ONE of the very few issues that all five of the presidential candidates agree on is that the practice of labor contractualization must be abolished, a plan that has made some business owners and executives very nervous. Government regulation of contractualization is a critical issue, particularly in an employment market that is as tenuous as the Philippines’, but as is usually the case with important public policy questions, advocates on both sides have reduced their arguments to a collection of sound bites riddled with inaccuracies, half-truths, and a few instances of outright dishonesty.
The first fallacy is that contractualization itself is bad, which is the implication of simple declarations like “put an end to contractualization.” It is a perfectly valid and useful employment model—it’s difficult to see how some sectors, like IT or construction, could function without it—and if done right, which is not difficult to do, it has benefits for employer and employee alike. But this country has a talent for taking familiar and generally uncontroversial concepts—like pizza, or democracy—and turning them into overcomplicated nightmares.
There are two main complaints about the way contractualization is practiced here.
The biggest is the practice of ‘endo’ or ‘end of contract,’ in which a worker is serially re-hired on five month contracts to dodge the legal stipulation that an employee must be considered permanent after six months.
The second complaint, which doesn’t get as much attention, is underpayment of contractual workers, which happens two ways. Employees are often misclassified in order to qualify them for a lower minimum wage; and more generally, many employees are paid less on a contractual basis for work that pays significantly better in comparable permanent jobs.
All of those practices are already prohibited by law, but the law has so many loopholes that most of the practitioners are doing them completely legally. Shortly after the second presidential debate, during which all the candidates vowed to “put an end to contractualization,” retail giant SM attracted widespread derision from critics when it told the media it did not engage in contractualization, and was therefore unperturbed by the promises of the candidates.
Despite the howls of protest on social media that “SM is lying,” they really were not: SM and other big retailers do not actually hire contract labor, apart from seasonal workers or other strictly temporary jobs. What they do instead is tap the services of an employment agency to supply labor; this isolates SM from most of the responsibility for making sure labor rules and regulations are followed, since the employees are technically not working for SM, but for the agency that sent them. The agency, in turn, can evade much of its responsibility because legally, its relationship with the workers is less employer-employee and more contractor-client; if the pay or other terms of employment are less than what the law stipulates, the fact that the worker freely agreed to it by signing a contract makes it very difficult for the worker to complain about it later.
The second fallacy of the “no to contractualization” position, then, is that the solution lies in more law. It does not; it lies in rationally enforcing the existing law, which in turn means subjecting employment agencies to a great deal more scrutiny than they are now.
It should not escape anyone’s notice, however, that in all the campaign rhetoric about ending “endo,” no one has suggested strengthening oversight on employment agencies, or even mentioned employment agencies at all. It is not hard to imagine why not: Without employment agencies, the country’s most valuable export—live bodies—would completely collapse, and take 8 to 10 percent of the country’s gross domestic product with it. Thus, to avoid that disastrous prospect, policymakers for the past 20 years or so have assiduously avoided regulating the labor supply business too much, and have instead wasted their efforts—and will continue to do so, if the promises of the candidates can be taken at face value—looking for solutions in the wrong places. Labor abuses have not been reduced at all by layering new laws and regulations on ones that are ambiguous and hard to enforce, except to make hiring and keeping people employed more difficult for most businesses, so there is no reason to expect that the same approach will work now.