When you screw your workers, you screw yourself

Buencamino is a fellow of Action for Economic Reforms. This piece was first published in Interaksyon.com on October 5, 2011.

 

Philippine Airlines passengers blame the PAL workers union for the inconvenience they suffered last week. That’s understandable. Passengers are only focused on getting to their destination safely and on time. But it’s also ironic because many of those angry passengers are like the PAL employees they are mad at, working stiffs with no job security.

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

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

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

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

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

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

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

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

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

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

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