From Core to Periphery?

Recent Developments
in Employment Relations in the Philippines

CHRISTOPHER L. ERICKSON, SAROSH KURUVILLA,

RENE E. OFRENEO, and MARIA ASUNCION ORTIZ*

We seek to describe recent developments in employment relations in the Phi-

lippines, placing these developments in the contexts of the distinctive elements
of the Philippine social/political/industrial relations systems as well as the
ongoing trade-based and functional integration of international markets and
the recent regional economic crisis. We find that while some firms are pursuing
functional flexibility and more cooperative employment relations, the logic of
competition primarily has induced firms to adopt practices that promote
numerical flexibility such that a core-periphery workforce is created. We argue
that the labor movement in the Philippines has been hampered in its efforts to
effectively counter employer strategies by its low density and fragmentation
and an unfavorable public-policy environment; Philippine labor unions have,
however, made some recent gains in organizing and interunion coordination.
We also argue that the government has not done enough to counteract the
negative effects of market integration on workers nor to evolve the Philippines
into a higher-value-added exporter.

IN THIS ARTICLE WE SEEK TO DESCRIBE RECENT DEVELOPMENTS in

employment relations in the Philippines. We place these developments in
the context of the distinctive elements of the Philippine social /political/
industrial relations systems: Spanish and U.S. colonial histories, a labor law
structure that closely corresponds to the National Labor Relations Act
(NLRA) in the United States, arguably the most actively militant and inde-
pendent labor movement in Southeast Asia, and a mostly democratic polit-
ical system in both the pre- and post-Marcos eras.
We also place the employment relations developments in the context of
the ongoing trade-based and functional integration of international markets

* The authors’ affiliations are, respectively, the UCLA Anderson School of Management, the Cornell
School of Industrial and Labor Relations, the University of the Philippines School of Labor and Industrial
Relations, and the Employers Confederation of the Philippines. E-mail: [email protected],
[email protected], [email protected], and [email protected]. We thank Emily Lau, Faye Casem,
and Irish Erro for excellent research assistance.
I R, Vol. 42, No. 3 (July 2003). © 2003 Regents of the University of California
Published by Blackwell Publishing, Inc., 350 Main Street, Malden, MA 02148, USA, and 9600 Garsington
Road, Oxford, OX4 2DQ, UK.

368
 Recent Developments in Employment Relations in the Philippines / 369
and the recent regional economic crisis, factors that have affected the Phi-
lippines to a great extent, given that it is one of the more open economies
in Southeast Asia.
We argue that the sharpening of the competitive environment as a
function of greater internationalization of markets has negatively affected
the workforce in the Philippines. The primary evidence cited in support of
this proposition includes the growing percentage of workers who are leaving
formal-sector employment for the informal sector through subcontracting and
casualization and stagnation in real wages despite overall economic growth.
We examine employment relations practices in a number of key industries
and firms with the objective of understanding the mechanisms by which
these effects of economic integration are generated (summarizing the
findings from Kuruvilla et al. 2000). We will take a detailed look at how
employment relations are changing and attempt to understand why they are
changing. We also will look at institutions in the labor market that tradi-
tionally work to protect workers (government policy and trade unions) and
examine why these institutions have worked or not worked.
We find that while some firms are pursuing functional flexibility and
more cooperative employment relations,1 the logic of competition primarily
has induced firms to adopt practices that promote numerical flexibility: cut
labor, restructure their business, and subcontract such that a core-periphery
workforce is created; otherwise cut labor costs and pursue anti-union pol-
icies. The imperative to restructure the activities of firms has come from a
number of directions, notably increasing competition from neighboring
countries, the ratification of various international standards and conven-
tions, and the lower productivity in some sectors relative to other ASEAN
countries, coupled with the gradual erosion in the competitive advantage
coming from lower labor costs. One of the most pervasive forms of numer-
ical flexibility is labor-only contracting, the prevalence of which has grown
in recent years despite its being formally illegal.2 In addition, the regional
economic crisis in Asia has only accelerated these trends (see Erickson and
Kuruvilla 1998; Esguerra et al. 1999; Legardo and Ortiz 2000).
We argue that the labor movement in the Philippines has been hampered
in its efforts to effectively counter employer strategies by its low density, its

1
For example, changes in work organization and the work process, investments in training and skills
development, performance-based pay, and enhancing worker involvement in production decisions.
2
The nonpermissible hiring of workers through agencies is popularly called labor-only contracting,
which is defined as follows: when a subcontractor does not have substantial capital or investment in the
form of machinery or equipment but recruits workers in the name of the subcontractor to do work that
is directly related to the principal business or operations of the employer in which workers are habitually
employed.
370 / CHRISTOPHER L. ERICKSON ET AL.

