Reforms needed to boost labor-intensive manufacturing sector, says PIDS study

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Tuesday, July 29, 2014

THE Philippines should implement reforms to facilitate the expansion of labor-intensive manufacturing that can increase the number of gainful jobs.

This recommendation was made by the study “Labor Policy Analysis For Jobs Expansion and Development” written by Vicente Paqueo, Aniceto Orbeta Jr., Leonardo Lanzona Jr. and Dean Gerard Dulay released by the Philippine Institute for Development Studies (PIDS).

The study underscored the need to accelerate labor-intensive production, particularly the manufacturing of tradable commodities.


“Facilitation means not just moderating minimum wage mandates and other restrictive labor regulations, but also pushing reforms that go beyond the responsibility of the Dole (Department of Labor and Employment),” it said.

The authors said these reforms should effectively deal with critical binding constraints and counterproductive policies, including infrastructure underdevelopment, elevated cost of subsistence due to rice import policy, high cost of doing business, high energy cost, weak enforcement of contracts and protection of property rights and confusing laws.

“Relative food price is one of the key drivers of minimum wages. This could be reduced by reforming regulations on the importation of rice,” they said.

The study stressed that the Philippines will benefit from looking at those industries that China is becoming less competitive in.

“These are labor-intensive industries that employ millions of workers. The Philippines can choose those industries that are suitable to its superabundant labor endowments and in which China and other more advanced countries do not have a leg up over the Philippines,” the study said.

Apart from increased labor-intensive manufacturing, the PIDS study also cited the need to improve investments in education and other human capital development and sustain total factor productivity gains.

“These objectives require inter alia minimum wage reform, which should be undertaken immediately, while investors are looking for new places to locate labor-intensive production and the Philippine economy is getting another look as a potential destination,” it said. (PhilExport)

Published in the Sun.Star Cebu newspaper on July 30, 2014.


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