When you screw your workers, you screw yourself

Philippine Airlines passengers blame the PAL workers union for the inconvenience they suffered last week. That’s understandable. But it’s also ironic because many of those angry passengers are like the PAL employees they are mad at: working stiffs with no job security.

There used to be a thing called job security. As long as the company was making money and employees were up to snuff, they could count on a paycheck and a pension when they retired. Not anymore. Today, businesses out-source as much as they can or keep employees on a casual status for as long as they can because gouging extra profits from the pockets of workers is now considered smart business practice.

Government is supposed to balance the conflicting interests of business and labor not only because justice demands it but, on a practical level, because a harmonious relationship between business and labor is good for everybody. Peace and prosperity go hand in hand.

So why did government side with PAL and threaten to charge its striking employees with economic sabotage? On the general principle that “An employer is not precluded from adopting a new policy conducive to more economical and effective management, and the law does not require that the employer should be suffering financial losses before he can terminate the services of an employee on the ground of redundancy.”

Okay, the general principle makes sense. However, is it applicable to PAL?

A lot of people said Lucio Tan was nuts for buying an airline that was losing a lot of money. But Tan is not like most people. He is astute. He saw there was money to be made by separating PAL’s profit centers, those operations providing services to PAL, from its losing operations, ferrying passengers. And so he began to chop up the airline, creating spin-offs that would make money feeding off from PAL. His formula worked. The spin-offs are making a lot of money.

PAL remains unprofitable but not so that it will have to stop flying. It’s a condition that wears well for its owner. PAL continues to fly and whenever its owner wants to lop off another profitable piece of it to create a new spin-off, he cries, “The airline is losing money, it has to downsize or it will crash!” and the government rides to the rescue, justifying its action with principle and jurisprudence.

Executive Secretary Paquito Ochoa couldn’t have been so shit-faced that he could not see Lucio Tan grinning like Lewis Carroll’s Cheshire cat when he favored the latest gimmick to “save” PAL. When was the last time anybody heard Tan belly-ache about the spin-offs feasting on PAL?

In fairness to Tan, he is only following what has become standard business practice worldwide: keep wages low, break labor unions, avoid paying health insurance, pensions, and other benefits, etc. It is a tragic reversal of the high-wage economy originated by Henry Ford.

Years ago Henry Ford saw that he needed to create a mass market for his mass produced cars. He took the bold step of raising his workers salaries so that they would be able to afford his cars. “It was such a good idea that most industrialists followed suit,” Murray Dobbins wrote. “It was the foundation of a high-wage economy, it lasted a very long time and it produced incredible real wealth for decades. Until something called neo-liberalism decided to kill the goose that laid the golden eggs.”

One does not have to read up on neo-liberal economic theory to know something is wrong with it. Even Stevie Wonder saw that anyone who touched it was burned, including the neo-liberals. But they are too proud to admit they made a mistake. People are clamoring for a change in direction but neo-liberals stubbornly insist their ideology is sound. Then again, maybe they are using ideology to mask greed. At any rate, there is no slithering away from a basic fact: the salary you pay your worker is what he will spend to buy your product. Screw him out of that and you screw yourself. Neo-liberal economists will never tell you that. So I did.

Manuel Buencamino

Buencamino was a weekly columnist for Today and Business Mirror. He has also written articles in other publications like Malaya, Newsbreak, "Yellow Pad" in Business World, and "Talk of the Town" in the Inquirer. He is currently with Interaksyon, the news site of TV5. MB blogged for Filipino Voices, blogs for ProPinoy and maintains a blog, Uniffors.com. Game-changers for him, as far as music goes, are Monk, Miles, Jimi, and Santana.

