Modernization of labor rules pushed

After the veto of the Security of Tenure bill, the Foundation for Economic Freedom (FEF) urged the government to conduct greater consultations with the private sector and worker groups to modernize the Labor Code and tackle employment security amid the threat of automation.

Malacañang announced yesterday that the bill promising to end illegal contractualization was vetoed by President Duterte, a day before it would have lapsed into law.

Business groups had called for the veto of the bill, arguing it could have a negative impact on job creation and security of tenure as enterprises may choose to eliminate low-skilled jobs and instead resort to automation.

Economic managers also had reservations on the bill, saying it may be a deterrent to attracting investments.

Asked by Malacañang to comment on the bill, the National Economic and Development Authority (NEDA) responded a month ago that the measure approved by Congress needed to be improved to balance the interests of businesses and workers.

“The correct move (after the veto) is for the government to call for a tripartite meeting between employers, workers and government, and propose the modernization of the Labor Code, which should tackle the problem of outsourcing and labor security tenure among other things, especially in the light of technological disruption and automation of work,” said economist Calixto Chikiamco, president of FEF.

Earlier, he said there is a need to remove” rigidities” in the system to serve the needs of labor-intensive industries like manufacturing and agriculture.

This, he said, should be done alongside the easing of restrictions on foreign investments in these sectors which produce the most number of jobs in the country. He noted that beyond traditional jobs, there is a need to provide for security of tenure in jobs that are in danger of being replaced by artificial intelligence such as credit analysts, translators, bookkeepers and legal researchers, among others.

“The new reality is that a number of jobs reflect the gig economy, such as Grab drivers, who are independent and can choose their own time. There’s no longer an employer-employee relationship at work,” said Chikiamco.

“The government cannot legislate permanency for jobs that are being threatened by automation,” he added.

Many companies, he said, resort to outsourcing because the Labor Code strictly provides that employees be immediately promoted to permanent status after six months. These companies consider six months to be too short to determine the productivity of the worker, he added.

Chikiamco goes on further to propose that instead of outlawing labor contracting, the Labor Code should relax the six-month permanency rule to at least two years.

“Instead of forcing companies to make workers permanent, the government should provide social safety nets such as unemployment insurance and tax deductibility of training expenses to encourage reskilling of the labor force and make them more employable in the labor market,” he said.