Dumaguete: A ‘labor employment zone’?

Excess labor supply at the going wage rate is a major characteristic of the Philippine economy. This statement is ekonomikspeak to describe a situation when many workers cannot find employment. “Excess labor supply” is a widespread phenomenon in the country.

Though the unemployment rate, as reported by the government, is seven percent of the labor force, there is an army of underemployed workers in low wage informal sector activities. At least, 25 percent of the country’s labor force is in need of quality jobs to uplift their family welfare.

Jobs generation is a major challenge in the Philippine economy. News about future employment possibilities abound. In the last week, a number of conflicting news stories on jobs came out. One said that rising wages in China and Vietnam present opportunities for the Philippines. Another says “the Philippines needs a jobs strategy: IMF cites formula for inclusive growth.” Another item reported that labor is seeking an P85 rise in daily minimum wage while some legislators are proposing a rise of P125 in the minimum wage!

The “raise-the-minimum-wage” route, while helpful to workers with jobs, has been one of the most cruel economic policies for the very poor. Because of excessive rises in the minimum wage, many of the poor who have skills are in fact unable to find regular jobs. An enterprise hires labor that in general helps to produce what it contributes as income or additional value to a firm. Otherwise, it does not hire or does not go into operation.

“An employment strategy for growth.” I am not attempting to reverse current minimum wage and other existing labor mainstream policies. We can continue to keep these labor market policies but we should invent imaginative and practical approaches toward raising jobs. A solution similar to our export processing approach could offer us a way out.

The “labor employment zone” is one way of generating jobs effectively. Our country was able to overcome the extreme restrictions of import substitution and high protection of local industries when we set up export processing zones to attract industries processing raw materials for exports.

“Dumaguete as a labor zone possibility.” I was in Dumaguete for five days on vacation and visited neighboring towns around this capital of Negros Oriental. Its population of 1.35 million people is clustered close to Dumaguete.

Negros Oriental is home to one-fifth of the population of seven million living in Central Visayas. The level of output of Central Visayas is only 17 percent of the level of Metro Manila’s GDP. Negros Oriental is the poorest of the Central Visayas provinces!

Dumaguete fits my bill for the examples that I have tried to suggest for the labor employment zone concept. It is far enough from the most developed parts of the country. Its labor force is well educated by Philippine standards. This is the home of Silliman University and other schools and now is host to new BPO-call centers.

The local labor force is dominated by the “informal market” activities in the service sector. Nearby towns and municipalities also have excess labor supply which could be gainfully employed in the area once those jobs appear.

Its access to infrastructure is sufficient. Four daily flights come into Dumaguete from Manila and Cebu. It has good land connections by ro-ro to Cebu. The road infrastructure in the area is sufficiently well-established.

Because of the natural beauty of its beaches and surrounding islands, it is becoming a tourism haven. But tourism is not enough to sustain the future. Signs of enormous unemployment and underemployment are evident just by strolling during sunset along its beautiful Rizal Boulevard by the harbor where so many people congregate.

When outside enterprise and capital enters this gentle town, Dumaguete has the prospects of a quick rise to economic prosperity.

“The labor employment zone concept.” In order to establish the labor employment zone, the government has to adopt the measure as law. In my own assessment, the labor employment zone, to become successful in the Philippine setting, has to be a restricted zone where large establishments – factories – can be allowed to employ labor under special incentives.

Such incentives relate to the exemption of the enterprises in the zone from mandated minimum wage setting processes and from some labor rules regarding hiring and firing of workers. Wages are set at the market rate that can be negotiated among locating enterprises. Such negotiations take into account the local community income standard and would likely gravitate toward the “regional minimum wage.” Large enterprises with substantial labor requirements will likely “bid up” the wage rate without the need for the state to intervene.

In these labor zones, the only other important labor standard measures that should be introduced as mandatory by the state should be the compulsory contributions for social security, for housing (Pag-Ibig), and for workmen’s compensation and the prohibition of child labor. With these as guarantees, the Labor Employment Zones could provide the venue for locating heavily labor-using companies.

We have one of the most highly regulated job markets among developing countries. The concept of the labor employment zone provides us “breathing room” for employment growth and we should take advantage of them in other regions of the country.

Advanced labor laws and an unsettled labor front in the early 1990s have caused the country to lose out in the growth of labor intensive industrial companies, some of which were already established then in the country.

“How we exported manufactures in the midst of protectionist policies.” Export processing zones have enabled the country to become a major exporter in the world market in electronics and semiconductors and other types of exports despite the highly protectionist policies of the past, the “labor employment zone” would be able to provide a channel for the country to tap into the rapid employment of our excess labor.

If we have the labor employment zone concept operating side by side with the current labor market policies, we can generate more industrial jobs in the country and resuscitate highly labor-using manufacturing industry that has failed to thrive well in the country.

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