fragmentation, and an unfavorable public-policy environment; Philippine

labor unions have, however, made some recent gains in organizing and inter-
union coordination. We argue that governments, both national and local,
have acted based on the logic of competition, with little regard to other
logics, such as employment protection or income protection (Frenkel and
Kuruvilla 2002, Kuruvilla and Erickson 2002), and that government has not
done enough to evolve the Philippines into a higher-value-added exporter
(both through infrastructural development policy and skills development
policy).
In sum, we argue that internationalization of markets has had a negative
impact on employment relations and workers in the Philippines due to
several interrelated factors: the limitations of the trade unions, the inability
of regulatory institutions to enforce the law, the pervasiveness of the logic
of free trade competition among people in positions of authority, and
perhaps most important, the absence of the political will to make policy
and enforcement changes top-down to counteract the deleterious effects of
economic integration. Thus the Philippine experience is consistent with
the view that economic integration does not necessarily provide increased
economic growth and prosperity for all but can instead lead to increased
poverty, exploitation, and inequality.
In the next sections we briefly review the historical and economic back-
ground and provide basic information on the industrial relations (IR) actors
and climate. We pay particular attention to the evidence indicating that the
Philippines, and Filipino workers (as a class) and unions in particular, have
not benefited much under the export-oriented industrialization regime in
place since the early 1970s. We then move to a discussion of the findings
from our case studies regarding the two most significant recent trends in
employment relations: toward functional flexibility in a few firms and
toward numerical flexibility in many others. Finally, we discuss the role of
IR and government institutions and how they have mediated (or not) the
impact of the employment relations changes on workers.

Recent Historical and Economic Background

The Philippines endured two different colonial periods, the Spanish period
from the time of Magellan through 1898 and the U.S. period through the first
four decades of the twentieth century.3 The beginnings of a formally defined
IR system emerged in the mid-1930s after the country gained commonwealth

3
For an historical account of U.S. involvement in the Philippines, see Karnow (1989).
 Recent Developments in Employment Relations in the Philippines / 371
TABLE 1
A A G R  GNP, 1946–2000
Year GNP
1946 –1950 17.2
1951–1955 9.3
1956 –1960 5.0
1961–1965 5.5
1966 –1970 4.8
1971–1975 6.5
1976 –1980 6.3
1981–1985 −1.7
1986 –1990 5.4
1991–1995 2.9
1996 –2000 2.8
S: NEDA statistical compilations.

status within the framework of U.S. colonial rule. A key early part of the
system was establishment of the Court of Industrial Relations (CIR), which
was mandated to compulsorily hear both industrial and agrarian disputes.
Following the Japanese occupation during World War II, the Philippines
gained independence. Table 1 provides gross national product (GNP) growth
rates for the various stages of Philippines development since World War II,
and Table 2 provides unemployment rates and wages since 1970.
Economic growth was high in the immediate postwar period due to the
extensive rebuilding after the war (Manila was considered the second most
damaged capital after Warsaw). This was a period of import-substitution
industrialization: Import and foreign-exchange controls were instituted, and
industries imported semifinished products and industrial parts for local
assembly and distribution. There also was a rise in industrial disputes dur-
ing the immediate postwar period; to deal with these disputes, the state
passed the cornerstone of Philippine IR legislation, the Industrial Peace Act
of 1953, based largely on the NLRA in the United States and designed to
promote bilateral collective bargaining.
A balance-of-payments crisis emerged in the late 1950s, which was
addressed by applying an International Monetary Fund (IMF) stabilization
program for the first time: currency devaluation, export orientation, and
removal of import and foreign-exchange controls. However, a high tariff
system also was instituted. In the early 1960s, the Philippines was widely
considered to be the second most developed country in Asia, after Japan. And
while not spectacular, growth continued through the 1960s (see Table 1).
The export-oriented industrialization strategy intensified in the 1970s.
This strategy, which was influenced heavily by World Bank structural
372 / CHRISTOPHER L. ERICKSON ET AL.

TABLE 2
U R  W

Unemployment Real Wage Index,

Year Rate Manufacturing (1980 = 100)
1970 5.3%a N/A
1975 4.4% 97b
1980 4.8% 100
1985 6.1% 72
1986 6.4% 82
1987 9.1% 95
1988 8.3% 108
1989 8.4% 110
1990 8.3% 108
1991 10.5% 99
1992 9.8% 107
1993 9.3% 97
1994 9.5% 114
1995 9.5% 122
1996 8.6% N/A
1997 8.7% N/A
1998 10.1% N/A
1999 9.8% 69
2000 11.2% 62
a
1971.
b
1973.
S: Integrated Survey of Households (ISH), Employment, Hours and Earnings Survey (EHES), National
Statistics Coordination Board.