  • J_ag

     

    The discovery of America, and that of a passage to the
    East Indies by the Cape of Good Hope, are the two greatest and most important
    events recorded in the history of mankind. 
    Their consequences have already been very great: but, in the short
    period of between two and three centuries which has elapsed since these
    discoveries were made, it is impossible that the whole extent of their
    consequences can have been seen.  What
    benefits, or what misfortunes to mankind may hereafter result from those great
    events, no human wisdom can foresee.. By uniting , in some measure, the most
    distant parts of the world, by enabling them to relieve one another’s wants, to
    increase one another’s enjoyments , and to encourage one another’s industry,
    their general tendency would seem to be beneficial.  To the natives, however, both of the East
    and the West Indies, all the commercial benefits which can have resulted from
    those events have been sunk and lost in the dreadful misfortunes which they
    have occasioned.  These misfortunes,
    however, seem to have arisen rather from accident than from anything in the
    nature of those events themselves.  At
    the particular time when these discoveries were made, the superiority of force
    happened to be so great on the side of the Europeans, that they were enabled to
    commit with impunity every sort of injustice in those remote countries.  Hereafter, perhaps, the natives of those
    countries may grow stronger, or those of Europe may grow weaker, and the
    inhabitants of all the different quarters of the world may arrive at that
    equality of courage and force which, by inspiring mutual fear, can alone
    overawe the injustice of independent nations into some sort of respect for the
    rights of one another. But nothing seems
    more likely to establish this equality of force than that mutual communication
    of knowledge and of all sorts of improvements which an extensive commerce from
    all countries to all countries naturally or rather necessarily, carries along
    with it.

    • J_ag

      Citation above from Adam Smiths History of Political Economy or the named  ….Wealth of Nations. 

  • Sorry the paragraphs got lost in the shuffle and J_ag  is Juancho short. 

  • Once again  I cannot understand why many people believe that America de-industrialized. The process of technological advancement propelled the U.S. to high tech manufacturing while shedding the low skills low tech manufacturing. 

    The value added of American manufacturing domestically alone and what they own abroad is the largest in the world. The mid tech manufacturing is also being affected by the high tech level. As these jobs were outsourced they allowed countries to rise up above the no skills and low skills level. That however will slowly level up the skills level and wages will rise in the developing countries as is happening now with China and other factors as in delivery times will factor in and jobs will even out. They will also eventually return home where the market is closest.  China’s rapid rise is the fact that they as an effective state put in place policies to learn from the more advanced economies just like Japan during the Meiji dynasty.They opened up to import brains, knowledge and technology at very little or no cost to them. Hank Paulson left his job at Goldman Sachs to teach in China as did many other practicing academics. Thousands of Chinese are sent all over the world to the best universities and they bring back their skills home.  The state provides almost free rents and cheap labor as long as you bring in your technology to share for free.  The foreign capitalist gets a competitive advantage while the Chinese State gets knowledge and technology. Look at the tigers of Asia and you will see the similar respect for knowledge and the sense of country that they possess. While we revel in sending gorgeous women to compete in contests. Supsup has a killer body in a bikini. There was this guy who wrote why trade would be beneficial in the long term as it would expose backward countries to new ways of doing stuff.  That is properly utilized by the poor and weak countries would eventually make them grow rich and powerful as to balance the equilibrium of power. The man who wrote about that was Adam Smith. Of yeah there was this other guy who also wrote that this idea of beggaring the labor force in favor of profits would not last too long as the unemployed labor would organize into a vast army and demand equality.That man was Marx.That would force states not to only move to impose civil rights but social rights.  The high standards of living in the West were a direct result of direct labor action. Technology has dispersed the division of labor on the factory floor. It is now replacing labor in the offices involved in the services sector. Jumbo jets today basically fly themselves. A bunch of committed individuals learnt how to take off in them and fly them into buildings. But in the final analysis countries must create the wealth first that will eventually have to be fought over. China unleashed thew power of the market guided by the iron hand of the State. They knew that to compete they first had to learn about productivity – mass production and mass markets and the provision of safety nets.  There are now training schools that will tech young girl’s how to mimic Supsup’s walk. 

