The divisive and conflict-ridden system of minimum wage fixing in the Philippines requires the development of alternative policy approaches to make the system meet the multiple and yet colliding development goals set by the minimum wage law: decent living wage for the workers, reasonable returns on investments, higher employment, increased productivity and general socio-economic stability for the country. The joke is that even Albert Einstein would not be able to come up with the mathematical equation that can successfully combine all the factors listed in the law.
So far, the work of the various Regional Tripartite Wages and Productivity Boards (RTWPBs) has been focused mainly on the monitoring of the movement of prices and how wages should be adjusted to the resulting inflation. Industry productivity and better worker lives beyond the minimum are hardly discussed. Thus, the perennial lament of the workers and their unions that the RTWPBs are stuck with inflation-based wage adjustment system. No progressive movement toward the attainment of decent living wage.
But are there alternative approaches available to the policy makers?
There are. One of them is the institution of collective bargaining. The International Labor Organization (ILO), which observes its centenary this year, has long been promoting the system of collective bargaining as the modern, enlightened and democratic way of determining wages and conditions of work. In integrative bargaining, the system of collective bargaining involves social dialogue and social consultation on how both parties can resolve problems at the work place and how the two sides can prosper together.
In fact, collective bargaining played a major role in the growth of Europe, North America and Japan in the post-war decades of the 1940s-1970s. These are often referred to by economic historians as the “golden decades” of capitalist growth and social development in these countries. These were the decades that saw the tremendous expansion of the trade union movement and the acceptance by these countries of the system of collective bargaining as the primary means of addressing wages, hours of work, social security, dispute settlement and other conditions of work. One outcome of the foregoing historical development is the transformation of these countries into welfare states, which are able to provide strong social protection to workers such as universal health care, unemployment insurance, and so on. In turn, the programs of social welfarism and social protection gave these countries the social stability and societal cooperation needed to bring them at a higher level of economic growth and development.
In short, the healthy social partnership between industry and unions, nurtured through collective bargaining and social dialogue, became a pillar for the sustained growth of the economy. This is best illustrated by the case of Germany where the system of collective bargaining was further reinforced by the Law on Co-Determination, which requires companies with 2,000 or more workers to have in the company supervisory boards representatives of the workers, and for the smaller companies, to have “work councils”, or forums for sustained dialogue between management and the workers on various work and productivity issues. The German system was further strengthened by the industry participation in the dual system of skills development and continuing support of the State for technological upgrading.
In Japan, labor relations were tumultuous after World War II. However, in the 1950s and 1960s, unionism grew (to as high as almost 50 percent) and Japanese industry learned to accept the unions as a partner in productivity programs. As a result, majority of the unionized firms set up joint consultation system featuring a system of two-way communication which had to deal not only with workers’ concerns (e.g., leave, safety and health, bonus, pension, work schedule, welfare and cultural activities, etc.) but also “management issues” such as business plans, new technology, organizational changes, production and sales plans, and so on. By the late 1960s, Japan was hailed as a miracle economy.
But the Japanese miracle was a product of the joint effort of unions and industry, made possible by the system of collective bargaining and social dialogue. In some industries, collective bargaining and labor-management consultation/communication also gave birth to productivity “gain-sharing” arrangements, where the gains of productivity were distributed equitably to industry (as added profits or investible funds), to unions and workers (as added income or bonuses) and to consumers (in the form of reduced prices).
Now, how about the Philippines?
The country has a relatively long history of unionism and collective bargaining compared to other Southeast Asian countries. The Minimum Wage Law was enacted in 1952 and the Industrial Peace Act, which introduced the right of unions to bargain collectively, in 1953. Both laws were drafted with the help of the US Mutual Security Agency (the forerunner of the present USAID). Both laws were part of the social reform package which the US MSA tried to push in order to help the country contain the Communist-led insurgency and social-labor unrest, which raged in 1948-1951.
Both laws were opposed by the nascent Filipino industrializing class led by the Araneta business family. However, the rapid growth of industry in the 1950s and 1960s, under the program of import substitution, rendered the business complaints against unionism and collective bargaining meaningless. In fact, Central Bank surveys in the 1960s showed that CBA wages were much higher than the legislated national minimum wages. The CBA wages were the wage leaders, or reference wages for new industries being formed.
The 1950s-1960s happened to be the golden age of Philippine industrialization. This was also the period that saw the tremendous growth of unionism and, like in Europe, the acceptance by industry of the institutions of unionism and collective bargaining.
However, things changed when martial law was declared in 1972. Strikes and peaceful assemblies were prohibited in the early years of martial law. Meantime, the government, with the help of the IMF-World Bank, introduced a new economic blueprint called “labor-intensive export-oriented industrial” development or LIEO. The assumption behind the blueprint was that jobs would mushroom with the inflow of investments into LIEO industries such as garments and electronics industry. It was against this backdrop that the twin institutions of unionism and collective bargaining weakened, while the minimum wage became a “wage leader”. Then President Marcos presided over the annual May 1 celebration in order to announce any new adjustment in the minimum wage or cost-of-living allowance.
The problem is that the LIEO jobs promises were not delivered; instead, more and more workers began looking at the overseas labor market in search of greener pastures. Those who stayed at home had to reconcile themselves to low wages and the repressive atmosphere against unionism. The late Professor Perfecto Fernandez, the leading UP legal scholar on labor laws, summed up the sad decline of unionism in this environment by writing that LIEO and martial law had transformed collective bargaining into “collective begging”.
In the 1980s (1980-1987), there was a revival of unionism, fueled largely by the socio-economic crisis that consumed the country due to the explosion of the debt crisis, assassination of Ninoy Aquino, flight of capital and the crisis of the dictatorial regime. The People Power Revolt and the rise of the Corazon Aquino regime also gave the union movement added energy.
Unfortunately, the opportunity to have a Social Accord involving the unions, industry and government in support of a new era of enlightened industrial relations and strengthening of the system of collective bargaining and social dialogue as the way forward was missed by the EDSA Regime and the succeeding administrations. After 1987, unionism began a steady decline, and so is the system of collective bargaining. In 2017, the ILO Manila office, in its diagnostics on decent work, estimated that the number of workers covered by CBAs for 2016 was roughly around 200,000 – in a country with a labor force of 43 million or so!
What happened? More in the next column.