Pidspjd09 2laborpolicies PDF

Philippine Journal of Development
Number 67, Second Semester 2009

Volume XXXVI, No. 2
Labor Policies and Philippine Companies:

Analysis of Survey Opinions
Gerardo P. Sicat1
Abstract
This paper analyzes the responses from a survey of Philippine
companies concerning labor market policies, such as minimum
wage-setting process, hiring and firing practices, training, and
holidays. These policies have gained wide acceptance as a means
of protecting the welfare of workers. But one of the features of the
Philippine economy is the massive unemployment that has persisted
for a long time.
Specific characteristics associated with the respondent firms help
to isolate important findings in their opinions about the country’s
labor policies. Responses to each policy issue vis-à-vis certain criteria
around which operating enterprises were grouped yielded some
important conclusions. The firms were either recipient or nonrecipient
of investment incentives; export- or domestic market-oriented; owned
by nationals or by foreigners; young or old; and small or large based
on size of labor employment.
Although the policy implications of the findings are not discussed in
this paper, some conclusions appear evident. Among others, companies
are adversely affected by certain policies that they complain about.
1
The author is Professor Emeritus, University of the Philippines School of Economics (UPSE). This side research
arose from topics stimulated by participation in a project under the Asian Development Bank which covered labor
market issues. The author is thankful to Rose Edillon and Sharon Faye Piza of the Asia Pacific Policy Center for
reigniting his interest in labor market issues, as well as to Kelly Bird of the ADB and Clarence Pascual of UP. He
is likewise grateful to his colleague, Emmanuel Esguerra of the UPSE, with whom he has had discussions on
labor issues in the Philippines. He is especially thankful to Lora Liza S. Dioquino, a human relations manager
in the private sector, who enlightened him on many practical labor policy issues in the workplace. E-mail for
correspondence: gsicat@skybroadband.com.ph
2 Philippine Journal of Development 2009
INTRODUCTION
This paper analyzes the results of an opinion survey of Philippine enterprises
on labor market issues. In early 2009, a survey of Philippine companies was
launched as part of a project study financed by the Asian Development Bank.
The firms consisted of a limited sample of operating enterprises located in two
major industrial and commercial regions of the country: Metro Manila and Metro
Cebu. Despite this limited sample, which was not intended to be representative
of the Philippine economy, the surveyed firms comprised 157 major operating
enterprises from which important findings could be drawn. The survey focused on
enterprises that provide a wide range of employment in the country.
As part of this survey, a number of labor market policy questions were posed
to the company respondent firms.2 In general, these questions revolved around
policy issues, specifically those involving the minimum wage, the regulation
of labor contracts, the hiring and firing of workers, manpower training, and the
number of holidays. Some of the issues covered were often publicly discussed.
The respondents were asked to rate specific labor policies based on a
scale of approval ranging from 1 (“very poor”) to 5 (“excellent”), with 3
indicating “average” or “fair.” Each labor policy issue was assigned a
corresponding frequency distribution of responses along the five-point scale,
yielding the corresponding average scores and measures of variability from
the resulting average.
This paper presents the survey results on labor market policies mainly in
two parts. The first part reviews the overall findings, summarizing the frequency
distribution of the various opinions expressed by the respondent companies.
Comparisons of average responses per policy show the degree of their variations
and the extent to which answers to the questionnaires correlate with one another.
The second part presents a full discussion of the various influences arising
from firm characteristics. The wide-ranging responses are analyzed to determine
their frequency distribution.
This paper was prompted by the need to probe the attitudes of operating
firms toward specific labor policies in a manner that yields statistical proof. If
surveys of opinions elicit their responses to specific labor policies, then it is
useful to find out what groups of firms consistently give tractable responses to
specific policies that may need the attention of policy makers. As a result, this
study focuses on the frequency of responses that are critical of the policies. This
means zeroing in on the responses of operating enterprises that are critical of
those policies.
2
The labor policy questions are only a part of a larger statistical survey of operating enterprises dealing with
other employment issues and company characteristics. The labor policy issues were only one aspect of this
larger labor market survey.
Sicat 3
Such responses yielded scores of “very poor” and “poor” on specific labor
market issues. Collectively they indicated a strong level of disagreement with
the existing labor policies and hinted at the types of companies that were hurt
or adversely affected by such policies. That could mean certain policies were
hampering their operations, possibly hindering their flexibility and therefore
adding to their costs. It could also mean being left with inferior options on the
hiring of labor that could not be properly exercised. In a globalizing world this
could eventually mean becoming less competitive compared to other enterprises,
either domestic or foreign.
This paper hopes to reach a wide segment of the general public that is
interested in labor policy issues in the Philippine context. Sicat (2010 ) uses the
same data reported here to determine the influences of various characteristics
associated with respondent companies on the probability that they would voice
a specific opinion about the minimum wage policy. The approaches of the two
papers are different but they feed into each other’s major conclusions.
COMPANY VIEWS ON LABOR ISSUES IN PERSPECTIVE

Company respondents were asked 14 specific questions covering a host of labor
market issues. The questions were designed to elicit responses on how respondent
companies viewed the policies meant to promote a good investment environment.
These specifically focused on the following:
 The minimum wage setting as a consultative process
 The cost of severance pay regulation
 Freedom to employ workers on fixed-term contracts
 Ease of dismissing regular workers
 Mandatory on work hours per week
 Overtime pay rates
 Industrial relations and harmony
 Mode of settling labor disputes
 Inspections by officials of the Department of Labor and Employment
(DOLE)
 Performance of the Public Employment Service Office
 Government incentives for training workers
 The quality of vocational schools in the respondent’s sector
 Number of mandatory national holidays
 Number of discretionary national and local holidays
Average scores of policies

Table 1 presents the summary of the responses of the surveyed enterprises to the
14 labor policy issues covered. It shows the average ratings derived from the
Table 1. Mean scores ranked (from highest to lowest )

Rank Symbol Description of Labor Policy Obs Mean Std. Dev. Min Max
1 LP_hours Policy on hours of work 157 4.08917 0.98953 2 9
2 LP_ovtime Policy on payment of overtime 157 4.03185 0.96357 2 9
3 LP_v_sch Quality of local vocational schools 157 3.97452 2.17783 1 9
4 LP_ind_rel Industrial relations process 157 3.93631 1.13047 1 9
5 LP_p_of Role of public employment placements 157 3.91720 2.25025 1 9
6 LP_l_train Training of labor in service 157 3.89172 2.38473 1 9
7 LP_hol_dy Labor policy on holidays in general 157 3.74522 1.06762 1 9
8 LP_ohol_dy Labor policy on other holidays 157 3.59236 1.06792 1 9
9 LP_fxtc Limitations on fixed term contracts 157 3.58599 1.50659 1 9
10 LP_sev_c Payment of severance costs 157 3.55414 1.29790 1 9
11 LP_l_dispu~s Settlement of labor disputes 157 3.38217 1.52557 1 9
12 LP_l_inspct Labor inspections 157 3.29936 1.42983 1 9
13 LP_min_w Minimum wage setting process 157 3.28026 1.10844 1 5
14 LP_dismiss Restrictions on worker dismissal 157 3.26752 1.57049 1 9
various responses. The labor policy which is seen as most problematic (lowest
score) is recorded first and the most favored (highest average score) is ranked
last. Since all the scores are based on the same scales of all possible answers, it is
possible to compare the average scores and view them in ranked order and draw
conclusions from their differences in scores. These are ranked according to the
order of lowest average scores to the highest. Each average score is shown along
with the corresponding standard deviation.
In general, the survey results returned relatively high ratings beyond the
mid-score of 3. This is to be expected. Labor welfare policies are high on the list
of public policies that support a humane and caring society. Based on this finding,
even the most problematic of the current policies rated higher than 3. Since the
highest score is equal to 5, it is not surprising that the policies most favored by the
respondents scored higher than 4.
The labor policies with the highest approval ratings—obtaining a mean score
higher than 4, or good—are the regulation of working hours and the payment of
overtime work beyond regular hours.
The survey yielded the lowest minimum score of 2, or poor. However, a few
questions did not elicit responses and were marked 9. They were excluded from
calculations of mean scores and standard deviations.
Other labor policies that scored well included those relating to the quality
of vocational schools in the firms’ host communities, the evaluation of industrial
labor-management relations, the role of public employment assistance, training
of workers, and public holidays. Some of the policies that rated high also had
high variability in the responses. This was especially true of the policies having
to do with the training of labor and the role of the public placement bureaus.
Sicat 5
The policies that received the lowest scores revolved around the restrictions
on the dismissal of workers, the minimum wage setting process, labor inspections
by the government, the settlement of labor disputes, the payment of workers’
severance pays, and the restrictions on the use of fixed-term contracts. These
are cause for grievance among respondent companies regarding labor policies.
The average scores are relatively close to one another although their measures of
variability differ.
Mean scores help to gauge which policies receive relatively greater or less
approval from the respondent firms. But variability measures the “noise” that
could be read from these responses. Variability in effect describes the spread
of the responses relative to the average. The wider the spread, the higher is the
disagreement of some respondents with the policy judgment of many firms.
Variability of answers
Table 2 uses the same data presented in Table 1 but focuses on the variability of the
mean scores. The standard deviation (which is given alongside the mean score)
is a measure of the variability of the mean. The lower the value of the standard
deviation, the more stable or reliable is the calculated average score. Thus, the
mean scores are judged by their relative variability: these scores are ranked
by their variability, that is, from the least variable or most stable estimate to
those with the highest variability (more widely spread and therefore less reliable
mean scores).
Table 2 shows that some mean scores also have low variability so that they are
quite reliable indicators of average sentiments. For instance, based on responses,
the minimum wage is fairly reliable and widely accepted. It has one of the lowest
Table 2. Ranking of variability of the mean scores (from lowest to highest)