adjustment programs (SAPs), sought to capitalize on the low-wage advan-

tage of the Philippines. However, this strategy was never fully implemented
during the Marcos era (in part due to the crony capitalism issue, where
Marcos’ business associates managed to secure various exceptions from full-
fledged export-oriented industrialization). The exposure of the Philippines
to the international economic order in the 1970s also was coincidental with
increased indebtedness, the steady erosion in the value of the currency,
declining real incomes, and a detrimental political environment. The declara-
tion of martial law in 1972 under President Marcos also was accompanied
by several repressive policies in the IR domain, such as the banning of strikes,
restrictions in the exercise of civil and labor rights, reassertion of govern-
ment authority over all disputes through the creation of the National Labor
Relations Commission, neglect in improving labor standards, and a restruc-
turing of the fragmented union movement along industrial lines, with all
unions required to be affiliated with the government-controlled Trade
Union Congress [see Villegas (1988) for a detailed description of this period].
 Recent Developments in Employment Relations in the Philippines / 373
Thus it was only after the Marcos era, under the tenure of Presidents
Aquino and Ramos, that a more full-scale implementation of export-
oriented industrialization was begun through the framework of the World
Bank’s Structural Adjustment Policies, reinforced by the enhanced struc-
tural adjustment facility loans from the IMF.
Overall, the shift to export orientation was associated with a decline in
labor power and voice and an increase in employer power in an era where
the Philippines’ competitive advantage was low wages and an English-
speaking workforce. The IR regime focused on the pursuance of lower
wages and workplace flexibility. In the Philippine context, this invariably
translated into efforts at increasing subcontracting, outsourcing, and
union-avoidance policies under an authoritarian regime.
Although the more restrictive aspects of the martial law regime were
lifted with the return to democracy after 1986, Philippine IR policy has
maintained a low-wage focus. While there have been changes in labor legis-
lation and recognition of labor rights, the fundamental character of both
competitiveness and labor relations has remained unchanged and, in fact,
has tended toward the direction of further increases in employer efforts to
generate numerical flexibility.
The Philippines remains an export-oriented economy whose basic com-
parative advantage is still low wages (see Table 2; Ofreneo 1994; Kuruvilla
1996). It is still a location for labor-intensive investment given the other
advantages of the Philippines workforce, notably its adaptability, education
levels, and facility with the English language. Notable in this respect is the
sustained expansion of the electronics industry, mainly in the following
areas: assembly work, parts manufacturing, and data encoding. The coun-
try is also a major site for the manufacture of auto parts such as wire
harnesses, transmissions, and so on.
Unlike Malaysia, however, which has made a definite transition to a more
advanced stage of export-oriented industrialization, the Philippines is still
located at an earlier stage even as it is already losing out to Asian compet-
itors in some of these lower-cost industries. This partly explains the con-
tinuing industrial and economic crisis in the Philippines. 4 We will return to
these issues below in our discussion of the role of government policy.

4
Note, however, that this mechanistic view of export-oriented industrialization covers a complex
range of investment and exports in the Philippines. There are many industries and firms that have
deepened their investment in manufacturing to produce more higher-quality, skill-intensive, value-added
products, (e.g., both the electronics and garment industries are more skill-intensive now than previ-
ously). Yet the majority of firms continue to capitalize on the low-wage aspect given the fact that this
is the aspect that management has relative control over (compared with other costs of business such as
power rates, shipping costs, etc.).
374 / CHRISTOPHER L. ERICKSON ET AL.