  • Joe America

    Reads like an epistle from a commie leftist pinko. Government need get involved only if the industry is not diversified enough to let markets work.

    Oh, yeah. No Filipino industry is diversified enough to let markets work. Maybe that is why cell phone service is so poor, gas is regulated, electricity is browned out, air lines cram people in like sardines, television networks crank up the sound on the 35 minutes of commercials per hour they relentlessly push at sucker audiences who are not enlightened enough to vote with the off switch of their remotes, subdivisions are all run by some guy named Manny who appears to run little scams here and there.  And there are the other extremes where government meddles to prohibit market forces from working properly: farming and wheeled transportation.

    • Manuelbuencamino

      Joe,

      I will take your comment as satire because your second paragraph brings up the spectre of a Reaganesque utopia: a dream that turned into today’s nightmare. 

      A little regulation ensuring fair play, healthy competition, safety for consumers and producers against work and environmentally related hazards, stability of financial institutions and all that  is neither capitalist nor communist. It is common sense. 

      By the way, what I found objectionable is Lucio Tan also owns PAL’s spin-offs. As a former investment banker, you know the game of buying a company and selling off its parts. There is nothing inherently wrong with doing it. But there’s something that doesn’t sit right about the whole Lucio Tan scheme with PAL. He is not creating anything new, he is simply going to make money on his worker’s backs. 

      Workers are consumers, that’s what the old industrialists realized. They didn’t make profits by screwing their workers, they paid them salaries that made them consumers, and they made their profits through more efficient manufacturing methods, better business practices, smart marketing, etc. etc. 

      • Joe America

        That would be the correct reading.

      • J_ag

        MB unfortunately is still in a time warp… Over 30 years ago the massive outsourcing of manufacturing started in earnest to include all major car companies and Ford was no exception. The old model of integrated manufacturing started its decline and death. Supply chains are now spread out over the globe.

        The massive wage deflation it caused is now primary responsible for the low aggregate demand in the West made worse by the financial crisis. 

        The dismantling of the social contract in domestic economies have made it easy for this type of wage destruction aided and abetted by free market fundamentalists.  International markets have no non-market institutions regulated by a world body.  They are fragmented… 

        Hence the free flow of goods and services, capital and labor are causing all sorts of problems all over the world. 

        The Philippines is not immune to this situation but with a weak dysfunctional state the problems are compounded with a predominantly ignorant people primarily at the top. 

        • Manuelbuencamino

          Jag,

          I am aware that outsourcing began a long time ago. And that is why america de-industrialized and became a service economy where money is made from making money instead of goods.

          I am also aware of about the demise of integrated manufacturing and the globalization of supply chains. There is no problem with those as they lead to more efficient production. Here’s where the problem is, and I’m disappointed you didn’t get what I was trying to point out, what screwed america is when they located their supply chains and plants abroad. The other countries prospered the american economy declined. Although, I might point out, that the owners of those companies and their bankers never had it so good that is until their unemployed.poorly paid workers ran out of money to buy their products.

  • GabbyD

    what i dont understand is, why is it legal to rehire them on a contractual basis. 

    • Anonymous

      what is not encoded as illegal  is legal.  Heck, some things are legal even if they are enshrined in the Constitution as “NO!! This won’t be allowed!!!” (example — anti-dynasty boladas-the-Pilipinas-way ).

      35-year-old-and-younger…. as you read the blogpost, before you get angry, get your “self-preservation” instincts to kick in, and the self-preservation action is to protect yourself and be sure to build up your own retirement-fund with your own savings. Save for a rainy day and old age. Having lots of money in the bank when you hit 60 is not being greedy, it is a responsibility.

  • The Filipinos must learn how to be contented, the PAL offering great benefits but the PALEA push their people to ask for more. So what happened? They all lost their jobs and the PAL decided to outsource their services. As a worker they must fulfill their duty in the company and not interfering the works on PAL. They just do business and I believe they have rights to do the things they know will be better for the business.  