Rank Symbol Description of Labor Policy Obs Mean Std. Dev. Min Max
1 LP_ovtime Policy on payment of overtime 157 4.03185 0.96357 2 9
2 LP_hours Policy on hours of work 157 4.08917 0.98953 2 9
3 LP_hol_dy Policy on holidays in general 157 3.74522 1.06762 1 9
4 LP_ohol_dy Policy on other holidays 157 3.59236 1.06792 1 9
5 LP_min_w Minimum wage setting process 157 3.28026 1.10844 1 5
6 LP_ind_rel Industrial relations process 157 3.93631 1.13047 1 9
7 LP_sev_c Payment of severance costs 157 3.55414 1.29790 1 9
8 LP_l_inspct Labor inspections 157 3.29936 1.42983 1 9
9 LP_fxtc Limitations on fixed-term contracts 157 3.58599 1.50659 1 9
10 LP_l_dispu~s Settlement of labor disputes 157 3.38217 1.52557 1 9
11 LP_dismiss Restrictions on worker dismissal 157 3.26752 1.57049 1 9
12 LP_v_sch Quality of local vocational schools 157 3.97452 2.17783 1 9
13 LP_p_of Role of public employment placements 157 3.91720 2.25025 1 9
14 LP_l_train Training of labor in service 157 3.89172 2.38473 1 9
measures of variability (rank number 5). Payment of overtime enjoys the second
highest mean score from the respondents but it has the lowest variability. In
general, however, all the average judgments arising from the respondent returns
indicate mean values that are above the measure of variability, the standard
deviation. When this fact is translated into statistical terms, the computed means
are statistically significant, which are at least at the 5 percent level. As will be
seen below, the responses to the policies on severance costs, fixed-term contracts,
and worker dismissal indicate that these are the most challenging labor policies to
a number of firms. Still, they have wide acceptability based on the magnitude of
favorable responses.
The policies related to labor training (on the quality of vocational schools
and on incentives for training) have the highest level of volatility of the mean
scores. But they still represent a situation in which the calculated variability is
lower than the mean score.
Correlations
Table 3 shows the simple correlation matrix of the responses with each other.
Correlations have values ranging from +1.0 to –1.0. Given the design of the
questions, most of the answers are expected to be positive correlations, with none
having negative correlations. The obvious correlation of a given policy with itself
is 1.0. The matrix reads best row-wise against the column entry, or alternatively,
column-wise against the row entry. It is essentially a two-by-two matrix: a
particular policy read on the row correlated against the entry that is given on the
answers to the policy listed in the column.
For instance, the policy on the payment of severance costs (LP_sev_c) in
the second row is correlated 0.48 with the minimum wage (column 1). This high
level of correlation shows that most answers relating to the minimum wage issue
have close to 50 percent chance of viewing the policy on severance costs in the
same way.
Highly related policy issues tend to have high correlations. Correlation
implies that responses tend to complement each other. For instance, respondents
that tend to approve a given policy would approve another closely related labor
policy. If the response is one of disapproval, then the same opinion is accorded to
a similar policy. For instance, those who responded favorably to the general policy
on holidays tend to favor the discretionary nature of additional local holidays and
nonworking holidays (close to 0.80). The same is true of responses on hours of
work in relation to the overtime payment (correlation is 0.82).
The correlation of the responses varies according to the specific labor
policy under consideration. Take the case, again, of the responses on severance
payment for affected workers. As could be gleaned from column 2 and the
Table 3. Correlation matrix among all the labor policy responses
1 2 3 4 5 6 7 8 9 10 11 12 13 14
LP_ LP_ LP_ LP_ LP_ LP_ LP_ LP_ LP_ LP_ LP_l_ LP_ LP_ LP_
min_w sev_c fxtc dismiss hours ovtime ind_rel l_ispu~s l_inspct p_of train v_sch hol_dy ohol_dy
1 LP_min_w 1.000
2 LP_sev_c 0.488 1.000
3 LP_fxtc 0.431 0.325 1.000
4 LP_dismiss 0.214 0.282 0.196 1.000
5 LP_hours 0.304 0.216 0.356 0.232 1.000
6 LP_ovtime 0.340 0.268 0.283 0.210 0.824 1.000
7 LP_ind_rel 0.286 0.203 0.278 0.165 0.263 0.308 1.000
8 LP_l_dispu~s 0.380 0.265 0.357 0.222 0.343 0.319 0.271 1.000
9 LP_l_inspct 0.351 0.297 0.388 0.115 0.312 0.240 0.159 0.397 1.000
10 LP_p_of 0.166 0.058 0.187 0.146 0.185 0.143 0.207 0.198 0.323 1.000
11 LP_l_train 0.164 0.204 -0.002 0.181 0.078 0.055 0.183 0.135 0.111 0.506 1.000
12 LP_v_sch 0.194 0.109 0.085 0.165 0.159 0.126 0.174 0.148 0.031 0.418 0.499 1.000
13 LP_hol_dy 0.364 0.260 0.345 0.255 0.283 0.288 0.247 0.383 0.369 0.213 0.259 0.221 1.000
14 LP_ohol_dy 0.330 0.257 0.345 0.257 0.259 0.287 0.196 0.376 0.408 0.207 0.129 0.268 0.780 1.000
Sicat
7
corresponding correlations across the rows, in general a lot of responses to

policies are substantially positively correlated if the correlations are low. But 10
of the responses to labor policies of different types are correlated with the policy
of severance pay by at least 25 percent of the time. The highest correlation lies in
responses on the minimum wage.
Some of the labor policies elicit responses that are closely linked with one
another. Approval ratings for the minimum wage, severance costs, restrictions on
fixed-term contracts, the policy on settling industrial disputes, and holidays tend
to go together. But responses to policies with respect to training, restrictions on
dismissal, and vocational schools tend to have less in common with the responses
to other policies.
All this discussion of correlation coefficients indicates a high degree of
variations among the responses to specific policies.
Correlations of the responses to various policies are just a peep through
the window. It is still important to understand the nature of the respondent
firms and how they respond to specific policies. Thus, it is also vital to delve
into firm characteristics and understand how these shape company opinions
of specific policies. A firm’s group background may embody important
behavioral characteristics that may be associated with its outlook, objectives,
or special interests.
For instance, a company that has been around for long may display a degree
of complacency about certain policy issues that are otherwise cause for concern
for a younger company. An enterprise mainly engaged in domestic business may
behave differently from one that caters to foreign markets. A firm owned by local
citizens could respond differently from a foreign-owned firm. A company with a
very large employment size may have different assessments of the same policy
compared to one with a very small manpower complement.
It is therefore desirable to find new information about respondent firms
that differentiate them from one another. In this way, it is possible to analyze
any degree of “noise” that might separate them in their judgments about
particular labor market policies. This could lead to critical information that
could be missed by focusing on average responses. Key to an effective policy
analysis is understanding the subtleties underlying complex issues and using
them effectively.
Specifically, the survey design allowed the regrouping of various respondents
by specific characteristics, which are outlined below.
 By the response of the firms to government investment incentives
(recipients or nonrecipients; the survey asked if the firm is or had
been a Board of Investments-or Philippine Economic Zone Authority-
registered enterprise).
Sicat 9
 By the main sector of activity of the firm (manufacturing or services,
which were the only ones comprehensively surveyed in the study).
 By type of market served by the firm (the survey asked companies to
indicate the extent of their sales to market destination, domestic or
foreign. For purposes of the study, only those catering to the domestic
market were compared with those catering solely to the foreign
markets. A few respondents have mixed markets.)
 By the nature of the enterprise ownership of the companies (respondent
firms were either 100% Filipino enterprises, joint ventures with at
least 60% Filipino ownership, joint ventures with at least 60% foreign
direct investment [FDI] ownership, or 100% FDI).
 By age of the enterprise (based on the year of their corporate registration
in the Philippines, firms were classified as new [one to five years old],
more than five to 10 years old, more than 10 years old to 20 years old,
and more than 20 years old).
 By size of employment (based on standards set by the Philippine
statistical authorities, the firms were reclassified as micro [with up
to 9 workers], small [with 10–99 workers], medium [with 100–199
workers], and large [with more than 200 workers]).
COMPANY CHARACTERISTICS AND THEIR RESPONSES

Survey responses that yielded poor ratings for certain labor market policies
were analyzed to determine the nature of firms that gave such responses. Such
enterprises are likely to have been adversely affected by these policies.
One major concern in the realm of economic policy is the inability of the
country to generate massive employment despite legal moves to raise labor
standards. This concern may not be readily blamed on specific labor policies,
since there are other factors that affect overall economic growth and employment.
For decades, these policies have been widely accepted by the public,
thus creating a feeling of comfort about them. In fact, relying mainly on the
average scores or the frequency of responses could lead to a mistaken notion
that all is well with respect to these policies and therefore dispel the need to
change them.
A different outcome could arise from some analysis of critical information
about the policies. The purpose of sound policymaking is to understand how
criticisms of existing policies could help improve them such that they can boost
economic and social development.3 An understanding of the views of specific firms
3
In the discussion below, the statement that a group of firms receives a poor rating might refer to the sum of
very poor and poor together. It is therefore useful to refer to the table whenever examining the full meaning of
the statement.
toward some policies could provide a hint about where desirable improvements
are possible and how they can boost economic growth.
Understanding the types of firms that are critical of certain policies also
facilitates understanding of those enterprises that favor such policies.
The discussion below focuses on the critical answers to each of the 14
labor policy issues posed in the survey. For ease of reference, 14 frequency
tables contain the responses “very poor” and “poor,” summing up the two sets
of responses and then showing these as a percent of the total responses to the
survey. The final column indicates the percent of respondents to a specific labor
policy issue.
Responses critical of specific labor policies yielded ratings of 1 and 2.
Each of these tables is a set of two-by-two tables: the frequencies of company
responses of “very poor” and “poor” are matched against the specific grouping
(that is defined by a specific characteristic classification) to which the respondent
firm belongs.
Labor policy 1: Minimum wage

Responses to the issue of minimum wage revolved around the level at which
it is set and how it is done. Under the law, a regional wage-setting process is
mandatory even as the national wage level is often influenced by that of the
Metro Manila region. All regional wages fall below that of Metro Manila while
the regional wage boards oftentimes act only after the Metro Manila level has
been set.
The sample of respondents was mainly drawn from two major areas
of the country: Cebu and Metro Manila. But because of the presence of
numerous firms in the CALABARZON (located in Southern Luzon and
comprising Cavite, Laguna, Batangas, Rizal, and Quezon) region, some of
them were included as respondents. Care, however, was taken to ensure that
the respondent firms were evenly spread out by municipality. The choice
of the samples was confined to Metro Manila and Cebu—two regions with
different minimum wage-setting schemes. The Metro Manila rates are slightly
higher than those of Cebu.
CALABARZON is almost an extension of the Metro Manila region. Firms
in the region are geographically close to Metro Manila. Their economic and
locational conditions appear to be similar to those of the latter. And there are
only a few of them.
Table 4 presents the results of the survey indicating outlier responses. The
mean score of the respondents is 3.28 (Table 1). With the exception of the labor
policy on the issue of dismissal of workers, this is the lowest rating received from
157 respondents. That all of the firms responded to the question suggests that none
Table 4. Minimum wage setting as a consultative process
Score 1=Very Poor 2=Poor Total Ratings of 1 & 2 as No response % of responses
respondents % of Total
(a) By Fiscal Incentives Recipients
Recipient 6 6 82 14.6 0 100.0
Nonrecipient 6 12 75 24.0 0 100.0
(b) By Economic Sector

