AN economist from the University of the Philippines (UP) warns that putting a full stop to contractualization could hurt the resurgence of the country’s manufacturing sector.
“If ‘endo’ becomes a law, it could hurt the manufacturing sector even more,” said Professor Emeritus Raul Fabella of the UP School of Economics, in a forum last Wednesday.
“Endo,” or end of contract, refers to a contractualization scheme that offers short-term temporary work arrangements.
Last May 1, President Duterte signed an executive order that reinforces a complete ban on “labor-only” contracting or the so-called “endo” or end of contract, which Article 106 of the Labor Code also bans.
Fabella said a total ban on “endo” could dampen the growth of manufacturing, an industry that generates employment and helps in the country’s poverty reduction.
“If we want to bring down poverty, we need to increase our manufacturing share,” said Fabella, noting that the sector is facing internal pressures to recover—such as the issue on contractualization.
“There is an attempt to favor unionized labor but in the process, it’s making them marginalized,” he said.
The UP professor said banning contractualization could force companies to invest more on labor costs, which may lead them to invest more in machines than in people. He said investment will locate in businesses where labor cost can be passed on.
“There will be greater investment in equipment that save on labor, and in the long run, it might just be that there is less employment than what is hoped for. It is an unintended consequence that may hurt our people. This endo is not the way to help manufacturing,” he said.
Contractual or project-based workers are most prevalent in construction, manufacturing, and wholesale and retail trade.
According to the Department of Trade and Industry (DTI), services was the main driver of growth in the past decades, but manufacturing has slowly recovered and has been contributing more substantially to the nation’s economic growth since 2013.
DTI earlier set a manufacturing sector growth target of between eight and 10 percent annually until the end of the Duterte administration.
In Central Visayas, National Economic and Development Authority (Neda) 7 Director Efren Carreon said manufacturing pushed the region’s growth in industry last year.
It grew by 5.5 percent and was the biggest sub-sector, accounting for some 24.5 percent of the output of the industry sector.