|Contractual or nonstandard work is on the rise among wage earners, diminishing the gains from the gradual shift from self-employment to higher quality jobs
Gene is a “rider,” or delivery guy, for Burger King. Like the rest of the store’s crew, he is an agency-hired worker. The restaurant business is known for employing young workers on nonstandard terms—contractual, part-time, hourly paid, hired by an employment agency, and so on—eschewing the regular and formal employee-employer relationship that used to be standard in large corporations.
Gene’s employment terms with the world’s second largest restaurant chain slightly stretches the envelope. The minimum wage worker also owns the motorbike he uses to deliver orders, which he paid for in installments. Gene and other retail employees featured in this article did not give their full names; they are not allowed by their companies to talk to the media without permission from management.
For the use of his bike, Burger King pays him about P200 a day. Not much, he says, since this covers the cost of gas and repairs. Recently he had to cough up P6,000 for repairs, an amount he borrowed from management.
When there are no major repairs, the high-school graduate from Sorsogon gets a take-home pay above the minimum. This arrangement gives him a sense of security and incentive to stay, probably more of the latter. He has been on the job for 10 years.
Nonstandard employment or employment other than permanent salaried employment, according to the “World of Work Report 2008” of the International Labor Organization (ILO), has risen in the last 20 years or so. A key aspect is the undermining of the traditional employment relationship: reducing its duration, increasing its uncertainty, or eroding the claims that workers and employers can make on one another.
“Precarious” or “contingent” are used to describe the uncertainty of such employment, including part-time or temporary work and self-employment. But these may also denote the everyday life of nonstandard workers. Marked by low pay and earnings, nonstandard employment has been blamed for the growing ranks of the working poor, rising uncertainty, and widening inequality.
The picture is mixed in terms of long-term trends in the Philippines. The good news is that self-employment has declined in the last 10 years or so, according to a study by the Asian Development Bank (ADB).
The paper, “Quality of Jobs in the Philippines: Comparing Self-Employment with Wage Employment,” reveals that the share of self-employed workers fell from 53 percent of total employment in 1994 to 47 percent in 2006. The shift from selfemployment to wage employment is not only due to a shrinking agricultural sector. It cuts across sectors, including manufacturing, trading, and other services.
Nevertheless, self-employment remains a major challenge. Agriculture and wholesale and retail trade remain predominantly informal, with self-employed workers accounting for 72 percent and 63 percent of employment, respectively. Overall, the self-employed outnumber either permanent or casual workers.
The bad news is that the shift towards wage work is accompanied by a rise in nonstandard employment or casual work in the terminology of the ADB study. Dividing wage workers between permanent and casual workers, it reveals that the share of casual work rose by 2 percentage points to 28 percent between 1994 and 2006.
The rise in casual employment is more evident in manufacturing and wholesale and retail trade, where one-third of all workers are found. Thus, in manufacturing, the share of casual employees rose by 7 percentage points to 24 percent, and in wholesale and retail trade, by 4 percentage points to 24 percent over the same period.
The rise in nonstandard work affects mostly young workers (21-30 years old) whose share of casual workers went up. By contrast, the share of older workers (30 and over) shrank. Being the fastest growing jobs, the share of casual work is likely to grow in the next decade.
Statistics pertaining to the formal sector—establishments with 20 or more workers—confirm the widespread use of nonstandard workers, including contractual, casual, and agency employees.
One out of three rank-and-file employees engaged by firms is a non-regular or agency-hired worker, according to the “2003/2004 BLES Integrated Survey.” Of 2.3 million workers, 855,000 or 37 percent were nonstandard workers, including 628,000 or 27 percent non-regular workers and 214,000 or 9 percent agency-hired workers.
Nonstandard work is more prevalent in some sectors than in others. In terms of incidence, non-regular employment is highest in construction, where two out of three workers are non-regulars, compared with one out of two in the hotels and restaurant industry. In absolute numbers, manufacturing and wholesale and retail employ the biggest number of non-regulars, 316,000 and 132,000, respectively.
The growth in nonstandard employment is not inherently bad if these jobs are just as good as standard, regular employment. But there is plenty of evidence to show that nonstandard workers are disadvantaged in more ways than one.
The “World of Work Report 2008” published by the ILO states that nonstandard jobs pay less than standard ones. It blames the rising global inequality in pay and earnings to the rise of nonstandard jobs in the sense that these jobs pay lower than standard jobs.
Differences in pay generally can be traced to a number of factors: the level of development in the area where the job is found, the industry, seniority of the worker, and skill intensity of the job. But these factors cannot fully explain the pay gap between standard and nonstandard workers. Part of the difference is simply due to the status of the job.
The ADB study likewise reports a significant gap in earnings between permanent and casual workers after taking into account worker and job characteristics. The gap is higher in the upper half of the earnings distribution compared with those in the bottom half. For example, for the top 50 percent, permanent workers earn 89 percent more than casual workers; for the bottom 50 percent, the earnings differential is narrower at 23 percent.
Underemployment combined with irregular work creates uncertainty in the daily lives of nonstandard workers. The variability of work hours and earnings is most pronounced for contractual, casual, or piece-rate workers.
Casual workers are therefore more likely to be underemployed than permanent workers, which explains part of the earnings gap between the two groups. The average casual worker, for example, worked 53 days in a quarter while permanent workers worked 71 days out of a possible 91 days, according to the ADB study.
Because of lower pay, nonstandard workers have to compensate for the difference and reduce the impact on their families. Where work is available, they work longer hours, more days in a week, engage in multiple jobs, or send more household members to work.