Manufacturing 6 4 50 20.0 0 100.0
Services 6 13 101 18.8 0 100.0
(c) By Market Orientation

Exports 3 1 15 26.7 0 100.0
Domestic 6 16 123 17.9 0 100.0
(d) By Enterprise Ownership

100% Fil. 9 15 118 20.3 0 100.0
60% Fil. 1 3 16 25.0 0 100.0
60% FDI 2 0 6 33.3 0 100.0
100% FDI 0 0 17 0.0 0 100.0
(e) By Age of Enterprise

New: 1 to 5 years 3 1 17 23.5 0 100.0
>5 to 10 years 3 8 56 19.6 0 100.0
>10 to 20 years 4 4 48 16.7 0 100.0
>20 years 2 5 36 19.4 0 100.0
(f) By Size of Employment

Micro (1 to 9 workers) 1 1 13 15.4 0 100.0
Small (10–99 workers) 7 4 63 17.5 0 100.0
Sicat
Medium (100–199 workers) 1 4 31 16.1 0 100.0

Large (200 and more workers) 3 9 50 24.0 0 100.0
11
of them was indifferent to the issue or was unaware of its implications on their
operations. All these show that there is a wide range of respondents who favor this
relatively low rating.
 By recipient or nonrecipient of fiscal incentives. Twelve respondents,
or 14.6 percent of a total of 82 recipients of fiscal incentives gave
a very poor or poor rating. A larger proportion, or 24 percent of 75
nonrecipient firms gave similar ratings. Nonrecipient companies
of investment incentives expressed greater resentment toward the
policy governing the minimum-wage setting process. Local firms
thriving under a uniform business environment appear to be more
hurt by mandated minimum wages than those who have been granted
additional investment incentives.
 By economic sector. There is no significant difference in the attitude of
respondents within the manufacturing and services sectors toward the
minimum wage. Around one-fifth of the firms in both sectors rated the
minimum wage issue as either poor or very poor.
 By market orientation: domestic or export. A higher proportion
of export firms have a poor opinion of the minimum wage policy
compared to those serving only the domestic market. Four (26.7%) of
15 export firms rated it as poor compared to only 17.9 percent of the
123 domestic market-oriented respondent firms.
 By ownership of enterprises. The critical view of minimum wage
legislation came mainly from firms owned by Filipino nationals,
whether 100 percent-owned or 60 percent controlled joint-venture
investments. Foreign enterprises, especially 100 percent-owned
companies, expressed little dissatisfaction with the policy. Therefore,
in general, the respondents found the minimum wage rate low.
Since foreign companies tend to pay their workers higher than the
government-mandated minimum wage, it can be concluded that the
minimum wage policy hurts Filipino-owned domestic firms more
compared to those owned by foreigners.
 By age of the enterprise. Younger firms tended to be more vocal in
their views of the policy than older ones. Still the latter made up a
sizeable size of firms—close to 20 percent among firm respondents
that were more than 20 years old.
 By employment size of the firm. The larger a firm is by employment
size, the more critical it is of the minimum wage policy. Among
micro, small- and medium-sized firms by employment size (with
less than 9 to 199 workers), the proportion of those respondent firms
rated the minimum wage policy as poor ranged from 15.4 percent to
Sicat 13
17.5 percent. But of the 50 large respondent firms, 12 gave the policy
a poor rating.
Labor policy 2: Cost-of-severance pay regulation

The survey also sought to determine respondent views on the policy on employee
severance pay. Severance payment is money paid to employees on top of their
wages when they leave the firm. It is a labor welfare standard mandated by
law and which is accorded to regular employees. Temporary workers or casual
workers are not entitled to this benefit.
Respondents who rated the policy as either poor or very poor indicated that
they found it too costly. Still, it was the issue of minimum wage that generated
stronger reactions from the respondents, at least 10 percent of whom gave it a
rating of poor or very poor.
Recipients of fiscal incentives as well as local companies tended to be
less vocal in their objections to the policy on severance pay. This is also true
of respondent firms in the manufacturing sector whose responses contrasted
with those in the services. Export-oriented enterprises, on the other hand,
seemed more critical of the policy than those selling mainly to the domestic
market. Younger firms (aged up to 5 years old) tended to be more sensitive
to this issue compared to older firms, who appeared resigned to it and who
comprised a smaller proportion of respondents who did not favor the policy.
Enterprises with huge manpower pools were less critical of the policy than
smaller firms.
Table 5 shows the various responses to the labor policy on severance pay.
 By recipient or nonrecipient of fiscal incentives. There was little
difference in the reaction of firms to the policy on severance pay.
 By economic sector. Respondent firms in the manufacturing
industry were proportionately more sensitive to the policy on
severance pay than those in the services sector. Eight, or 16 percent
of the 50 manufacturing respondents rated the policy as poor. Of
101 respondents in the services sector, 11, or 11 percent of them,
gave it a poor rating. Poor ratings exceeded very poor ratings in
both sectors.
 By market orientation: domestic or export. Proportionately, more
export firms rated the policy as poor compared to those catering to
the domestic market. Of the 15 fully export firms, three, or 20 percent
of the respondents gave the policy a poor rating. Domestic–oriented
firms that rated this policy made up 11.4 percent of 123 respondents.
 By ownership of enterprises. Dissatisfaction with the policy was
most pronounced among 100 percent Filipino-owned enterprises.
Table 5. Cost of severance pay regulation 14
Score 1=Very Poor 2=Poor Total Ratings of 1 & 2 as No response % of responses
Recipient 1 9 82 12.2 1 98.8
Nonrecipient 3 7 75 13.3 3 96.0

Manufacturing 2 6 50 16.0 2 96.0
Services 1 10 101 10.9 2 98.0

Exports 0 3 15 20.0 0 100.0
Domestic 3 11 123 11.4 3 97.6
Philippine Journal of Development 2009

100% Fil. 4 13 118 14.4 2 98.3
60% Fil. 0 2 16 12.5 1 93.8
60% FDI 0 0 6 0.0 0 100.0
100% FDI 0 1 17 5.9 1 94.1

New: 1 to 5 years 1 2 17 17.6 1 94.1
>5 to 10 years 1 5 56 10.7 1 98.2
>10 to 20 years 2 5 48 14.6 1 97.9
>20 years 0 4 36 11.1 1 97.2

Micro (1 to 9 workers) 0 2 13 15.4 0 100.0
Small (10–99 workers) 4 4 63 12.7 2 96.8
Medium (100–199 workers) 0 5 31 16.1 0 100.0
Sicat 15
More Filipino-controlled joint ventures, albeit marginally, seemed
to favor this policy compared to fully Filipino-owned enterprises.
Firms that are owned by foreigners—whether fully owned or
joint ventures—generally accepted severance cost as part of the
employment contracts.
 By age of the enterprise. Newer firms tended to be more critical of
severance costs compared to older firms. Of 17 new firms (1 to 5
years old), five, or 17 percent of them rated the policy on severance
costs as poor. Firms aged 6 to 10 years old expressed greater tolerance
toward the policy, with only 10.7 percent of them rating the policy as
poor. Among much older firms (above 20 years), 11 percent, or four
of the 36 firms, gave this policy issue a poor rating. A slight spike in
dissatisfaction was observed among firms that are more than 10 to 20
years old. Among these, 14.6 percent, or 7 of 48 respondent firms,
rated the policy as either poor or very poor.
 By employment size of the firm. The responses of firms by employment
size approximated those of firms classified by age. Small firms (with
10 to 99 workers) that rated the severance pay policy negatively
comprised 12.7 percent of the respondents; micro enterprises, 15.4
percent. More medium-sized firms (with 100 to 199 workers) gave
the policy negative ratings. Among large firms (with more than 200
workers), only 5, or 10 percent of the 50 respondents, rated this policy
as poor.
Labor policy 3: Freedom to employ on a fixed-term basis

To protect employees from being employed on a temporary basis for long periods,
labor policy has required that temporary workers be elevated to full-time status
after six months of their employment. However, some enterprises want more
leeway in dealing with workers on temporary contracts so they can control
costs and citing specific and nonrecurrent projects that do not require fixed-term
contracts. But those who favor this policy say it helps ensure employment stability
for temporary workers.
The proportion of responses indicating very poor and poor ratings on the
policy varied based on certain firm characteristics. At least 20 percent of respondents
across most classifications of firms rated the policy either as poor or very poor.
Table 6 shows the survey responses to the policy on restrictions to fixed-term
labor contracts.
 By recipient or nonrecipient of fiscal incentives. Among firms that
received or did not receive fiscal incentives, there was no marked
difference in their view of this policy. Among respondents, 20 percent
Table 6. Freedom to employ workers on a fixed-term basis 16
Firm Grouping 1=Very Poor 2=Poor Total Ratings of 1 & 2 as No response % of responses
Recipient 6 10 82 19.5 2 97.6
Nonrecipient 5 11 75 21.3 3 96.0

Manufacturing 4 7 50 22.0 0 100.0
Services 7 13 101 19.8 5 95.0

Exports 2 3 15 33.3 1 93.3
Domestic 9 13 123 17.9 4 96.7

100% Fil. 11 15 118 22.0 3 97.5
60% Fil. 0 2 16 12.5 1 93.8
60% FDI 0 1 6 16.7 0 100.0
100% FDI 0 3 17 17.6 1 94.1

New: 1 to 5 years 2 3 17 29.4 2 88.2
>5 to 10 years 2 8 56 17.9 2 96.4
>10 to 20 years 5 8 48 27.1 0 100.0
>20 years 2 2 36 11.1 1 97.2

