“Put the politicians on minimum wage and watch how fast things change.”
Last Thursday, I had lunch with a good friend of mine last week to discuss several real estate properties that are “in distress” so to speak.
One topic of our conversation was the growing unemployment rate in the Philippines during the term of the current Administration. She then told me a very good and viable proposal to create jobs for our countrymen.
She said to me, “Government should develop ‘labor zones’ where the minimum wage is suspended so that foreign investors will have the competitive advantage when they come here to establish their business. And those businesses that will locate inside these zone will be required to give incentives to the workers through profit sharing schemes or other performance-based incentives.”
Dominique said the same thing to her mother over breakfast last May 1. Then, before lunch she was surprised to learn that a similar idea was being broached by former NEDA Secretary General Gerardo Sicat in his article last May 1, 2013 in the Philippine Star.
When her mother asked if Dominique read the article of Mr. Sicat prior to having breakfast, she said “No.” I then searched for the said Sicat article and read it.
To me the idea of a “labor zone” makes sense.
Of course, such proposal is controversial in the eyes of the leaders in the labor sector and certain legislators. There must be an enabling law that will operationalize such a zone. But it will be an uphill battle.
There are several key policy issues that should be ironed out before a bill is filed in Congress. Where will it be established? Can the current PEZA zones be declared as “labor zones?”
During the Labor Day rallies, we heard labor leaders ask for an increase in the minimum wage, which has been an annual demand of theirs. However, have we heard anything from the side of the unemployed – the people who do not have work and do not receive any wage at all?
Raising our minimum wage every year is unsustainable and very dangerous for those who are currently employed. It has been reported that our manufacturing sector has been contracting and that jobs in manufacturing are the only hope for the poor.
The HIGH MINIMUM WAGE is one of three major challenges for foreign investors who want to invest in the manufacturing sector in the country. The other two challenges are HIGH POWER RATES and a STRONG PESO.
We are losing out on the low wage regime in Indonesia and Vietnam. These challenges are keeping Foreign Direct Investments (FDIs) out of the Philippines and into Indonesia, Vietnam and Thailand, as well.
Another key policy issue that has to be resolved is how low should the prescribed wages inside the zones be? Such a decision should definitely not be left in the hands of the private sector.
I think it is a no-brainer to mandate that all those laborers working inside the “labor zone” shall have compulsory minimum coverage in SSS, PhilHealth and PAG-IBIG from the first day that they work for the manufacturing companies.
Furthermore, as suggested by Dominique the locators in these zones shall be required to implement a mandatory profit-sharing scheme for the workers as approved by the Department of Labor and Employment.
The importance of these “labor zones” is the creation of jobs for the unemployed. In summary, as a result of paying for below minimum wages to its workers, the companies operating in the zones are required to share the profits of their operations. This may be a sensible and practical compromise in order give employment to those without work at present.
We can only attain inclusive growth that economists are talking about if the current unemployed Filipinos are given jobs to earn a decent living during this period of economic boom we are experiencing.
Do you think it is a viable solution to unemployment? Would you support such a bill if introduced in Congress? Let us know.