Part of the attraction of nonstandard employment to employers is the ability to shift the cost of temporary or periodic shutdowns to workers through a no-work-no-pay policy. Firms are more likely to pay regular rank-and-file workers on a monthly basis than other bases of payment, such as weekly, daily, or hourly.
According to the BLES survey, 54 percent of companies pay regular workers on a monthly basis. By contrast, only 32 percent of companies pay non-regular workers on a monthly basis. Six out of 10 firms pay non-regular workers on a daily (48 percent), hourly (11 percent), and output or piece-rate (4 percent) basis.
NO WAGE BARGAINING
Yet another reason for the lower pay of non-regular workers is the absence of unions and collective bargaining for wages and benefits. The determination of wages of non-regular workers becomes highly dependent on the minimum wage law.
Again, the BLES data show that 72 percent of establishments rely on the minimum wage to fix or revise wages of nonregular workers, while 59 percent do so for regular workers, and another 6 percent rely on collective bargaining agreements.
With no bargaining power to raise wages, the minimum wage serves as a ceiling rather than a floor for non-regular workers, often regardless of years of service.
A major advantage of workers in establishments with unions over those without unions is in the range of fringe benefits accessible to them. The BLES survey enumerates 16 types of paid leave benefits, nine social security schemes, and 10 health care benefits, or a total of 35 fringe benefits possibly provided by firms.
The survey reveals that the proportion of firms providing regular rank and file workers fringe benefits is consistently higher for those with unions than without unions in each of the 35 possible benefits.
The only exception is the service incentive leave, which the law mandates in the absence of a paid vacation leave. Adding the service incentive leave to vacation leave maintains the result: unionized firms provide wider fringe benefits than non-unionized firms. Establishments with unions represented 12 percent of the survey sample.
Regardless of union status, the average establishment provides regular rank-and-file employees four types of paid leave benefits (vacation, sick, maternity, and paternity leave), two types of social security schemes (compulsory SSS and separation pay), and three types of health care benefits (first aid treatment, medical care, and annual physical check-up).
The most common fringe benefits accessible to non-regular workers are compulsory SSS and PhilHealth membership, medical assistance for work-related illness or accident, and a five-day service incentive leave required by law.
Avoiding severance or termination pay for regular workers is one of the reasons behind the rise in contractual and agency-hired workers. To retain workers with good performance, a common practice is to hire those workers through an employment agency to allow continuous hiring without incurring financial obligations to the worker in case of termination.
An ILO study by Peter Dorman, “The Economics of Safety, Health, and Well-Being at Work,” examines the causes and consequences of occupational health and safety risks. It shows that the proliferation of various forms of nonstandard employment have been linked to increased health and safety risks.
There are several reasons for this. Outsourced and contract workers receive less training and have less awareness of their rights. In some instances they do not even know who their employer actually is.
To maximize output and minimize time, which is the attraction of nonstandard workers, employers tend to cut corners and take greater risks. Safety and health problems often go unrecognized. Nonstandard workers are on average less educated and also at greater risk.
Nonstandard workers have little input into their work conditions. They have less knowledge about their work environment and feel constrained by their status from complaining about or refusing poor and hazardous working conditions. They feel their voices are not heard and are less likely to be represented on health and safety committees. They do not have the freedom to choose when to take personal leave. All these are important for overall health.
FUTURE LOOKS BRIGHT—ABROAD
Jeff and Anthony are “disers,” Pinoy slang for mechandisers, in Handyman, the hardware store of Robinson’s mall. The two buddies sell competing brands of power tools.
Jeff, a college undergraduate, is a regular employee of NKD International Trading Corp., a distributor of brands like Black & Decker and De Walt. Anthony, a computer technician, is an agency-hired worker for the company distributing Bosch power tools.
In their mid-20s, both are in a hurry to get an overseas job. It is their best hope for a better future. They have been working in their present jobs for the last four years, getting no more than Metro Manila’s daily minimum wage of less than P400.
Jeff has a job waiting for him with the Saudi Company Hardware as a “diser.” With a mother and one sibling to support, he has not been able to raise the P2,500 needed to pay for medical exams.
Anthony has found a potential employer in Canada through the Internet and is awaiting processing of his application also to work as a “diser.” It is easier to get a job abroad when one is still young and without a family, he explains. He does not like the idea of getting stuck in his present position.
Gene had earlier tried his luck looking for work overseas. He was hired as a rider for Pizza Hut in Brunei, but backed out after he was asked to pay P45,000 in recruitment fees. With a monthly salary of $300, he calculated it was not worth it. He stayed at his job with Burger King, a job he has held for 10 years. For his labor, he gets paid the minimum wage.
The ADB study on job quality in the Philippines sums up the situation of workers like Jeff, Anthony, and Gene: “What we can say with more confidence is that while a shift from self-employment to wage employment is underway, perhaps the fundamental weakness in the Philippine labor market is the slow growth in earnings.”
In terms of wage growth, there is little difference between rank and file permanent and casual workers. Real wage rates rose 1.2 percent and 1.0 percent annually for permanent and casual workers, respectively, over the period 1994-2006.
The stampede for overseas jobs has had the perverse effect of keeping wages low in specific labor markets—salespeople, nurses, hotel and restaurant workers, to name a few. This is because these positions require work experience with credible employers. The result is competition among potential overseas workers for limited local positions, reducing the need for employers to hire regular workers. It is not uncommon for young nurses and hotel workers to pay employers for a chance to be “trainees” or to render free labor in exchange for a certificate of work experience.
For Gene who is not lucky enough to leave his job, there is no choice but to put up, especially as the second of his two kids is about to enter primary school. Gene does not want to think too much about the future. “My head will just spin,” he quips—a dangerous thought for somebody who weaves through Manila’s crazy traffic for a living.