IR Actors, the Structure of the Labor Force,

and the Overall IR Climate
Labor and Employer Associations. We focus here primarily on providing
a picture of the Philippine trade unions. Estimating the strength of the labor
movement and union density in the Philippines is problematic. First, the
economy is highly uneven: Wage or salaried workers constitute roughly
50 percent of the employed workforce, or about 13.7 million workers as
of April 1998. The rest are either self-employed or unpaid family workers,
mostly in the informal sector or in rural areas.
Of the 13.7 million wage workers, about 2 million are in government
service, where unionism is relatively weak. And then, of the 11.7 million
private-sector employees as of April 1998, about half are in micro enter-
prises, employing 10 or fewer workers. Unionism in these enterprises is
impractical for obvious reasons of size and the highly paternalistic employ-
ment relations existing in such enterprises.
Thus it is surprising to note that Philippine labor statistics indicate a total
union membership of about 3.5 million (Table 3). If the organizable work-
force is around 6 million, this membership figure gives the Philippines one
of the highest union density rates in the world. However, the membership
figure given by the Department of Labor is based on “membership claims”
submitted by the various federations and unions, which tend to exaggerate
their respective membership bases. This loose procedure of recording union
membership means that a dozen competing federations can count as their
members the same workforce in a given company.
A more realistic assessment of the union strength is through the number
of collective-bargaining agreements (CBAs) and the number of workers
covered by these CBAs. With this approach, the picture changes radically. In
1997, roughly 524,000 workers were covered by 3003 CBAs. However, the
number of effectively organized workers is certainly higher than the 524,000
figure because at any given time there are workers in any of the following
situations: in the process of registering their unions, negotiating an agree-
ment, or waiting for the outcome of a legal case on union recognition or
CBA negotiation. There are also those in the process of organizing and
cases where the parties did not bother to formally register their CBAs.
Overall, the estimate of the research team is that there cannot be more than
1 million unionized workers out of a total organizable workforce of about
6 million in the private sector.
However, as in many Asian countries, there is also a great deal of frag-
mentation and rivalry among the unions and the federations. As of 1997,
there were 8822 labor unions divided into 174 federations, which are then
 Recent Developments in Employment Relations in the Philippines / 375
TABLE 3
U  C-B C
Indicator 1996 1997 1998 1999
Labor organizations
Unions registered/restored 410 342 330 335
Federations/labor centers 4 2 1 —
Private-sector unions 371 305 268 272
Public-sector unions 35 35 61 63
Membership of newly registered unions 32,738 28,671 34,919 29,403
a a
Federations/labor centers 649 —
Private-sector unions 28,802 24,833 23,426 22,763
Public-sector unions 3,936 3,836 10,844 6,640
Unions/federations cancelled 22 3 3 5
Existing unions 8,248 8,822 9,374 9,850
Federations/labor centers 172 174 173 173
Private-sector unions 7,610 8,149 8,643 9,056
Public-sector unions 466 499 558 621
Existing membership of active unions (000) 3,611 3,635 3,687 3,731
Private-sector unionsb 3,468 3,489 3,537 3,570
Public-sector unions 143 146 150 161
Collective-bargaining agreements
CBAs newly filed 818 532 432 413
Workers covered by new CBAs 131,446 92,149 68,616 64,703
Expired CBAs 634 517 319 577
Existing CBAs 3,398 2,987 3,106 2,956
Workers covered by existing CBAs (000) 411 426 551 529
N: Starting 1998, data include Caraga Region; existing unions and memberships include those registered with BLR.
a
Membership of newly registered federations was already included in the membership of private-sector unions.
b
Includes membership of affiliated unions. It excludes, however, federation members of 2.8 million farm workers.

affiliated with 9 to 10 competing labor centers. One of the largest of the

union federations, the Trade Union Congress of the Philippines (TUCP),
was formed during the martial law period. The Federation of Free Workers
(FFW) is also a moderate labor federation. Another large union federation,
and the TUCP’s main left-wing rival, the Kilusang Mayo Uno (KMU), was
formed in 1980 and received de facto legal recognition in 1986 with the end
of the Marcos regime. There are also other smaller federations across the
range of the political spectrum.
On major labor and IR policy issues, employers generally are represented
by the Employers Confederation of the Philippines (ECOP), which works
closely with the Philippine Chamber of Commerce and Industry (PCCI),
the Philippine Exporters Confederation (Philexport), the Federation of
Filipino-Chinese Chambers of Commerce and Industry, Inc. (FFCCCII), and
the various foreign chambers of commerce and industry associations. At the
industry or plant level, ECOP works either in tandem or separately with the
376 / CHRISTOPHER L. ERICKSON ET AL.

TABLE 4
SELECTED LABOR FORCE STATISTICS, 1998 –2000 (IN THOUSANDS AND PERCENTAGES)
Selected Variables April 1998 April 1999 April 2000
Labor force (£000) 32,111 33,444 32,874
Class of worker (percent)
Wage and salary 49.4 48.2 50.6
Own account 37.2 36.6 37.4
Unpaid family workers 13.4 15.1 12
Industry (percent)
Agriculture 37.5 41.0 37.3
Industrial
Mining and quarrying 0.5 0.4 0.4
Manufacturing 10.2 9.4 9.7
Electricity, gas, and water 0.5 0.5 0.5
Construction 6.1 5.4 5.5
Services
Wholesale and retail 15.9 15.4 16.4
Transportation 6.7 6.5 7
Financing 2.4 2.4 2.6
Community 20.2 19.0 20.6
Unemployment rate 13.3 11.8 13.9
Underemployment rate 21.0 22.7 25.1
S: National Statistics Office.

Personnel Management Association of the Philippines (PMAP). These

organizations have, by and large, been successful in influencing the direction
of labor policies. However, they are not organizations directly involved in
collective negotiations, and they are dominated by some of the big foreign
and local companies.5

The Structure of the Philippine Labor Force. Table 4 shows the basic
structure of the Philippine labor force, and Table 5 presents sectoral employ-
ment shares for selected Asian countries. As the tables suggest, much of the
workforce is engaged in services and agriculture. While the economic devel-
opment strategy is predicated on attracting foreign direct investment
in manufacturing for exports (see above), the share of manufacturing in
terms of employment has not increased appreciably in recent years, and the
share in “industry” is now below many other Asian nations (see Table 5).