    • Manuelbuencamino

      Salcedo,
      “The Filipinos must learn how to be contented, the PAL offering great benefits but the PALEA push their people to ask for more. So what happened? They all lost their jobs and the PAL decided to outsource their services.”

      I think you got the sequence wrong. They lost their jobs because PAL decided to outsource.

      Now consider this: PAL’s spin-off offered to rehire ALL the PAL workers that would be displaced by the reorganization. If PALEA went along that means they would be doing the same work they ‘ve been doing for PAL except this time it would be for a new company.

      So, what changed as far as the employees are concerned? 

      What changed as far as PAL management is concerned? 

      If nothing changed then why did PAL management even bother to create the spin-off?

      • J_ag

        PAL buys off the old with separation and if they decide to join the new company for the same work they get paid less………. That would mean less in wages and benefits. 

  • J_ag

    Oh My goodness MB, you are attacking the doctrine that has been the foundation of Philippines economic policy since Cory.

    Markets know best!

    We have had a missing in action state for the last 30 years. 
    All full service airlines have their state’s backing or are fully or partly state owned. Point of fact the worlds best airlines are all in that category. 

    In all capital intensive economic sectors all around the world the state has a well intentioned visible hand. 

    Point of fact when Lucio Tan bought into PNB the Filipino taxpayer saved his behind. 

    But that is another story for another day. 

    Under that doctrine of markets know in the global economy best wage deflation is always the effect of open unregulated competition. 

    Love or hate Tan he deserves congratulations for willing to put up a fight. Wages are always going to be sacrificed. 

    Perwisyo yung nag strike. Just like those mad militants in NY who blocked the traffic in the Brooklyn Bridge.  

    Just like those stupid militants who wanted a shutdown of public transportation. 

    It is looking more and more that this PNOY is really living in a bubble and the market fundamentalists are running the government. 

    • Manuelbuencamino

      Jag,

      “All full service airlines have their state’s backing or are fully or partly state owned. Point of fact the worlds best airlines are all in that category. ”

      Does Cebu Pacific fit in your all encompassing assertion?

      • J_ag

        Full service airlines are not discount airlines.  Singapore Airlines, Cathay, and the airlines from the Middle East are not full service airlines. Singapore Air and Cathay have their discount airlines at the level of Cebu Pacific. 

        Get your apples and oranges straight. Do you understand what full service means most especially on long haul flights? Do you understand the difference between premium economy business and first class on these full service airlines? 

        Have you ever flown on the top airlines in the world on economy.  Dancing flight attendants alone would not matter.  

        PAL being the flag carrier have obligations on missionary routes.  Granted Tan is a bottom feeding capitalist but you cannot fault him for trying.

        We had the lock on airlines in Asia in the early days with PAL.  We had the most gorgeous flight attendants then and even taught the Japanese about service.   

        What happened??? 

        • Manuelbuencamino

          Tell me Jag, what services are offered by …oh wait… first give me the names of what you call full service airlines…and long haul flights would mean any flight over how many hours?…

    • Manuelbuencamino

      Jag,

      read the essay again.  I said, 

      “Government is supposed to balance the conflicting interests of business and labor not only because justice demands it but, on a practical level, because a harmonious relationship between business and labor is good for everybody. Peace and prosperity go hand in hand.”

      Sa madaling salita, a free market cannot exist when the government takes sides instead of ensuring fair play among competing interests.

      I said the general principle cited by jurisprudence is okay. However it cannot apply to the specific case of PAL because it was creating spin-offs that would feed off PAL. Worse is the fact that the spin-offs are also owned by Lucio Tan who will now make money from PAL. I would be more sympathetic to Lucio Tan if he did not own the spin-offs. But he does. And that’s why he has never bitched about the expenses incurred by PAL for doing business with the spin-offs. And so we are supposed to congratulate him for that?