Micro (1 to 9 workers) 0 1 13 7.7 0 100.0
Small (10–99 workers) 4 7 63 17.5 3 95.2
Medium (100–199 workers) 1 8 31 29.0 1 96.8
Sicat 17
in either class of firms rated this policy either as very poor or poor. This
is a fairly high level of disapproval of the policy under consideration.
 By economic sector. Slightly more respondent firms in manufacturing
rated the policy as either very poor or poor compared to those in
the services sector. The level of dissatisfaction was noted among a
sizeable 20 percent of the respondents.
 By market: domestic or export orientation. More firms engaged in
exports expressed disapproval of this policy compared to those serving
the domestic market, with five (33%) of 15 respondent firms and 22
(16.7%) of 123 respondent firms, respectively. Thus the export sector
appeared more hurt by this policy.
 By ownership of enterprises. Filipino-owned enterprises appear more
critical of this labor policy, with 26 or 29.4 percent of 118 respondents
rating it as poor or very poor. Among respondents comprising foreign-
owned enterprises (fully or 60% controlled), 17 percent gave the policy
similar ratings, indicating less intense sentiments toward the policy
compared to the former. By all accounts, however, this policy is more
discomfiting to foreign-owned enterprises than those on severance pay
and minimum wage, which they consider socially useful.
 By age of the enterprise. This labor policy restricting fixed-term
contracts for workers was viewed most critically by new respondent
firms and by companies that aged more than 10 years to 20 years old.
Of the 17 respondent firms in this age group, five of them (29%) rated
the policy as poor. Such rating persisted also among firms that have
been around for 20 years, and even more so among firms that have
been in operation for more than 20 years.
 By employment size of the firm. The smaller a firm is, the less important
is the restriction against fixed-term contracts. More respondent firms
with bigger manpower complement rated this policy as poor. Among
medium-sized enterprises (with 100 to 199 workers), 9 out of 31 firms,
or 29.0 percent, the policy also rated poorly. Among large firms with
more than 200 workers, 11 of 50 respondent firms, or 22.0 percent,
rated the policy as poor. This shows that the impact of such a policy is
greater on large companies.
Labor policy 4: Regulations against worker dismissal

The policy relating to worker dismissal is designed to protect workers from
arbitrary dismissal. Companies are legally bound to observe due process before
terminating a worker with cause. Among others, this requires written justification,
which some firms may find difficult to comply with owing to the complexity
of certain situations underlying such a decision. The company also risks lawsuit
from the affected workers, who by law are entitled to their day in court.
On the other hand, employers have the right to remove workers with cause.
The stringent restrictions are considered an infringement on the firm’s need for
speedy action and flexibility, especially if the case at hand affects worker morale
and company productivity. If firms find it difficult to dismiss erring workers, so
the argument goes, then it would be hampered in its market performance.
The law requires just cause for firing an employee. While the law also
recognizes a company’s right to dismiss workers with cause, the corresponding
legal conditions it imposes could exact a high cost on the employer. Based on the
survey, this specific component of employment protection generated the strongest
negative reaction among the respondents.
Among the labor market policies covered in this study, the policy surrounding
the dismissal of a worker received the lowest average score from respondents
(Table 1). This is due to the high degree of “very poor” and “poor” ratings that
respondent firms gave to this labor policy.
Table 7 provides details of these responses critical of the policy on
dismissal of workers. In general, this policy elicited the highest rate of very poor
and poor ratings from respondents, with a fourth to a third of all respondents
giving such ratings.
 By recipient or nonrecipient of fiscal incentives. Although classification
of firms did not play a major role in how the respondents rated this
policy, the number of scores rating this policy is significantly large.
Of fiscal incentives recipients, 26.8 percent among 82 firms rated
this policy poorly. Among nonrecipients, similarly 24 percent of
respondents give the same poor rating.
 By economic sector. Manufacturing sector firms seem most hurt by
this policy. Of the 50 firms responding, 32 percent of them gave this
policy a similarly poor rating. Domestic firms in the services sector
are hurt as well; 19.8 percent of firms among 101 respondents have
disapproving ratings. Although there appeared to be no significant
difference in the attitude of respondents toward the policy on worker
dismissal, a review of this policy is still in order if only to determine
its potential impact on operating firms.
 By market orientation: domestic or export. Five, or 33 percent of the
15 respondent export firms gave this policy a poor rating. Of 123
domestic-oriented firms, 18 percent of them similarly rated this policy.
Thus, more export enterprises are against this policy.
 By ownership of enterprises. More locally owned firms thumbed
down this policy compared to foreign-owned ones operating in the
Table 7. Ease of dismissal of regular workers
Recipient 7 15 82 26.8 3 96.3
Nonrecipient 9 9 75 24.0 3 96.0

Manufacturing 5 11 50 32.0 2 96.0
Services 10 12 101 21.8 4 96.0

Exports 1 4 15 33.3 0 100.0
Domestic 13 17 123 24.4 6 95.1

100% Fil. 12 16 118 23.7 5 95.8
60% Fil. 3 3 16 37.5 0 100.0
60% FDI 1 1 6 33.3 0 100.0
100% FDI 0 4 17 23.5 1 94.1

New: 1 to 5 years 1 4 17 29.4 2 88.2
>5 to 10 years 4 9 56 23.2 1 98.2
>10 to 20 years 6 7 48 27.1 1 97.9
>20 years 5 4 36 25.0 2 94.4

Micro (1 to 9 workers) 1 3 13 30.8 1 92.3
Sicat
Small (10–99 workers) 5 11 63 25.4 2 96.8

Medium (100–199 workers) 6 4 31 32.3 1 96.8
19
country, with 22 percent and 17.6, respectively. This shows that the
policy hurts the former more than the latter. The policy on dismissal of
labor requires further study in light of liberalization if the country is to
attract more foreign-owned companies.
 By age of the enterprise. Younger firms tended to give this policy a poor
rating compared to the oldest of the respondent firms. Disapproval of
the policy was strongest among firms that have been in operation for
five years. Older companies, like those in the more than 10 years up to
20 years of operational existence, rated this policy as poor. Within this
group, 13 of 48 respondent firms, or 27 percent of them, rated this policy
as either poor or very poor. Firms that have existed for much longer
than 20 years were not as critical of the policy, though, with only a
little over tenth (11%) of the 36 respondents giving it a negative rating.
 By employment size of the firm. A universal margin of small to large
enterprises (with more than 10 and up to more than 200 workers)
rated the policy as poor or very poor. Among the 31 medium-sized
respondent enterprises, 29 percent thought poorly of the policy.
Findings showed restrictions to worker dismissal needed the most
attention for reform among the policies covered.
Labor policy 5: Regulation on work hours per week

Introduced in the early 1960s, the 40-hour workweek is one of the earliest labor
market regulations to be enforced in the Philippines. It is the legally mandated
maximum workweek length in industrialized countries. Minimum wages are
based on eight hourly cycles, and salaries in general are based on this labor
standard. Another measure of standard work hours refers to the work of women.
Based on the traditional view of work hours, women are allowed to work only
during specific hours of the day. The night work prohibition for women is one of
the requirements of law protecting women employed in industry and commerce.
Hence the limited supply of labor for the night shift in factories.
The imposition of regulated working hours is considered a humane workplace
practice, because it protects workers against exploitation. Industrial enterprises in
general appear to have adopted it without complaint. Mandating standard work
hours sets the stage for the imposition of additional pay for extended work hours.
This regulation is also intended to discourage the occurrence of sweatshops,
places of work known for their excessive work hours for very little pay. Yet,
workers in these places are forced to endure their conditions if only to make a
living. Cognizant of this problem, the government encourages the establishment
of cottage industries that operate outside the restrictions of many, if not all, of the
labor standards that are part of the formal labor policies of the country.
Sicat 21
In general, there is wide acceptance of the regulation of hours of work as a
labor policy. Responses yielded no very poor ratings while very few enterprises
rated the policy as poor. This policy obtained the highest mean rating among all
policies with the lowest variability.
Table 8 contains breakdowns of the responses by respondent characteristics.
In general, this policy on regulated work hours seemed generally accepted. There
were no “very poor” ratings and only two instances of poor ratings.
 By recipient or nonrecipient of fiscal incentives. Only two respondent
firms among nonrecipients gave the policy a score of poor.
 By economic sector. The nature of the economic sector has no
distinguishing role in the emerging responses.
 By market orientation: domestic or export. The only respondents
that gave the policy a poor rating belong to domestic-oriented firms.
However, one respondent, or 6.7 percent among 15 exporters gave a
similarly poor rating.
 By ownership of enterprises. Only four, or 3.4 percent of 118
respondents among 100 percent Filipino-owned enterprises rated this
policy as poor. No respondents among foreign-owned firms gave this
policy a poor rating.
 By age of the enterprise. This policy did not receive markedly
significant poor ratings from the respondents.
 By employment size of the firm. Only three (4.8%) of 63 respondent
firms accorded the policy a poor rating.
Labor policy 6: Regulation on overtime rates of work

The labor policy on overtime is almost an extension of the regulation on
work hours. Under such a policy, workers who render overtime work are
allowed a higher pay over base pay. Overtime pay rate is 25 percent of the
base pay and is different during holidays (see discussion under the labor laws
on holidays). It becomes applicable after the full eight-hour work has been
rendered. Overtime pay rates raise the hourly cost of labor but it may also
be one way of compensating highly productive employees for work done
beyond the standard work hours. Responses to this policy were similar to
those involving working hours. Hence, this labor policy scored well in the
comparison of average scores.
Table 9 indicates an insignificant number of firms that rated labor policy
on overtime as poor. Such ratings were similar to those given to the regulation of
work hours.
(a) By recipient or nonrecipient of fiscal incentives. Of the 82 recipients
of fiscal incentives, not one gave the policy a poor rating while
Table 8. Regulation on work hours 22
Recipient 0 3 82 3.7 1 98.8
Nonrecipient 0 1 75 1.3 1 98.7

Services 0 3 101 3.0 1 99.0

Exports 0 0 15 0.0 0 100.0
Domestic 0 3 123 2.4 0 100.0

100% Fil. 0 4 118 3.4 0 100.0
60% Fil. 0 0 16 0.0 0 100.0
60% FDI 0 0 6 0.0 0 100.0
100% FDI 0 0 17 0.0 0 100.0