5
ECOP is composed of 600 corporations and 56 industry associations and chambers of commerce.
Philexport has more than 2000 members, which are majority small to medium-sized enterprises. PCCI
has more than 100,000 direct and indirect members.
 Recent Developments in Employment Relations in the Philippines / 377
TABLE 5
E  S  S A C:
P S 1980, 1990,  1998
Agriculture Industry Services

1980 1990 1998 1980 1990 1998 1980 1990 1998

Philippines 51.7 44.5 39.2 15.5 15.9 16.4 32.9 39.5 44.4
Thailand 71.0 64.0 50.3 10.0 14.0 19.7 19.0 22.0 30.0
Indonesia 59.0 57.0 41.2 12.0 14.0 19.0 29.0 29.0 39.8
Malaysia 41.0 27.0 17.3 19.0 23.0 19.0 40.0 50.0 63.7
Korea (S) 37.0 18.0 13.6 27.0 35.0 33.2 36.0 47.0 53.2
S: Esguerra et al. (1999).

In the early 1960s, the share of manufacturing in total employment was

already around 10 to 12 percent. Today it is not much higher.
With agriculture shrinking through the decades (from over 60 percent
share in employment in the early 1960s to less than 40 percent today), what
seems to be really expanding by leaps and bounds is the service sector,
which is now the biggest source of employment in the country.
How can a nation with a stagnant or sluggish industrial sector and a
declining agricultural sector sustain expansion in the service sector? In the
case of the Philippines, in two ways. First, the country’s economy relies
heavily on remittances by overseas Filipino workers (OFWs) and Filipino
immigrants in North America and other regions. In 1995, a special commis-
sion (Gangayco Commission) created to inquire into the situation of OFWs
estimated the number of overseas Filipinos working in over 120 countries
to be around 5 million. Assuming that each OFW supports four to five
Filipinos at home, the total population dependent on OFWs could easily
be 20 to 25 million. The OFW phenomenon explains why the Philippines
has more money-changing offices than bank branches and why its malls are
full on any given weekend with families of OFWs. 6
The other source of expansion is the informal sector, which is the catch
basin for those unable to find jobs in the relatively small formal sector of
the economy or in the overseas labor market. Unfortunately, there are few
reliable statistics on the informal sector. A survey conducted by the Bureau
of Labor and Employment Statistics in 1992 7 estimated the number of
casual and contractual workers in establishments of 10 workers or more

6
Note as well that the OFW phenomenon can operate as a peculiar type of “automatic stabilizer”
during times of crisis. For example, when the peso plunged with the other Southeast Asian currencies
in the late 1990s, the value in pesos of a given remittance from dollars or yen nearly doubled.
7
Ofreneo and Fernando (1993).
378 / CHRISTOPHER L. ERICKSON ET AL.

TABLE 6
P  E H T/C L  S P,
 E S, 1990

Employment Limited-Duration Stop-Gap Alternative to

Size Projects Labor Regular Workers
1–20 67.7 63.1 24.6
21–50 70.3 52.5 34.7
51–100 76.9 69.2 35.9
101–250 80.9 63.8 38.3
251–500 84.9 71.2 39.7
501–1000 78.6 57.1 42.9
1001 and above 90.3 80.6 35.5
TOTAL 77.6 63.8 36.0

TABLE 7
A P   E  S
1. Percent share of establishments with subcontractors
1994 21.0%
1995 24.1%
2. Distribution of subcontractors
Companies 82.0%
Individuals 15.0%
3. Jobs contracted
Security services 34.4%
Maintenance/janitorial 22.6%
Production process 32.2%
4. Subcontracting by industry
Manufacturing 35.3%
Trade 13.3%
Services 13.0%
5. Number of subcontractors/establishment
Manufacturing: 3 per firm
6. Subcontracting by type of firm
Export-oriented firms 40.7%
Non-export-oriented firms 21.0%
7. Subcontracting by ownership
Foreign firms 43.0%
Domestic firms 21.0%

at roughly 10 percent of the workforce, or 250,000. The National Capital

region accounts for 176,000 contractual workers. The only data that were
available were for 1990, however, and they are reproduced in Table 6.
Although it is difficult to get accurate estimates regarding subcontracting,
clearly it is also pervasive in the economy, as Table 7 indicates.
 Recent Developments in Employment Relations in the Philippines / 379
Finally, Philippine unemployment has been relatively high by Asian
standards. The 13.3 percent unemployment rate in April 1998 was second only
to Indonesia. The latest unemployment figure, 11.4 percent as of January
2001, is still higher than most countries in East and Southeast Asia.

