Wage fixing and CBA negotiation dilemmas

LAST JULY 18, 2013, A Manila newspaper (not the Inquirer) quoted DOLE NCR Director Alan Macaraya, "The board approved the holding of public hearing, which means there will be a salary hike. But the amount will still have to be determined."

Reactions

Ed Lacson, President of the Employers Confederation of the Philippines (ECOP) texted DOLE Secretary Linda Baldoz, "Good morning, Madam Secretary Alan Macaraya seems to be the spokesperson of TUCP. I tried to hold my comments about his press releases, wage hike in September, and today he gave assurance to NCR workers of a wage increase. He even said the wage hearing is being conducted to determine only the amount of increase. "If this is so, why bother with the hearing? NEDA computes the peso erosion rate, which is one of two bases for a wage order. The other is the capacity of employers to pay."

Secretary Baldoz forwarded Director Macaraya's reply, "That is not true. The slant made by media cannot be attributed to me…. Rest assured that I'm mindful of the sensitivity of the issue and will never compromise my neutrality as Chair of the Wage Board."

Lacson believes that Director Macaraya's denial of the news item … will need a leap of faith on the part of employers.

So far, the ECOP, the Philippine Exporters Confederation, Inc., and the Philippine Plastics Industry Association, Inc. have submitted their opposition to the impending upward adjustment in the NCR minimum wage increase. Other business organizations and professional associations like the Joint Foreign Chambers, MAP, Makati Business Club, PMAP, BPAP, SEIPI, PALSCON, and several others are preparing their position papers in time for the August 8 public hearing called by the NCR RTWPB (wage board). At this time, nobody knows if a boycott can send a stronger message more than a position paper.

Well, when Congress created the RTWPB, it was meant to be a wage and productivity board. But I still have to attend consultations and hearings where the board discusses or listens to arguments pertaining to productivity or lack of it in the Philippines. Productivity seems more observed in breach in Wage Board hearings.

Productivity

The word productivity did not exist in the dictionary during the time of Karl Marx. In countries where productivity is very high -- e.g., Japan, Hong Kong and Singapore -- salaries and wages are also high. There is no problem with high salaries coupled with high productivity.

But when wages are high and productivity is low, something's got to give -- competitiveness. When the Wage and Productivity Boards first came into being, the minimum wage in Metro Manila was P89 per day. As we write, the minimum wage is P426 plus P30 cost of living allowance (COLA). Effectively, the minimum an employer shells out for unskilled work is P456 per day, not including other employer obligations that are mostly wage-related. If you track on a graph the increases in minimum wage and productivity year by year, you will be amazed that the productivity increase is almost a flat line, while the wage increase line ascends like crazy.

The Philippines will have lesser problems in global competitiveness if only we don't deviate radically from basic economic principles such as the correlation between wages and productivity. Our policy makers, especially the legislators, need to understand that all the economic theories in the world boil down to one thing, "There's no such thing as a free lunch."

Somebody's always footing the lunch bill, but often the bill is passed on to those who think they're savoring the so-called free lunch. For an economic activity to be sustainable, all sectors of society must contribute to the creation of value.

Wage fixing

Usually, market forces work to determine the right wages. The problem with that is sometimes there are rent-seeking sectors of the market that could keep wages lower than appropriate levels. It is a good argument for involving government in wage fixing. Government is more comfortable when policies (including wage policies) are discussed among the tripartite partners -- government, employers and employees.

The problem arises when policymakers don't observe the rules they set in making wage policies. The problem with wage fixing in the Philippines is that it has ceased to be an economics-based activity. Read my lips -- wage fixing here is more political than anything else. Often, the policies tend to be harmful to the sector that the policies want to protect simply because of ingrained myopia and "short-termism" among the policy makers.

Negotiations

Often, collective bargaining is a better way to fix wages. But with the RTWPB's mandating annual adjustment in the minimum wages all over the country, they have become the collective bargaining agents for all workers, organized or non-organized, including the exempt.

Time was when collective bargaining agreements (CBA) covered more than 2.5 million workers in the Philippines. Today, when the workforce has practically doubled, the workers covered by CBAs are down to 200,000. What gives?

There are some 6.1 million workers in the formal sector today. The two single biggest industries that employ people are the BPO (business process outsourcing) and the semi-conductor and electronic manufacturing sectors. Between them, they have roughly 1.5 million workers. In the BPO sector, workers have not formed unions, despite the eagerness of some labor organizers.

In the past, unions sprouted in the sweatshops and in large companies that operate like sweat shops. Today, BPO and manufacturing companies have modernized, not only their facilities but the way they treat and retain their people. When a union organizer would urge the BPO employees to form unions and say, "You have nothing to lose but your chains," the employees fail to see the oppressive chains. They don't want to lose their newfound freedoms to be themselves, to co-determine work arrangements and compensation, to focus on their passion, to reap rewards of a productive work life, and to contribute significantly to their community, society and country.

Responsible unions

Both employers and employees today have realized that much can be gained mutually from working with each other -- not against each other. The CBA negotiation, which happens every two or three years, is an activity much awaited by both parties. In the past, it was a nightmare for the lawyer, HR manager and the negotiating team.

There was a time when strikes more than 500 per year. Today, there's hardly one per semester. Workers have already realized that nobody wins in a strike -- except the competitor. Employers have also realized that all the money and technology will not produce the desired results unless they care for their employees and treat them with dignity, and reward them for their value contribution.

Union leaders today are more responsible, and even bright, negotiators. Most collective bargaining negotiations have transformed into problem solving sessions. Responsible unions today are fully aware of the following bargaining realities:

o You can't draw water from an empty well. The best way to get big CBA increases is to give the company no reason to decline your CBA demand because you know you have contributed to increasing the company's net income, market share, financial viability, and productivity.

o Treat your boss with respect. Don't call your boss names or treat him with disrespect during the CBA negotiation. When the CBA is finally signed, you still have to live with your boss. Don't burn bridges that connect you to a great career -- think of your career beyond union leadership.

o Learn when enough is enough. As the saying says, "don't kill the goose that lays the golden eggs." You are an employee first, a union negotiator second. You cease to be an employee when there is no more business. Find a way for both you and the company to survive and co-exist.

o The enemy is not the boss. The real enemy is not the boss. It's the competition that's trying hard to keep your company out of business, and you out of job. Find ways to make your company competitive, but learn more competencies to make your career competitive in the job market.

o Leaders must make decisions. You can't always rely on surveys to guide you. Of course, the union members always want more wages and benefits. Union leaders must know what are reasonable negotiating goals.

Wages were simpler then. Julius Caesar used to give his legions salt to pay for their services. That's why pay became know as "salary." Today, people don't just work -- they want great salaries, benefits, perquisites, a swimming pool in the workplace, and meaning in what they do!

(Ernie is the current Executive Director, and the 1999 President, of the People Management Association of the Philippines, Chair of the AMCHAM Human Capital Committee, and Co-Chair of the TWG on Labor Policy and Issues of ECOP. He was recognized by PMAP as Diplomate in People Management (DPM) in 2011. He was also voted "Best Newspaper Columnist" by PMAP in 2011 and 2012. He is the President and CEO of EC Business Solutions and Career Center, a HR consulting firm. His books, "Life's Big Lessons" and "Life's Big Lies" are available at PMAP, tel. +632 726 1532 or at ernie_cecilia@yahoo.com)