Contractualization: Pros and cons

One of the ticklish issues that will confront the Duterte administration when its term finally commences at midday of June 30, 2016 is the continued existence or demise of job contractualization. Despite several attempts to weed out this very contentious labor scheme, it has remained in effect until now.

The capitalist nature of the outgoing regime has not given emphasis on this supposed anti-poor policy of employment for reasons that may be both beneficial and otherwise to labor matters and stakeholders. But then we also have to acknowledge that many investors deem it wise to put their money in the Philippines because of the relatively cheaper labor cost, which to an extent is brought about by contractualization.

The termination of “endo”(end of contract) as a campaign promise of incoming president Rodrigo Duterte will create various repercussions to the Philippine economy. The labor force especially the proletariat sees endo as a tool of the capitalist to manipulate and exploit the vulnerability of laborers. The laborers, as an offshoot of prolonged unemployment and uncompetitive nature, would rather accept a below par employment contract without full benefits enjoyed by a regular worker than have no paid employment.

The termination of “endo”(end of contract) as a campaign promise of incoming president Rodrigo Duterte will create various repercussions to the Philippine economy. The labor force especially the proletariat sees endo as a tool of the capitalist to manipulate and exploit the vulnerability of laborers.

Although there are legal implications of endo because a company cannot just practice labor contracting wittingly or unwittingly without having in their company a roster of regular employees, it has nonetheless contributed a lot to the total employment and national income by way of short-term employment opportunities.  While endo has deprived many laborers of the opportunity to enjoy the full benefit of being a regular employee, the stringent measure normally applied to a regular applicant is relaxed in favor of an endo worker, resulting in a bigger participation of the entire employment sector. 

Cancellation of endo would most likely post stringent requirements for the employers before new regular employees may be hired. Hiring regular employees in favor of contractual employees, we have to admit, entails a lot of costs perhaps more than double than what a contractual employee will get sans benefits. Although this author would not favor a full implementation of contractualization, but the thought of full cancellation of the same would accelerate the unemployment statistics that we currently have.

Logic tells us that you cannot force the employers to give what they do not have. Much less force them to hire regular employees to fill in job vacancies. To escape from the responsibility of carrying the load and additional cost of hiring regular manpower, firms would rather overload their current roster of regular employees with work in lieu of hiring regular employees.

To escape from the responsibility of carrying the load and additional cost of hiring regular manpower, firms would rather overload their current roster of regular employees with work in lieu of hiring regular employees.

This is the most plausible scenario that may transpire if the government will go for the full prohibition of contractualization. Prudence dictates that contractualization should still exist in a case to case basis but with government regulation to avoid abuses by the employers. Firms in the infancy stage should be allowed to some extent to hire contractual employees until such time that firms can exist on its own and be stable enough to weather the challenges of investment risks.

Firms in the infancy stage should be allowed to some extent to hire contractual employees until such time that firms can exist on its own and be stable enough to weather the challenges of investment risks.

Unemployment and economic growth

With the current data on unemployment which stands at 5.8 percent, the incoming administration under the leadership of presumptive president Duterte stands to inherit around 3.48 million people who are unemployed. This practically puts to naught the 6.9 percent GDP growth the country was able to accomplish in the 1st quarter of 2016.

The growth component was mainly consumer-driven fuelled primarily by election spending estimated to be within P10-12 billion. This amount of fund injection created temporary employment opportunities that generated an income that contributed to the 1st quarter growth rate. This, however, is a short-term “economic bliss” that after certain “honeymoon period” will go back to its previous dilemma of exclusive growth, an economy reserved for the ruling oligarchy.

Countless growth have been experienced but the people who consider themselves poor remain unyielding, the number of unemployed remain at more than 3 million. Graft and corruption remain unmoved, putting it in the upper index of most corrupt nations of the world.

Tall order

Despite the tall order that awaits the incoming Duterte regime, the resounding mandate that he received during the last election puts to emphasis the people’s high trust in his leadership. One thing going for the incoming president that perhaps distinguishes him from his predecessor is the fact that he approaches the nation’s problem with “coolness’ and serenity. If you are in this mood, it is most likely you will make a good account of yourself and your decision.

His micro approach to the problem as exemplified by the news item he heard about the group of pushers arrested in Tanauan, Batangas. The pushers were made to parade in the streets as if to imitate the traditional “Flores de mayo” but this time renamed “Flores de Pusher,” for purposes of putting them to shame for their criminal acts.

Perhaps in jest, incoming president Duterte made pronouncements that these people may have been dead if he was in the position of the mayor. His ability to put premium and emphasis even for this simple police matters if he continues doing it during his term, will endear him to people. It shows that he does not want himself isolated from the most basic problem of the society — the society that elected him and catapulted him to the highest position of the land. 

His ability to put premium and emphasis even for this simple police matters if he continues doing it during his term, will endear him to people. It shows that he does not want himself isolated from the most basic problem of the society — the society that elected him and catapulted him to the highest position of the land. 

Emmanuel J. Lopez, Ph.D. is an associate professor at the University of Santo Tomas and the chair of its Department of Economics. Views reflected in this article are his own. For comments email: [email protected]