The Overall IR Climate. The defining characteristic of Filipino IR is

the adversarial nature of labor-management relations. This adversarial
nature is rooted in an exceptionally legalistic approach that permeates
every institution in the IR system, in particular, dispute settlement. A
tendency to rely on litigation and third-party dispute resolution is dominant,
with relatively fewer examples of bilateral problem solving. The existing
institutional framework further deeply entrenches the adversarial nature of
IR with its reliance on U.S.-style legislation regarding union formation and
dispute settlement. The focus is on procedural issues rather than on substance.
The key question of why legalism exists needs to be answered before any
attempt at policy reform. Historically, compulsory arbitration was the cor-
nerstone of the IR system. Since the CIR was given comprehensive powers
to handle all IR (and agrarian) cases in 1936 and settle them compulsorily
on behalf of the state, IR resolution was handled like any other court case.
This policy thus required lawyers, and this is the first and primary cause of
legalism in the system.
After the 1953 Industrial Peace Act, lawyers, who were entrenched in
labor relations, took the lead role in the bargaining process, reducing the
process of bargaining to a question of law rather than a question of nego-
tiation. This legalistic tendency in collective bargaining was reinforced by
the continuing central role of the CIR in dispute settlement, including the
settlement of issues involving unionized companies such as union recogni-
tion, collective-bargaining deadlocks, unfair labor practices, and strikes and
lockouts. Eventually, cases not settled at the level of the Office of the Sec-
retary of Labor (in national interest disputes) and the CIR were elevated to
the Court of Appeals and the Supreme Court for judicial review.
In 1974, the CIR was replaced by the National Labor Relations Commis-
sion (NLRC) pursuant to the IR policy of the martial law government of
“promoting collective bargaining within the framework of compulsory arbi-
tration.” The legalistic character of the system has not changed with the
creation of the NLRC, even if the latter has been dubbed as a quasi-judicial
body and has been tasked to settle disputes in a nontechnical and nonlitigious
manner. Today there is a huge body of labor jurisprudence that has been built
around various decisions issued by the Supreme Court and the Court of Appeals
that guide labor law practitioners in the Philippines and which easily intimidate
union officers and human resources (HR) managers who are nonlawyers.
380 / CHRISTOPHER L. ERICKSON ET AL.

Efforts to change the amount of legalism in IR in the 1980s through the

creation of the National Conciliation and Mediation Board (NCMB) and
the encouragement of private voluntary arbitration were important signals
that the government had tired of the legalistic nature of IR. In 1993, a
comprehensive review of the labor code was undertaken with a view to
changing IR legislation to promote collaborative labor-management rela-
tions, yet no positive outcomes are apparent. Today, another review is being
undertaken by a Joint Congressional Labor Commission.
Legalism has two major outcomes. The first is that a large number of
cases are filed instead of being resolved bilaterally, causing delays. The sec-
ond is that given the long delays, the development of collaborative IR is
very difficult because the parties’ positions tend to become more entrenched
and often bitter as they wait for third-party dispute resolution.
A recent analysis by a former undersecretary of labor suggests the follow-
ing central causes of the lack of trust and collaboration in IR. From the
employers side, it is the basic belief that union actions should be controlled,
militant unions must be decertified, and strikes should be stopped through
the use of labor injunctions and court orders. There is a basic unwillingness
to confront and deal with grievances and management actions that cause
labor problems. Further, given the potential for multiple union membership,
management appears to pit one union against the other, particularly in
union representation elections. Often top management becomes aware of
problems only when they have reached a critical level, and then top man-
agement is faced with the issue of trying to reaffirm middle-management
decision making. Thus, in some sense, the major failure of Filipino manage-
ment is its unwillingness (in general) to make the effort to create long-term
collaborative IR. We must note, however, that recent efforts to establish
labor-management councils in firms represent some change in management
thinking about labor-management collaboration in the Philippines (see below).

Data and Methods

Our method in this article is to analyze changing employment relations
in the Philippines through the study of practices in different firms and
sectors. Accordingly, we conducted field research using interviews with
managers and union leaders, participant observation, and examination of
company-level documents in the Philippines in 1998.
The industries and workplaces were selected for four different reasons. First,
we wanted to study industries that were exposed to international competition.
Second, it was important that these industries be significant players in the
 Recent Developments in Employment Relations in the Philippines / 381
national economy. Third, we wanted to have industries from both manufactur-
ing and services. And finally, we hoped to get a mix of foreign and domesti-
cally owned firms. The last condition was more difficult to meet, particularly
in the Philippines, because the internationalization of some industries (e.g.,
automobiles) has almost completely erased domestic firms from the landscape.
One to three lead firms were selected in key industries and studied in detail.
The industries covered include consumer appliances, automobiles, banking,
electronics manufacturing, petroleum refining and distribution, and sugar.
Several caveats regarding the data should be noted. First, the sample does
not purport to be representative. Rather, the data indicate employment rela-
tions changes in lead firms in significant industries. Our argument here is that
the changes in lead firms are an indication of the future movement in employ-
ment relations. The firms we researched had certain distinguishing charac-
teristics. They tended to be larger, higher-paying, more law-abiding companies
and more highly unionized than the average company in the country. Another
noteworthy point is that the research was conducted in the immediate
aftermath of the Asian economic crisis. Although this reflects a particular
episode, it may accentuate temporary differences in economic contexts.

