Labor and Productivity

Understanding the Federation of Philippine Industries’ (FPI) advocacy on labor and productivity requires looking at the broader context of Philippine labor and economic development.

FPI’s advocacy aims to create a labor environment that supports industrial growth, enhances productivity, and ensures the competitiveness of Philippine industries in the global market.

Regarding legislated wage hike, however, the Federation greatly appreciates the noble intention for legislated wage hike, however, we humbly manifests our vehement opposition of a legislative wage hike for the following grounds:

1. Companies in the same industry are not similarly situated because of the difference in terms of capitalization, location, machinery, workforce, among others.  In fact, some are earning, while the others are really losing and to legislate a wage hike that will affect all of them will not only deprive them to recover, but, they could even go to jail in view of the criminal liability provision therein.
2. Most of our members have existing Collective Bargaining Agreements (CBA) which were voluntarily agreed upon by the employers and its employees in accordance with the prevailing condition known to the parties in the respective companies.
3. Smuggling must be stopped. The unabated smuggling is costing government more than PhP250Billion revenue loss in terms of unpaid taxes and duties, annually.  It is continuously causing the influx of substandard/cheap smuggled goods which are unfairly competing with locally manufactured products (that regularly pays taxes) that already resulted in company closures and loss of jobs.
4. Using various econometric methods, a study finds that the minimum wage policy reduces employment in small firms. It causes small firms to reduce their production workers. The negative impact of minimum wages emanates from scale effects. Because of greater marginal costs, it is difficult for small firms to mature into larger-scale firms. In the process, the production and the demand for production workers decline. With the decline of small-scale firms, larger firms are able to acquire more production workers, presumably at starting wages lower than what experienced workers would have received in smaller firms. These firms are not able to rehire all the laid-off workers, and the poorer workers who may need cash in the short term may find these arrangements inferior to their previous jobs.

   Furthermore, because of the minimum wages, firms are reluctant to hire younger, less educated and female production workers. To minimize costs, increasing training for these younger and less educated production workers may no longer be an option as minimum wages rise. These findings may have serious consequences in the way the Labor Code affects production efficiency, as well as social protection. There is thus a need to coordinate these policy areas in a way that reinforces one another.

5. Raising the minimum wage, however, is a formula for causing unemployment among the least-skilled members of society. The higher wages are, the higher costs of production are. The higher costs of production are, the higher prices are. The higher prices are, the smaller are the quantities of goods and services demanded and the number of workers employed in producing them. These are all propositions of elementary economics that all educated citizens and political leaders should well know.
6. Government, with all due respect, must focus instead on the generation of employment as well as maintaining the security of existing jobs.
7. Moreover, our Regional Wage Boards are in place where the employer, labor, and government are duly represented, – that could readily determine the reasonable minimum wage taking into consideration the standard of living in the different regions as well as the actual employer-employee condition therein in relation to the market. Hence, they are better equipped and have a better understanding of the situation on the ground. And,
8. Finally, the granting of a legislated wage increase might even affect the loyalty of the employees toward their employers, which good relationship they have both long nurtured.