The puzzle of the Filipino laborer

By Eduardo A. MoratoInquirerLast updated 08:17pm (Mla time) 12/10/2006

Published on page B2-1 of the December 11, 2006 issue of the Philippine Daily Inquirer
EVERY YEAR, the AIM Policy Center participates in a World Competitiveness Survey conducted by International Management Development of Switzerland. Every year, the same puzzle appears. Why is it that the Filipino is the number one most preferred labor in the world, according to global respondents, but the same survey says that the productivity of Philippine labor, while they are in the Philippines, ranks 58th, or third to the lowest, among the 60 countries surveyed?

Labor productivity is measured by economists as value added per laborer. This is particularly low for the Philippines due to several factors. First, Philippine industries rely heavily on imported materials, machinery and equipment. This is notably true for the top two exports of the country: Electronics and garments. The value added in these industries is, practically, only the labor component since everything else is imported. Second, the low levels of technology employed by Philippine businesses result in low volumes of production, hence, lower productivity. Third, the Philippines has a very small base of large and medium sized firms. There were only 2,958 large enterprises and 2,923 medium sized enterprises in the country in 2001. Meanwhile, during the same year, there were 61,762 small firms and 743,949 microenterprises. Small and microenterprises have low levels of management sophistication, very rudimentary production systems and generally utilize under-trained laborers who are paid minimum, or lower than minimum, wages. The final outcome of all three factors is low labor productivity.

(Microenterprises have assets below P1.5 million; small have assets of P1.5 to P15 million; medium from P15 million to P60 million and large, P60 million up.)

More educated workerThe Filipino laborer who goes abroad is more educated than the laborer in the Philippines. Some 51 percent of the OFWs are college graduates while only 9 percent of total Philippine labor are college graduates. The OFW who gets hired has, generally, more work experience and is, by inference, more aspirational and ambitious. After all, he or she is willing to leave family and friends in order to get ahead in life. Furthermore, the companies that hire Filipino laborers are infinitely more advanced in terms of technology, management sophistication and operating systems. To the credit of Filipino laborers, they rise up to the challenge. With their more accommodating temperament and higher service orientation, Filipino laborers perform their tasks well, with better attitudes to boot.

They seem to learn fast and adapt very well to any culture in the world. This adaptability, coupled with proven resiliency and job commitment, catapults the Filipino laborer to the number one position as the most preferred in the world.
The puzzle of the Filipino laborer is solved. First, Filipino laborers are great workers but the country must invest more in the education and training of the majority of our laborers in order to give them better employability.

Second, the low productivity of the Filipino laborer in the Philippines is largely the fault of our entrepreneurs who use antiquated and uncompetitive technologies. They lack managerial expertise, hardly deploy modern operating systems and underpay their workers relative to the global standards.
Third, Philippine businesses are into low value added industries. Generally, they are concentrated at the low end of the value chain. Fourth, 99 percent of Philippine enterprises are small or microenterprises with rudimentary production or service capabilities. The fault, dear businessmen, lies not in our laborers but in yourselves.

Out-migration trendsThe underutilization and undervaluation of the Filipino laborer has resulted in one of the most alarming out-migration trends in the world. The Philippine diaspora is a global phenomenon. In 2005, there were 7,924,188 OFWs. Almost a third of them, or 2,596,508, were in the United States, largely as permanent workers. Almost a million, or 994,671, were in Saudi Arabia, mainly as temporary workers. What is really alarming is the fact that the eight million OFWs represent 20 percent or a full fifth of the total Philippine population aged 21 years old and above.

What is driving the Philippine diaspora is the high level of unemployment in the country, which stood at 10.9 percent in 2004. There was a greater underemployment rate of 16.9 percent for the same year. This makes for a total of 27.8 percent unemployed or underemployed. For those who are employed, the cost of living is simply much higher than the minimum wage. For example, the poverty threshold for a family of five in Metro Manila is P16,000 a month versus the minimum wage of P8,000 a month. Unless, the family has two breadwinners, they will remain poor. However, only 52 percent of female workers in the Philippines are economically active. This remains one of the lowest in East and Southeast Asia. Thus, most families have single income earners.

Clearly, the trumpeting of OFWs as modern heroes hides the underlying deficiencies and inefficiencies of the Philippine economy. Sure, the dollar remittances provide the economic band-aid but that's what they are--band-aid. We should not regard our massive diaspora as our good fortune because Filipino laborers are leaving the country because of their misfortunes. They are great workers and regarded as the most internationally competitive laborer in the world. We should, therefore, all beat our breasts with a thousand mea culpas because Filipino laborers only underperform while in the hands of Philippine businessmen. A national soul searching is in order.