Results of Case Studies: Salient Current Employment

Relations Issues
In this section we go into depth on the two most important recent devel-
opments in employment relations in the Philippines: the diffusion of inno-
vative IR/HR practices and the development of a core-periphery system of
workforce management.
Ofreneo and Ortiz (1998) found, and our research supports, two main
trends in employment relations in the Philippines. In the smaller minority
of cases, there is a clear movement toward accepting the concept of func-
tional flexibility, which includes a bundle of high-commitment HR practices,
yet most Philippine industry is focused on numerical flexibility, reducing
full-time headcount through layoffs, retrenchments, subcontracting, labor-
only contracting, and casualization and engaging in union avoidance.
The evidence from the 6 industry and 16 firm cases we studied tends to
show two main approaches to functional flexibility [the findings from the
case studies are summarized in Table 8 and are described and analyzed in
more detail in Kuruvilla et al. (2000)]. On the one hand is the model where
HR practices from multinational corporations are transplanted directly into
the local firms. The U.S. companies in the electronics industry are good
examples of this, since both Motorola and Intel have managed to introduce
 TABLE 8

382 /
F  C S

Consumer Appliances Banking Automobiles Electronics Petroleum Products Sugar

CHRISTOPHER L. ERICKSON
Industry Competition Competition Steadily growing Steady growth, Deregulated Domestic market
features increases as MNCs increases as a market for autos, foreign-dominated, industry, stable focus, industry
enter the market. function of and sharp increase largest exporter markets, but characterized by
The Montreal deregulation in the players in of the Philippines. unstable raw low yields and low
protocol forces in 1994. the market, leading material costs productivity, ravaged
restructuring. to intensive (oil prices). by E1 Nino.
competition.
(Number) and (1) Largest firm (2) Premier (3) The oldest, (3) High-end firm (1) The largest (1) Largest refiner of
features of with 56% market banks, the (Mitsubishi), the that is “best oil firm in the sugar, but cost of
firms studied share that is largest most successful company to work Philippines, has production higher
declining. recently (Toyota), and a for” and two other been recently than imported sugar.

ET AL.
privatized. domestically firms. privatized.
owned firm.
IR/HR Greenfield strategy. Restructuring Rationalization Nonunion high- Major Restructuring to cut
strategy to cut costs, and restructuring. performance organizational refining costs.
redeployment. workplace and work
practice at high- restructuring.
end firms.
Work Movement from Movement Mitsubishi follows Autonomous Continuous-process Continuous
organization Tayloristic to toward team- more Tayloristic teams at industry. process industry,
changes team-based. based work, systems, while high end, multiskilling
slower in the Toyota follows Tayloristic at common, reducing
erstwhile team-based low end. job classifications.
public-sector production systems.
bank.
 TABLE 8
C

Recent Developments in Employment Relations in the Philippines

Consumer Appliances Banking Automobiles Electronics Petroleum Products Sugar
Numerical Enhanced through No layoffs, or Reduction of No layoffs at high Subcontracting Subcontracting.
flexibility intensive subcontracting. headcount is key end, use of trainees beginning
changes subcontracting. for all firms. and subcontracting in the 1990s.
Subcontracting very at low end.
heavily used.
Compensation New systems tied Focus on higher Toyota system links Linked to skill Market leader Compensation tied
changes to skills in compensation wages to skills, but acquisition at in compensation, to training and
greenfield sites. given high labor other plants do not high end, but at recent introduction behavioral
turnover of link. Gradual move minimum wage of pay for programs.
skilled clericals. toward bonuses. level at low end. performance.
Labor relations Introduction of Private bank is Toyota is nonunion Completely and Amicable labor Cordial labor
changes labor-management aggressively and aggressively so. aggressively relations with three relations through
council, some nonunion, while Mitsubishi is nonunion. company unions, labor-management
conflict. erstwhile public unionized, and and one clerical councils.
bank has strong relations with staff union affiliated
union that union gradually to national union.
follows industry improving through
pattern. the introduction of
Privatization a labor-management
has provided council.
union rights to
bargain
independently.

/ 383
384 / CHRISTOPHER L. ERICKSON ET AL.