New: 1 to 5 years 0 0 17 0.0 0 100.0
>5 to 10 years 0 1 56 1.8 0 100.0
>10 to 20 years 0 0 48 0.0 1 97.9
>20 years 0 1 36 2.8 1 97.2

Micro (1 to 9 workers) 0 0 13 0.0 0 100.0
Small (10–99 workers) 0 3 63 4.8 1 98.4
Medium (100–199 workers) 0 0 31 0.0 0 100.0
Table 9. Regulation on overtime rates of work
(a) By Fiscal Incentive Recipients
Recipient 0 0 82 0.0 1 98.8

Services 0 1 101 1.0 1 99.0

Exports 0 1 15 6.7 0 100.0
Domestic 0 1 123 0.8 1 99.2

100% Fil. 0 2 118 1.7 2 98.3
60% Fil. 0 0 16 0.0 0 100.0
60% FDI 0 0 6 0.0 0 100.0
100% FDI 0 0 17 0.0 0 100.0

New: 1 to 5 years 0 0 17 0.0 0 100.0
>5 to 10 years 0 1 56 1.8 0 100.0
>10 to 20 years 0 0 48 0.0 1 97.9
>20 years 0 1 36 2.8 1 97.2

Micro (1 to 9 workers) 0 0 13 0.0 0 100.0
Small (10–99 workers) 0 1 63 1.6 1 98.4
Medium (100–199 workers) 0 1 31 3.2 0 100.0
Sicat

23
among the 75 nonrecipient respondents, two firms rated this policy

as poor.
(b) By economic sector. The two firms that registered a poor rating were
split between manufacturing enterprises and the services sector. There
were 50 manufacturing and 101 services firms among the respondents.
(c) By market orientation: domestic or export. Of the 15 export-oriented
respondents, one respondent—a Filipino-owned enterprise—rated this
policy as poor. This lone respondent represents 6.7 percent of the total
firms in the sample. Only one of 123 domestic-oriented firms rated this
policy as poor.
(d) By ownership of enterprises. Two Filipino-owned enterprises (out of
118 respondents) rated this policy as poor. Not one of the foreign-
owned firm gave the policy a similar rating.
(e) By age of the enterprise. Of the two firms that gave this policy a poor
rating, one was in the age group of 5 to 10 years and the other in than
more than 20 years age bracket. Both were Filipino-owned enterprises.
(f) By employment size of the firm. One of two respondent firms belonged
to small-scale companies by employment size, of which there were 63
firms in the sample. The other is a medium-scale company, of which
there were 31 firms in the sample.
Labor policy 7: Industrial relations (labor-management relations)

Industrial relations have become more peaceful in recent years. Major external
trade adjustments marked by the country’s entry into the World Trade Organization
(WTO), the moves of the Association of Southeast Asian Nations (ASEAN)
toward a free-trade area, as well as adjustments triggered by the financial crisis
of 1997 in East Asia, among others, changed the industrial climate and removed
many protectionist barriers. These led to a decline of highly protected domestic
industries. As a number of well-known companies began closing down their
operations and restructuring their production locations within Southeast Asia,
sometimes leaving and at other times repositioning their strengths within the
Philippines, extreme labor activism was weakened at its core. That this was an
international trend only made the process take its course naturally.
Table 10 shows only a few respondent firms were critical of the climate of
industrial relations in the country. In general, the proportion of such respondents
was smaller than those of other controversial policies such as those governing
minimum wages, fixed-term contracts, and worker dismissal. Less than 10 percent
of respondents in each class of firms had a critical view of the state of industrial
relations in the country. This shows little dissatisfaction among respondents
about the state of industrial relations in the Philippines.
Table 10. Industrial relations (labor-management relations)
Recipient 1 5 82 7.3 0 100.0

Manufacturing 2 5 50 14.0 0 100.0
Services 0 0 101 0.0 2 98.0

Exports 1 1 15 13.3 0 100.0
Domestic 1 5 123 4.9 3 97.6

100% Fil. 1 6 118 5.9 2 98.3
60% Fil. 1 0 15 6.7 1 93.3
60% FDI 0 0 6 0.0 0 100.0
100% FDI 0 2 17 11.8 0 100.0

New: 1 to 5 years 0 0 17 0.0 2 88.2
>5 to 10 years 1 5 56 10.7 1 98.2
>10 to 20 years 1 2 48 6.3 0 100.0
>20 years 0 1 36 2.8 0 100.0

Micro (1 to 9 workers) 0 0 13 0.0 0 100.0
Small (10–99 workers) 1 1 63 3.2 1 98.4
Medium (100–199 workers) 1 3 31 12.9 1 96.8
Sicat

25
 By recipient or nonrecipient of fiscal incentives. There was no

difference in the nature of responses between recipients and
nonrecipients of fiscal incentives where their responses concerning
industrial relations were concerned.
 By economic sector. Of the 50 respondent firms within the
manufacturing sector, seven firms gave a poor rating to the state
of industrial relations policy. Although these represent around 14
percent of the respondents, such a proportion was significantly
different from that in the services sector, where not one firm among
the 101 respondents rated this policy as poor.
 By market orientation: domestic or export. Among the 15 companies
that are engaged in export sales, only two, or 13 percent, rated the
policy as poor. In the case of 123 domestic market respondent
companies, only 5 percent expressed a negative view of the state of
industrial relations in the Philippines. In general, therefore, export-
oriented companies tend to be more critical of this policy.
 By ownership of enterprise. Despite general acknowledgement of
industrial peace among companies by ownership, the 100 percent
foreign direct investors, or 2 of 17 foreign-owned firms, which
translates to 11.8 percent, assign the policy a rating of poor. Of the
100 percent and 60 percent Filipino-owned companies, only 6 percent
gave the policy a similar rating. This shows that foreign companies
were less inclined to be less satisfied with this labor policy on labor
relations. There was little evidence, however, of direct complaint
among these firms about the policy.
 By age of enterprise. New enterprises hardly indicated poor ratings
for the state of industrial relations. Some of the older firms were
dissatisfied with the policy, yet their poor ratings were negligible.
 By employment size of the firm. The labor policy on industrial relations
does not seem to be a concern among very small firms. In general,
it only rated poorly among a small percentage of larger firms. The
few medium-sized firms and very large companies who gave it poor
ratings represent no more than 13 percent of the respondent class, and
even fewer among very large companies.
Labor policy 8: Regulatory mechanisms for settling labor disputes

All enterprises encounter worker grievances in varying degrees as well as their
own share of complaints against specific members of their workforce. At times,
such a situation requires government intervention.
Sicat 27
When grievance cases cannot be settled easily—or the mechanisms
encourage a prolonged settlement—then the country’s court system becomes
the venue for their settlement. Litigation is a costly process for all the parties
involved, especially for the company concerned. How the latter responds to this
labor policy issue essentially sets the course for the labor-management relations
within the enterprise.
The issue of dispute resolution has one of the lowest ratings given by the
respondents. The mean score ranks 11th (Table 1) and the variability of this mean
score ranked 10th (Table 2). All this means that it is among the most controversial
of the labor policies.
Table 11 indicates the various outlier responses for the labor policy on the
mechanisms for settling labor disputes.
 By recipient or nonrecipient of fiscal incentives. Recipients of fiscal
incentives appeared less inclined to favor the existing labor dispute
settlement mechanism in the country compared to nonrecipients
of those incentives. Of the recipient firms, 24 percent of them gave
the policy a poor rating. This perhaps approximates the number of
instances of dispute affecting the respondents concerned, but this
is at best a mere conjecture. The proportion of respondents among
nonrecipient firms giving a similar rating stood at only 15 percent.
 By economic sector. The policy was rated as poor by 20 of 50
respondents, which translated to 40 percent. Among respondents
in the services sector, 18.8 percent or 19 of the 101 respondent
companies, gave similar ratings. This shows that far more respondents
in manufacturing frowned on the policy compared to those in the
services industry.
 By market orientation: domestic or export. Export companies also had
a high proportion of respondents giving the policy a poor rating—40
percent of the 15 respondent companies. Among domestic-oriented
companies, 22 percent or 27 of the 123 respondent companies,
similarly rated the policy as poor.
 By ownership of enterprises. In general, there is no marked difference
between the ratings accorded by Filipino-owned and foreign owned
companies for the policy, which obtained the same proportion of poor
ratings as the mechanism for labor disputes. But despite the limited
sample of respondent firms, less joint ventures—whether dominated
by nationals or by foreigners—gave the policy lower ratings compared
to fully owned enterprises.
 By age of the enterprise. A firm’s age made no difference in the
respondents’ responses on the policy. Outlier responses—which
Table 11. Regulatory mechanisms for labor dispute settlement 28
Recipient 6 15 82 25.6 3 96.3
Nonrecipient 6 5 75 14.7 2 97.3

Manufacturing 8 12 50 40.0 1 98.0
Services 4 15 101 18.8 4 96.0

Exports 2 4 15 40.0 0 100.0
Domestic 6 21 123 22.0 4 96.7

100% Fil. 10 19 118 24.6 3 97.5
60% Fil. 1 6 16 43.8 1 93.8
60% FDI 1 1 6 33.3 1 83.3
100% FDI 0 4 17 23.5 0 100.0

New: 1 to 5 years 1 4 17 29.4 0 100.0
>5 to 10 years 5 10 56 26.8 2 96.4
>10 to 20 years 4 9 48 27.1 3 93.8
>20 years 2 7 36 25.0 0 100.0

Micro (1 to 9 workers) 0 2 13 15.4 0 100.0
Small (10–99 workers) 4 12 63 25.4 2 96.8
Medium (100–199 workers) 4 7 31 35.5 2 93.5
Sicat 29
indicated poor ratings for the policy—comprised about one-fourth of
the total.
 By employment size of the firm. With the exception of the smallest
firms, the general responses of firms of whatever size of employment
were also relatively high and similar in extent to the enterprises
classified by their length of existence as companies.
Labor policy 9: Government monitoring of enterprises

