling and pre-departure orientation seminars. Support the creation or strengthening of community-based support groups for families of OFWs.
17	Improve seafarer’s upgrading program, credit/loaning program, self-insurance coverage program, which includes life insurance, burial, disability and dismemberment benefits, and reintegration programs.
18	Complete a global trading master plan that aims to establish worldwide trading posts that rely on the labor, knowledge and entrepreneurial spirit of Overseas Filipino Workers (OFWs).
19	Facilitate the re-integration of returning OFWs by favorable terms of investment, tax incentives, access to government financial institutions and other benefits that are offered to foreign investors.
20	Regularly package and disseminate information on agency budgets, bidding and procurement documents and SALNs (Statement of Assets Liabilities and Networths) of senior government officials to ensure transparency and accountability.
21	Ensure that the DOLE and its attached agencies are streamlined and rationalized to have clear-cut and distinct mandates and those qualification standards, especially on eligibility, will be strictly followed.
22	Work with the Civil Service Commission (CSC) to ensure that performances of government agencies and civil servants will be evaluated rationally and systematically. This can be achieved through an effective and measurable performance management system to be approved by the CSC such as directly linking the CSC Performance Management System-Office Performance Evaluation System (PMS-OPES) with the Department of Budget and Management (DBM) to ensure the accountability of government agencies and officials.

CONCLUSION
 

It can be said that the Philippines was primarily influenced by the United States of America when U.S. government decided to take control of this small country from 1898 up until its independence in 1946. The Philippines adopted a democratic form of government similar to U.S.A. Along with this, laws on labor and employment were mostly patterned to the U.S. in which the Filipino people have learned to adopt. It can be observed in this paper that government intervention is very important so that equality and fair treatment between employees and their employers will be closely monitored. Government efforts in promoting social benefits (e.g. insurance, retirement, health, and housing) are democratic concepts based on the premise, that is, “quality of life”.

Inequalities on labor and employment are issues that need to be given utmost attention by the government. Vulnerable employment, youth unemployment, educated unemployed, job-skill mismatch, outdated labor code, limited social benefits, limited workers’ rights, and child labor are just among several issues faced by the Philippine labor system.

The present administration of President Benigno S. Aquino III has laid out plans to improve labor and employment in the Philippines. It is fortunate to note that the present administration acted to give more investments on human resource development. This can be achieved by strengthening strategic partnerships in the private sector. So far, the economic performance of the Philippines compared to its neighboring countries is said to be on the right track. Hence, strategies to strengthen labor and employment is deemed possible in the future as long as there is political stability and economic stability.  It is then hoped that there is inclusive growth through decent and productive work in this growing nation.

 

REFERENCES
 

Steven W. Hays, Richard C. Kearney, Jerrell D. Coggburn. 2009. Public Human Resource Management: Problems and Prospects, 5^th Edition. U.S.A.: Pearson Education Ltd. pp.278-287

World Bank. 2011. Philippine Population. http://databank.worldbank.org/ddp/home.do

------------------------. Total Labor Force. http://databank.worldbank.org/ddp/home.do

Department of Labor and Employment. 2011. Philippines www.dole.gov.ph

Chan Robles. 2011. Virtual Law Library. www.chanrobles.com

Maria Christine N. Halili. 2010. Philippine History, 2^nd Edition. Manila, Philippines: Rex Bookstore, Inc. 141-198

The Philippine Labor and Employment Plan: Inclusive Growth through Decent and Productive Work. 2011-2016.

International Labor Organization. 2006. Global Employment Trends in Brief. www.ilo.org

Maria Carmen Galang. 2004. The Transferability Question: Comparing HRM Practices in the Philippines with the US and Canada. International Journal of Human Resource Management. USA: Routledge Taylor & Francis Group. 207-233.

Kenneth Ronquillo, Fely Marilyn Elegado-Lorenzo, Rodel Nodora. 2005. Human Resources for Health Migration in the Philippines: A Case Study and Policy Directions. Bangkok, Thailand: ASEAN Learning Network for Human Resources for Health.

Ames Gross, Jon Minot. 2007. The Philippine HR Update. Pacific Bridge, Inc. www.pacificbridge.com/publication.asp?id=103

Ames Gross, Rachel Weintraub. 2005. The Philippine HR Update. Pacific Bridge, Inc. www.pacificbridge.com/publication.asp?id=12

Ames Gross. 2001. The Philippine HR Update. Pacific Bridge, Inc. www.pacificbridge.com/publication.asp?id=11

Divina M. Edralin. 2001. Issues in human resources management and approaches to their solution. De La Salle University, Philippines: Notes on Business Education Volume 4, No.1.

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[1] Generation Y is also called the Millennial Generation or the Generation Next. They are generally born somewhere from mid-1970s to early 2000.
[2] Labor force trends affect human resource management in different ways. An example is the effect of an aging labor force to the management of an organization.
[3] Available at <http://databank.worldbank.org/ddp/home.do>. Accessed on Dec. 14, 2011.
[4] Available at <http://databank.worldbank.org/ddp/home.do>. Accessed on Dec. 14, 2011.
[5] Available at <http://www.dole.gov.ph/secondpage.php?id=57>. Accessed on Dec. 15, 2011.
[6] Available at <http://www.chanrobles.com/presidentialdecreeno626.html>. Accessed on Dec. 14, 2011.
[7] Available at <http://www.chanrobles.com/bataspambansabilang70.htm>. Accessed on Dec. 14, 2011.
[8] Available at <http://www.chanrobles.com/bataspambansabilang130.htm>. Accessed on Dec. 14, 2011.
[9] Available at <http://www.chanrobles.com/republicactno6715.html>. Accessed on Dec. 14, 2011.
[10] Available at <http://www.chanrobles.com/legal4pagibig.htm#HOME%20DEVELOPMENT%20MUTUAL%20FUND%20LAW%20OF%201980>. Accessed on Dec. 14, 2011.
[11] Available at <http://www.chanrobles.com/legal4wagerationalize.htm>. Accessed on Dec. 14, 2011.
[12] Available at <http://www.chanrobles.com/legal4sss.htm#SOCIAL%20SECURITY%20ACT%20OF%201997>. Accessed on Dec. 14, 2011.
[13] Available at <http://www.chanrobles.com/legal4gsis.htm#GOVERNMENT%20SERVICE%20INSURANCE%20SYSTEM%20ACT%20OF%201997>. Accessed on Dec. 14, 2011.
[14] Upon its independence, the Philippines adopted a democratic form of government that is patterned to U.S.A.
[15] The Philippine Labor and Employment Plan: Inclusive Growth through Decent and Productive Work. 2011. pp.3-13. 
[16] The Philippine Labor and Employment Plan: Inclusive Growth through Decent and Productive Work. 2011. pp.3-13.
[17] The Philippine Labor and Employment Plan: Inclusive Growth through Decent and Productive Work. 2011. pp.4.
[18] International Labor Organization. 2006. Global Employment Trends in Brief.
[19] The Philippine Labor and Employment Plan: Inclusive Growth through Decent and Productive Work. 2011. pp.23-25.
[20] In the Philippines, tripartism is being treated as an approach to economic development in the labor sector by forming tripartite contracts between the government, the workers, and the business sector or the employers.
[21] This particular agenda is yet to be verified to the Department of Labor and Employment about its status. Labor cases have been filed in the Philippine court, the concrete report if the agenda have been accomplished should be verified later.