Labor flexibility in the Philippines

Abstract

Globalization intensified competitive pressures among developing economies as indiscriminate openness to trade and capital flows exposed many labor markets to greater volatility.In efforts to attract foreign capital investments, fulfill structural adjustment programs of international financial institutions and promote the interests of dominant factions of domestic capitalists, many developing economies reconfigured existing regulatory frameworks to incorporate flexible labor arrangements which are highly vulnerable to social and economic precarity.Short-term contracts and labor outsourcing have deepened structural inequalities in labor markets while obstructing access to collective bargaining, skills development, and wage growth. As such, the prevalence of labor flexibility in many countries historically excluded workers from the gains of economic growth.The institutionalization of labor flexibility in the Philippines demonstrates this historical exclusion, as GDP growth at an unprecedented rate of 6.5% from 2010 to 2017 occurred while the labor market employed 30% of the labor force in short-term and outsourced labor contracts. The study traces the development of labor flexibility in the Philippines by examining transformations in its political economy. In its globalization period from 1970 to 2010, the institutionalization of labor flexibility in the Philippines served three functions: (1) as a source of competitive advantage in the quest for foreign capital investments on the national level, (2) as a local labor control regime for key developing regions on the subnational level, and (3) as an available adjustment apparatus for economic sectors with externally-sourced demand.For the growth period of 2010 to 2017, the further entrenchment of these functions is examined within the context of services-led growth. The study demonstrates that increased employment and productivity in services sectors with high rates of growth, i.e. retail trade, business processing, and real estate sectors entailed the employment of more workers under precarious short-term and outsourced contracts with persistently unequal and stagnant wage growth. Thus, the study challenges neoclassical and new institutionalist claims that growth from integration and economic upgrading will generally translate into better working conditions.