The labor inspection system involves judgment about the government
implementation of labor laws and regulations. This consists of direct interaction
between firms and agents of the law. Such contacts could be driven by the need
for regular inspections and specific workplace issues that require government
intervention or reporting.
To some extent, responses to the survey question on this issue reflected
the companies’ perception of their interactions with government authorities.
The nature of regulation of enterprise operation presupposes some degree of
antagonism between the regulator, who implements government policy, and
the company, which is the subject of the mandatory regulation. In this context,
the interaction produces some friction. A high degree of negative response
from respondent firms implies a need for improvement of the policy regime
in question.
Interactions with the government could further involve issues beyond those
affecting labor and employment. These include compliance with tax laws or
laws involving the grant of fiscal support. While the survey question was mainly
focused on labor issues, some of the emerging responses may be indicative of the
respondents’ sentiments toward other regulatory issues involving the government.
Thus, while this question on government’s monitoring of companies’
compliance with labor laws was expected to yield responses that reflected the
performance of the DOLE and its attached agencies, it was not limited to it. It
could also cover the finance department and its tax-collecting units, namely, the
internal revenue and customs bureau, and all other regulatory agencies with which
firms interact in the course of their operations.
Based on the emerging responses from the survey, government inspection
systems rated lower than the labor policy on dispute settlement. The former also
elicited the same average rating as that of minimum wage legislation. This means
that it is one of the biggest issues confronting companies.
Table 12 outlines how the respondent firms, classified according to specific
criteria, responded when asked on the issue of government’s regulation of
companies’ compliance with specific labor laws. There is a high degree of ‘noise’
(covering almost one-fifths of respondents) arising from domestic firms, foreign-
Table 12. Inspections by DOLE officials 30
Recipient 10 10 82 24.4 1 98.8
Nonrecipient 6 10 75 21.3 3 96.0

Manufacturing 5 10 50 30.0 0 100.0
Services 11 10 101 20.8 4 96.0

Exports 3 5 15 53.3 0 100.0
Domestic 10 11 123 17.1 4 96.7

100% Fil. 10 17 118 22.9 3 97.5
60% Fil. 3 0 16 18.8 1 93.8
60% FDI 1 1 6 33.3 0 100.0
100% FDI 2 2 17 23.5 0 100.0

New: 1 to 5 years 1 3 17 23.5 1 94.1
>5 to 10 years 9 7 56 28.6 1 98.2
>10 to 20 years 3 6 48 18.8 1 97.9
>20 years 3 4 36 19.4 1 97.2

Micro (1 to 9 workers) 0 2 13 15.4 1 92.3
Small (10–99 workers) 4 10 63 22.2 1 98.4
Medium (100–199 workers) 4 4 31 25.8 1 96.8
Sicat 31
owned firms, large companies, export-oriented enterprises, the manufacturing
sector, and all other classifications of firms, whether they are qualified as fiscal
incentive recipients or not.
 By recipient or nonrecipient of fiscal incentives. Of the 80 recipients
of fiscal incentives, 20 respondents, or 24.4 percent, rated the policy
as poor. Among nonrecipients of fiscal incentives, or ordinary firms,
of the 75 respondents, 18 (21.3%) of the respondents graded the
policy as poor.
 By economic sector. Poor ratings for the policy were prevalent in
the manufacturing sector, where 15 of 50 respondents or 30 percent,
gave such responses. Within the services sector, 21.3 percent of 101
respondents rated this policy as either poor or very poor.
 By market orientation: domestic or export. Far more firms with export
businesses expressed dissatisfaction with this policy compared to
domestic enterprises. Among the 15 respondent companies, eight of
them gave a rating of poor or very poor. Of the 123 firms serving the
domestic market, only 21 respondents, representing 17 percent of the
sector, gave this labor policy a poor rating.
 By ownership of enterprises. In general, firms, whether 100 percent
Filipino-owned or 100 percent foreign-owned, registered the same
level of dissatisfaction with the policy, with almost 20 percent of their
respective respondents giving similar responses.
 By age of the enterprise. A slightly greater number of younger firms (9
years and below) were dissatisfied with this labor policy compared to
older firms (10 years and above), 19 percent of whom rated the policy
as poor.
 By employment size of the firm. Only very small or micro enterprises
yielded responses that were critical of the policy. Firms employing
more than 10 workers (whether small, medium, or large) tended to
view the policy similarly, with 22 to 24 percent of respondents in each
class of firms by size rating it as either poor or very poor.
The foregoing responses show that government regulatory agencies must do

better in their interactions with all types of firms while ensuring labor policies are
consistently enforced by companies.
Labor policy 10: Performance of the public employment service officer

This labor policy refers mainly to the performance of public employment services
by the government. This concerns mainly the DOLE, which is tasked, among
others, to provide labor-related assistance to enterprises operating in the country.
To some extent, the responses to the survey question reflect on the effectiveness
of DOLE in its role of supporting employment generation. They also reflect the
respondents’ sentiments on the government policy on labor inspections.
This labor policy obtained a much higher average score compared to the
policy on labor inspection, that is, by more than half a percentage point score.
Yet the variability of the answers relating to the former is much wider. A number
of respondents did not answer the question on this policy on the provision of
labor assistance, as indicated by the last column in Table 13, which shows the
percentage of responses to the issue. Abstention from answering the question was
more frequent among companies operating in the domestic market, which are
mainly owned by Filipinos and which are predominantly in the services sector.
They are also mainly medium-scale enterprises employing 100 to 199 workers.4
Table 13 sums up the respondent classifications. Following is a brief
description of the responses.
 By recipient or nonrecipient of fiscal incentives. The policy got a
poor rating from 20.7 percent of the 82 respondent firms among
fiscal incentive recipients and 24 percent of 75 respondents among
nonrecipients.
 By economic sector. Of the 50 manufacturing firms, six or 30 percent
of them rated this policy as poor or very poor. This contrasted with
only 17.8 percent of the 101 respondents firms in the services sector
who gave the policy similar ratings.
 By market orientation: domestic or export. Among 15 respondent
export firms, almost 30 percent gave the policy a poor rating.
Domestic-oriented firms were less critical of the policy, with 18.7 of
123 respondent firms rating it as poor. Some respondents, however,
comprising 13.8 percent of the total firms in this group, declined
to answer the question on this policy. These are all Filipino-owned
enterprises.
 By ownership of enterprises. Among 118 firms that are 100 percent
Filipino-owned, 22 percent gave the policy a poor rating, with 17 of
them declining to respond to the question. Among 100 percent foreign-
owned firms totaling 17 in the sample, 29.4 percent gave the policy a
similar rating. This shows a substantial difference between these two
groups of respondents.
 By age of the enterprise. Younger firms tended to be more critical of
this labor policy than much older firms. Among the youngest firms, 29
percent rated the policy as poor. This percentage drops to 20 percent
4
There must be some reason for this: the respondent has no opinion on the matter, the matter is too sensitive
to discuss, or they have no experience and knowledge about it. Some of these reasons are mutually exclusive.
Table 13. Performance of the public employment service officer
Recipient 6 11 82 20.7 7 91.5
Nonrecipient 6 12 75 24.0 14 81.3

Services 6 12 101 17.8 12 88.1

Exports 1 3 15 26.7 2 86.7
Domestic 9 14 123 18.7 17 86.2

100% Fil. 10 16 118 22.0 85.6
60% Fil. 0 3 16 18.8 17 87.5
60% FDI 0 1 6 16.7 2 100.0
100% FDI 2 3 17 29.4 0 100.0

New: 1 to 5 years 1 4 17 29.4 1 94.1
>5 to 10 years 5 8 56 23.2 8 85.7
>10 to 20 years 5 6 48 22.9 4 91.7
>20 years 1 5 36 16.7 8 77.8

Micro (1 to 9 workers) 0 1 13 7.7 3 76.9
Small (10–99 workers) 5 8 63 20.6 11 82.5
Sicat
Medium (100–199 workers) 2 6 31 25.8 5 83.9

33
among respondents that are five years old up to 20 years old. Among
firms 20 years and older, the proportion of respondents who gave poor
ratings comprised 16.7 percent.
 By employment size of the firm. Firms with the smallest employment
size were the least critical of this policy. Among the rest of the
larger firms, at least a fifth of the respondents gave the policy a
poor score.
Labor policy 11: Government incentives for workers’ training

Continuous manpower development and investment in new equipment or
technology are a definite boost to company productivity. Government’s role in
this regard is vital as well.
Two related policy questions in this survey relate to labor training. The
first concerned respondents’ views on government incentives for companies
providing manpower training. The other asked the respondent to rate
the quality of vocational schools catering to their sector and in their host
communities. It is possible that the answers of the respondent companies
would factor in the quality of the educational system that produces the
manpower they employ.
In general, the responses indicated strong support for training incentives
while showing a high degree of variability. As the summary of mean scores
shows, this labor policy has one of the highest scores among the policies covered
by the survey although their variance was wide. There was also a high rate of no
response among the respondents, which implies that some firms did not consider
training as a priority. This could further indicate that the concerned respondent
firms had a significant supply of trained workforce.
The labor market is marked by a large supply of unemployed labor, a
significant number of whom are educated and therefore can be easily trained for
employment. This probably explains one aspect of the training issue. There is no
significant need for workers’ training except during their employment.
Table 14 shows the responses on the policy concerning government
incentives for labor training. In general, there is a high degree of dissatisfaction
among the respondents, comprising a fifth to a fourth of the respondents.
 By recipient or nonrecipient of fiscal incentives. There was no marked
difference in the responses of the recipients and nonrecipients of fiscal
incentives. However, 17 of 75 respondents refrained from answering
the question on the policy at hand.
 By economic sector. Responses in the manufacturing and services
sectors showed no significant disparity but a high degree of
nonresponse.
Table 14. Incentives for training of workers
Recipient 7 12 82 23.2 7 91.5
Nonrecipient 7 13 75 26.7 17 77.3

Services 10 16 101 25.7 16 84.2

Exports 0 3 15 20.0 3 80.0
Domestic 12 20 123 26.0 20 83.7

100% Fil. 13 20 118 28.0 18 84.7
60% Fil. 1 3 16 25.0 3 81.3
60% FDI 0 0 6 0.0 0 100.0
100% FDI 0 2 17 11.8 3 82.4

New: 1 to 5 years 1 5 17 35.3 1 94.1
>5 to 10 years 6 9 56 26.8 9 83.9
>10 to 20 years 6 7 48 27.1 6 87.5
>20 years 1 4 36 13.9 8 77.8

Micro (1 to 9 workers) 0 3 13 23.1 3 76.9
Small (10–99 workers) 6 12 63 28.6 10 84.1
Sicat
Medium (100–199 workers) 3 3 31 19.4 3 90.3

35
 By market orientation: domestic or export. Firms in exports and those

that sell only to the domestic market gave generally the same rating for
this policy. But again, the emergence of a high degree of nonresponses
by either type of firms reduced the force of the ensuing ratings.
 By ownership of enterprises. Most firms owned by Filipinos were more
critical of the labor policy on training than firms owned by foreigners.
Among 118 fully Filipino-owned firms, 28 percent rated the policy as
poor. But among the 17 fully foreign-owned firms, only 11.8 percent
gave the same rating.
 By age of the enterprise. Younger firms were more critical of this labor
policy. Of the 17 firms in this sample, 35.3 percent of them rated this
policy as poor. Among firms between 5 and 20 years old, 27 percent
gave the policy a poor rating. Such a response came from only 13.9
percent of 36 older firms.
 By employment size of the firm. No clear pattern emerged in the
ratings given by respondents under this classification. For instance,
among the 31 medium enterprises (100 to 199 workers) in the
sample, 19.4 percent gave a rating of poor for this policy. So did 23
percent of micro enterprises and 28.6 percent of small enterprises.
Such ratings are substantial.
Labor policy 12: Quality of vocational schools

The average rating for the quality of vocational schools from the survey
respondents turned out to be one of the highest among the various labor policy
issues. However, the average response rate to this question was also among
the lowest. Except for fiscal incentive-recipient enterprises and very young
respondent firms, the rate of response among other groups of enterprises had a
sizable nonresponse rate so that they hinted a lack of interest in the issue. This
means that there is as much uncertain quality in these responses. The lack of
response among some firms was due perhaps either to sheer indifference to the
question or to perceptions of the issue of vocational schools being irrelevant to
their operations. The latter could be attributed to the steady supply of good labor
to the formal sector.
While the variability of the mean response was statistically significant, it
still came out among the lowest in terms of labor market responses, ranking the
12th most variable among 14 labor issues. Among the respondents, there appeared
to be a degree of discomfort over the quality of vocational schools in the country,
since ratings of poor comprised around a fifth of the responses.
Table 15 shows the answers to the question relating to the quality of
vocational schools.
Table 15. Quality of vocational schools
Recipient 3 12 82 18.3 6 92.7
Nonrecipient 3 12 75 20.0 15 80.0

Services 5 15 101 19.8 15 85.1

Exports 0 3 15 20.0 2 86.7
Domestic 6 19 123 20.3 15 87.8

100% Fil. 6 19 118 21.2 17 85.6
60% Fil. 0 1 16 6.3 1 93.8
60% FDI 0 0 6 0.0 1 83.3
100% FDI 0 4 17 23.5 2 88.2

New: 1 to 5 years 0 2 17 11.8 1 94.1
>5 to 10 years 2 9 56 19.6 7 87.5
>10 to 20 years 3 10 48 27.1 7 85.4
>20 years 1 3 36 11.1 6 83.3

Micro (1 to 9 workers) 0 2 13 15.4 2 84.6
Small (10–99 workers) 1 8 63 14.3 10 84.1
Medium (100–199 workers) 1 7 31 25.8 4 87.1
Sicat

37

significant difference in the ratings that recipients and nonrecipients
of fiscal incentives gave to the question on vocational schools’ quality
of education. About one-fifth of the respondents rated the issue either
as poor or very poor. Presumably the comments refer to schools in the
community where the firms are located.
 By economic sector. This classification made no difference in the
respondents’ judgment of the issue. If the enterprises concerned
relied on the supply of labor from vocational schools, the issue of
quality of vocational schools would appear to be more important
for manufacturing. But this was not the case with the current
sample of respondents.
 By market orientation: domestic or export. This sample of the
respondents yielded exactly the same proportional distribution of poor
ratings, with no distinct difference across the firms in each group.
 By ownership of enterprises. The quality of vocational schools in the
Philippines was generally adjudged poor by respondents among fully
Filipino- and foreign-owned firms, which constitute the bulk of the
respondents. Among joint ventures involving Filipinos and foreigners,
respondents gave a less critical assessment of vocational schools. The
rate of response to the labor issue is evenly distributed among these
types of enterprises.
 By age of the enterprise. In general, most of the firms that rated the
quality of vocational schools as poor, began operations between the
1980s and 1990s. The proportion of responses among the very young
and very old of the respondent firms was not as high as the other firms.
The underlying reason for this was not readily evident compared to
those who did not offer any opinion or opted not to give any response
and who comprised a significant number of the respondents, indicating
a lack of interest in the issue.
 By employment size of the firm. The bigger the firm is in terms
of employment size, the more negative responses there are on the
quality of the vocational schools. However, there was only a slightly
higher degree of responses among the larger firms compared to the
smaller ones.
Labor policy 13: Number of mandatory national holidays

National holidays are designed as days of rest for the labor sector. They are
also important elements of nation building, national development, and other
significant national undertakings with religious and cultural underpinnings.
Sicat 39
While national holidays are generally mandated by law, the president of the
country can, by executive fiat, declare certain occasions as special and/or
nonworking holidays. As a result, the number of such holidays can increase
from year to year.
There are reasons holidays are welcome among workers. First, for any
employed person, a holiday is a day out of work available for leisure. Second,
there is a mandatory holiday work rate if an employee is asked to work on an
otherwise nonworking holiday, which is higher than standard overtime pay. While
regular overtime rate is 25 percent of the base pay, on legal holidays, the rate is
100 percent of the basic compensation. On special nonworking holidays, the base
pay is slightly higher at 30 percent of the daily rate.
The country’s number of holidays usually exceeds those of other countries.
Elsewhere in the world, the heads of state cannot increase the number of their
holidays. In 2006, the Philippine Congress passed a law amending the holiday
law, mainly to make the holidays fall toward the weekend or the beginning of the
week. Its purpose was to minimize work disruptions while extending weekends
to include certain holidays, noting that holidays had an impact on the costs of
production and services. The amended legislation did not clip the power of the
president to declare special holidays.
Employers have on many occasions called attention to the problem of
excessive number of holidays, saying it is detrimental to the country’s efforts to
promote employment. At worst, it tends to raise production costs and reduces
the country’s competitive advantage relative to other countries with fewer and
a fixed number of holidays. Thus, the net impact is likely to create a drag on
labor productivity.
Employers’ groups—prominent among them the chambers of commerce and
industry—have often expressed concerns about the disruptive effects of excessive
holidays. A second labor policy issue is the additional power given to the executive
branch of government to add to the number of discretionary holidays.
The executive power to declare holidays is also exercised at the local level
as an extension of the president’s power. Local holidays are also added to those
that are nationally observed. These are often designed to help improve local
traditions and recognize the importance of specific events such as the founding
day of a certain locality.
In general, the responses to this labor policy issue were favorable. The
mean scores for national holidays were slightly higher than that for local and
other discretionary holidays. The average opinion appeared to convey a stable
set of responses (low variability).
Table 16 analyzes the responses to the labor policy on national holidays.
Across classifications of the respondent enterprises, there was less disagreement
Table 16. `Number of mandatory national holidays 40
Recipient 2 6 82 9.8 1 98.8
Nonrecipient 2 5 75 9.3 0 100.0

Services 2 4 101 5.9 0 100.0

Exports 0 2 15 13.3 0 100.0
Domestic 3 9 123 9.8 1 99.2

100% Fil. 3 7 118 8.5 1 99.2
60% Fil. 0 1 16 6.3 0 100.0
60% FDI 0 0 6 0.0 0 100.0
100% FDI 1 3 17 23.5 0 100.0

New: 1 to 5 years 0 2 17 11.8 0 100.0
>5 to 10 years 3 2 56 8.9 0 100.0
>10 to 20 years 1 4 48 10.4 0 100.0
>20 years 0 3 36 8.3 1 97.2

Micro (1 to 9 workers) 0 0 13 0.0 0 100.0
Small (10–99 workers) 1 5 63 9.5 0 100.0
Medium (100–199 workers) 1 4 31 16.1 0 100.0
Sicat 41
with the policies. But it is possible to get a hint of dissent in the answers in some
classifications of the respondent firms.
distinction in response among recipients and nonrecipients of fiscal
incentives. In general, there are some firms that gave holidays very
poor and poor ratings. Negative views about the policy comprised
only about 10 percent or even less of the responses.
 By economic sector. Among manufacturing establishments, 8 out of
50 respondents, or 16 percent, gave the policy a poor rating compared
to 6 percent of respondents among 101 establishments in the services
sector. Thus, manufacturing firms tended to be hit harder by this policy
compared to those in the services.
 By market orientation: domestic or export. Two of 15 export
establishments, or 13.3 percent, rated this as poor compared to 10
percent of 123 domestic-oriented respondents. Export producers tended
to disagree with the policy compared to domestic-oriented companies.
 By ownership of enterprises. Foreign-owned establishments rated
this policy more critically than Filipino-owned companies. Of the 17
foreign-owned companies in this class of enterprises, four, or 23.5
percent of them, rated this policy as poor. On the other hand, of the
118 fully Filipino-owned firms, 8.3 percent of them rated this policy as
poor. It is clear from these responses that foreign investors were more
critical of the policy on public holidays than domestic firms.
 By age of the enterprise. In general, there is little distinction in the
responses of these enterprises when classified by age. Only around 10
percent of them rated the policy as poor.
 By employment size of the firm. Among the micro enterprises, the
policy merited no poor ratings. About 16 percent of the respondents
among medium-scale enterprises rated this policy as poor while only
less than 10 percent of the respondents among small and large firms
similarly rated the holiday policy. In general, employment size did not
have much influence on the firms’ responses.
Labor policy 14: Number of other discretionary national and local holidays
The number of discretionary national and local holidays is a critical component
of the holiday law provisions, since it raises the total number of public holidays
in the country. The law on holidays was designed to correct the adjustment of
working days when the normal holidays fall on a Sunday, a practice that tended to
create longer holidays. Religious and other holidays, as well as important events
like elections, often create a long list of unintended holidays.
Then, too, there was the government’s “holiday economics” policy, which
was intended to promote longer weekend holidays, thus boosting the local tourism
industry, when normal holidays veered toward the weekend. The issue of long
holidays takes on greater significance when one considers, for instance, that the
last week of the year has become essentially a nonworking week because it covers
Christmas Day (December 25) and Rizal Day (December 30) and due to its close
proximity to New Year’s Day. This is also the time of year when companies must
close their books of accounts. This period corresponds to some countries’ practice
of observing workers’ long holidays as a national tradition. This is specifically
true of Japan, which is known for its weeklong spring holiday. Work stops at all
levels except in the utilities sector and the holiday (local tourism) industry.
In the Philippines there is also the Holy Week, during which Thursdays and
Fridays are public national holidays. Wednesdays are practically extensions of
these official holidays since many workers go home to their provinces as early as
then. Elsewhere in the world, such as in the United States, these days are normal
working days.
National elections also provide another distortion of the holiday practice.
These are declared nonworking holidays. Again, in the United States, elections
are considered normal working days, although work hours are flexible to allow
workers to do their civic duty, albeit for a limited period of time. In the Philippines,
the President is allowed to declare the day before as a nonworking day to allow
workers to go home to their provinces so they can vote. A sensible residential
requirement for voting should take care of this issue so that voters, most of whom
comprise the labor force, need not travel back their places of origin just to cast
their votes. This is not the case, however, for many of the electorates.
All these instances of local and special holidays have created a bias for
vacations. It is as if the country’s working policy is designed to create slack in the
work place. This has also raised labor costs and reduced the opportunities for poor
people to earn more income during normal working days within the organized
sector of the economy.
Despite the high satisfactory rating the policy has generated among the
respondents, the responses across the different classifications of the respondents
are similar to those on national holidays.
As expected, the responses to this question mirrored those revolving
around the issue of mandatory holidays. Table 17 provides a picture of the
answers to the issue. Even without detailing the answers of various respondents
by different classifications, it may be useful to comment on the respondents of
the questionnaire.
An analysis of Tables 16 and 17 indicates that they are complementary. The
detailed descriptions of the influences of specific firm characteristics indicate that
Table 17. Number of other discretionary national and local holidays
Recipient 3 7 82 12.2 1 98.8
Nonrecipient 0 11 75 14.7 0 100.0

Services 1 12 101 12.9 0 100.0

Exports 0 2 15 13.3 0 100.0
Domestic 2 14 123 13.0 1 99.2

100% Fil. 1 16 118 14.4 1 99.2
60% Fil. 0 1 16 6.3 0 100.0
60% FDI 0 0 6 0.0 0 100.0
100% FDI 2 1 17 17.6 0 100.0

New: 1 to 5 years 0 1 17 5.9 0 100.0
>5 to 10 years 3 6 56 16.1 0 100.0
>10 to 20 years 1 5 48 12.5 0 100.0
>20 years 0 6 36 16.7 1 97.2

Micro (1 to 9 workers) 0 0 13 0.0 0 100.0
Small (10–99 workers) 0 7 63 11.1 0 100.0
Medium (100–199 workers) 2 7 31 29.0 0 100.0
Sicat

43
the responses to the question under consideration were generally independent

of the specific classification of the respondent firms. But this was not the case
with the classification of respondents by ownership. Foreign-owned companies
regarded this policy on holidays critically. Perhaps, given their awareness of
holidays in other countries, they thought the Philippines simply had too many of
them or that some of the holidays were too unpredictable in occurrence.
It must also be pointed out how the questionnaires in the survey were
answered. Officials in the human resource (HR) departments of the respondent
companies mainly filled up the survey questionnaires. A few of the respondents
were operating managers whose posts fall below those of the president or chief
executive officers of the respondent companies. The possibility of upward bias in
the nature of the replies is examined elsewhere.
Indeed, there appears to be some bias for long and intermittent holidays. This
is due in part to the mandate of the HR personnel to oversee the implementation of
laws and regulations pertaining to worker welfare. Company presidents, owners,
or general managers who responded to the survey tended to be more critical of the
policy compared to those in HR (Sicat 2010).
CONCLUSION
This paper analyzed the survey responses of enterprises operating in the
Philippines concerning various labor policies in the country. In general, such
policies have come from an extensive list of welfare legislation comprising
the legal framework that is intended to protect labor’s welfare, improve their
incomes and job security, as well as to help develop a caring and prosperous
society. The findings of the paper should help inform the policy debate on
labor market issues (Congress of the Philippines [2002], Sicat [2004], and
Imperial [2004]).
The inadequacy of the country’s employment creation suggests current
labor policies need reevaluation. Admittedly, however, the populist character
of these social policies makes them difficult to reform. Understanding the
opinions of operating enterprises is a big step toward understanding the impact
of these policies on labor costs and, in the long term, on the country’s global
competitiveness. The future ASEAN Free Trade Agreement and the application of
rules of the WTO on trade and industrial issues make these reforms most urgent.
As the national economics become more homogenous as a result of this trade and
industrial system, competition becomes important.
The approval rates for these policies were high, and this was reflected
in the mean scores for the opinions that the respondent firms expressed with
respect to various labor policies. Many respondent firms favored these labor
market policies.
Sicat 45
But the variability of these average scores indicates a pattern. Some policies
that continue to be discussed publicly have far wider variability in opinions
expressed than other policies. These policies include the following: severance
costs for workers leaving the service, restrictions on fixed-term contracts,
regulations dealing with worker dismissals, settling of labor disputes, government
labor inspections, and public holidays. The minimum wage issue is generally
widely accepted in principle. But various answers pertaining to this policy also
reveal interesting details about the firms that have a critical view of the policy.
The views of particular types of enterprises send important signals for
policy reforms, which the government needs to consider. For instance, the fact
that FDIs are in favor of the minimum wage process while complaining about
specific labor issues conveys many important messages about the direction of
labor market reforms.
It is therefore important to recognize the nature of criticisms about the labor
policies and the types of firms making them. Focusing on the favorable opinions
on these policies will prevent the government from undertaking the needed
reforms to address the issues confronting the different enterprises operating in the
country. Government would do well to understand how firms classified by specific
criteria responded to the questions on these policies. This paper has brought to
the fore differences in views among firms according to the sector of the economy
in which they operate; whether or not they receive fiscal incentives; who owns
them—nationals or foreigners; the nature of their markets—domestic or export;
the length of time they have been in operation; and their employment sizes.
One major point that merits mention in this conclusion is that the existing
labor laws tend to harm Filipino-owned domestic enterprises most heavily
compared to foreign investors in the country. Yet it is also true that the government’s
efforts to attract FDIs into the country have not yielded as much fruit as other
countries in the regions that have continuously raised the inflows of desirable
FDIs. These twin facts seem to emphasize a failure of economic policy to address
two major needs—to make domestic enterprises competitive and to attract foreign
capital—to enable the country to raise growth, generate employment, and sustain
development.
In fact, many foreign direct investors—those that were once in the country
and those prospectively reviewing their investment plans in favor of lower-cost
sites—put a premium on the stability of labor policies alongside other factors.
Some have had to move to other countries. This has led the labor sector to be
more moderate in its demands and perhaps take a more realistic assessment of
their attitudes. Yet, there are radical remnants on the labor front, and some in the
government front who are insensitive to development objectives, who continue to
remain intransigent on these issues.
Domestic policies on the economic environment have discordant effects on

local and foreign investors. Foreign companies that do not agree with these policies
have an escape route: exit or reduce their presence. But domestic enterprises have
basically little choice unless they migrate to other countries—a move that entails
costs many of them can ill afford. Hence the penalty is larger on domestic firms
than on foreign firms.
REFERENCES
Asian Development Bank (ADB). 2009. Project on the employment of the youth.
Pasig City: ADB.
Imperial, G.S. 2004. Understanding Philippine labor policies. Philippine Review
of Economics 41(2).
Presidential Decree No. 442. (The Labor Code of the Philippines).
Republic of the Philippines, Congress of the Philippines. (2001). Report and
recommendations of the congressional committee on labor: human
capital in an emerging economy.
Sicat, G.P. 2010. Firm characteristics as determinants of views on the minimum
wage policy. Discussion Paper. Unpublished manuscript. Quezon City:
University of the Philippines School of Economics.
_______. 2004. Reforming the Philippine labor market. Philippine Review of
Economics 41(2).

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Philippine Journal of Development

Number 67, Second Semester 2009

Labor Policies and Philippine Companies:

COMPANY VIEWS ON LABOR ISSUES IN PERSPECTIVE

Average scores of policies

Table 1. Mean scores ranked (from highest to lowest )

Table 2. Ranking of variability of the mean scores (from lowest to highest)

corresponding correlations across the rows, in general a lot of responses to

COMPANY CHARACTERISTICS AND THEIR RESPONSES

Labor policy 1: Minimum wage

(b) By Economic Sector

(c) By Market Orientation

(d) By Enterprise Ownership

(e) By Age of Enterprise

(f) By Size of Employment

Medium (100–199 workers) 1 4 31 16.1 0 100.0

Labor policy 2: Cost-of-severance pay regulation

(b) By Economic Sector

(c) By Market Orientation

(d) By Enterprise Ownership

(e) By Age of Enterprise

(f) By Size of Employment

Labor policy 3: Freedom to employ on a fixed-term basis

(b) By Economic Sector

(c) By Market Orientation

(d) By Enterprise Ownership

(e) By Age of Enterprise

(f) By Size of Employment

Labor policy 4: Regulations against worker dismissal

(b) By Economic Sector

(c) By Market Orientation

(d) By Enterprise Ownership

(e) By Age of Enterprise

(f) By Size of Employment

Small (10–99 workers) 5 11 63 25.4 2 96.8

Labor policy 5: Regulation on work hours per week

Labor policy 6: Regulation on overtime rates of work

(b) By Economic Sector

(c) By Market Orientation

(d) By Enterprise Ownership

(e) By Age of Enterprise

(f) By Size of Employment

(b) By Economic Sector

(c) By Market Orientation

(d) By Enterprise Ownership

(e) By Age of Enterprise

(f) By Size of Employment

Large (200 and more workers) 0 0 50 0.0 1 98.0

among the 75 nonrecipient respondents, two firms rated this policy

Labor policy 7: Industrial relations (labor-management relations)

(b) By Economic Sector

(c) By Market Orientation

(d) By Enterprise Ownership

(e) By Age of Enterprise

(f) By Size of Employment

Large (200 and more workers) 0 4 50 8.0 1 98.0

 By recipient or nonrecipient of fiscal incentives. There was no

Labor policy 8: Regulatory mechanisms for settling labor disputes