U.S.-style HR practices. However, the electronics industry all over Asia has had
a strong history of benchmarking with leading firms, and as such, their HR
practices tend to be rather similar as long as the technology used is similar.
The other example is a more “global” strategy where there is a mix of
foreign and domestic practices. We can see this in the Japanese-owned auto-
mobile industry in particular. For instance, while Toyota has introduced its
HR practices in the Philippines, Mitsubishi Motors Philippines tends to
have developed more localized IR and HR practices. Both, however, have
their fair share of labor disputes elevated not only to the Office of the
Secretary of Labor but also to the higher courts.
There is also a pressure to shift from traditional paternalism to more
professional management; here benchmarking is not with multinational
corporations but with any professional management.
One additional recent initiative that shows some progress is the gradually
increasing adoption of labor-management councils, resembling European
works councils, introduced by employers with government encouragement
but with limited union acceptance (Gatchalian 2000). Although it has
become fashionable to have a labor-management council (and all the com-
panies that we studied have one in force), there has been until now no
systematic evaluation regarding whether they are effective in promoting
collaboration. In most cases, the subjects for discussion at the councils are
those on which the CBA is silent, and they tend to focus on noncontrover-
sial issues such as worker welfare rather than bargainable issues.
Thus the first major trend is toward functional flexibility and the
introduction of new and modern types of HR practices, such as teamwork,
multiskilling, flexible compensation, and more cooperative labor-management
relations [Aganon (1995), Amante (1997), Ofreneo and Ortiz (1998), and
PMAP (1995) also provide evidence of this trend]. In particular, methods to
improve labor-management relations and, in nonunion companies, employee
relations through communication and labor-management councils are the
norm in this group of companies and industries.8
The second major trend has involves restructuring toward increased
numerical flexibility through four main channels: layoffs, casualization,
increased subcontracting, and labor-only contracting [Aguilar (1990), Amante
(1995, 2000), Barranco-Fernando (1994 –1995), Ofreneo and Fernando
(1994), Ofreneo and Ortiz (1998), and Windell and Standing (1991) also

8
It is important to note that another side to this is the policy of union avoidance because companies
are using the old-fashioned strategy of using progressive HR practices to keep union organization at
bay. It is hard to make the claim that any one approach dominates. In general, the nature of the industry
and the competitive strategy of the firm make the biggest differences.
 Recent Developments in Employment Relations in the Philippines / 385
provide evidence of this trend]. This restructuring helps to explain the over-
all GNP growth, particularly in manufacturing, despite the minimal growth
of employment in manufacturing (see Tables 1 and 4).
With regard to casualization, a growing number of IR/HR managers are
now conscious of the fact that they can easily divide the workforce into
two—the skilled, technical, managerial, and professional staff, whose loyalty
the company wants to develop and who are the object of various training
and other HR development investments of the company, and the semiskilled
and unskilled workforce, whose tenure can be kept casual and whose per-
formance can be controlled through further segmentation of the work process.
Under Philippine laws, a probationary worker can be regularized once
he or she completes 6 months of work. A casual worker, on other hand, is
defined as an employee hired to do work that is not regular and necessary
for the business, meaning tangential or odd types of work such as messen-
gerial services. However, a casual worker can apply for regularization once
he or she has rendered 1 year of service, even if the year is broken.
In practice, however, many companies simply hire casual or contractual
workers for only 6 months and do not bother to make any distinction
between regular and nonregular work. This is also true in the case of workers
under labor contracting arrangements, a practice that has been the subject
of acrimonious union-employer debates in the various tripartite forums
during the regional economic crisis. And many companies avoid legal
problems through the recruitment of “trainees” who are not deemed to be
regular but who, in fact, work for long periods.
Thus there is a clear trend toward the creation of a core and periphery
divide in the workforce. The core workers are those who have permanent
employment, are the recipients of training and other investments in HR devel-
opment, and are being upskilled continuously. The periphery is increasing,
however, and casualization takes several forms: hiring workers through agencies,
direct hiring of casuals, and maintaining the workforce as probationaries or
temporaries for as long as possible. Some companies also subcontract work
that traditionally was done inside the company. In the process of increasing
casualization and subcontracting, there are many instances where there are
violations of existing labor law (Aguilar 1990). Most important, the absence
of legislative support for this growing pool of workers is a significant issue.

The Role of Unions, IR Institutions, and Government

Our case studies indicated that the focus of employment relations adjustments
includes two broad types, functional flexibility and numerical flexibility.
386 / CHRISTOPHER L. ERICKSON ET AL.

Industries using higher levels of skills and technology emphasize functional

flexibility. Such companies can be seen in particular in the electronics, auto-
mobile, and appliance industries. There is also the gradual beginning of a
movement toward functional flexibility in banking and even in the sector
of the garments industry focusing on quality markets. However, in most
other industries, the overwhelming focus is on numerical flexibility.
In the view of the World Bank, it is important that appropriate policies
and institutions be in place to mitigate against the negative impact of
industrial restructuring and structural adjustment (World Bank 1993, 1995;
see discussion below). In some economies, there are institutions (such as
unions and government policies) that act as countervailing forces to the
actions of capital. In this section we explore the question of why these
institutions have either not been present or not been very effective in the
Philippines.

Unions and IR Institutions. An already weak union movement is being

further weakened as a consequence of employer emphases on numerical
flexibility. Our cases and accumulated evidence from various other studies
show a pattern of pervasive union avoidance in the most globalized sector
of the Philippines, the electronics industry (Bitonio 2000; Lainez, Lerma,
and Ofreneo 1994). This is true for electronics companies located in both
the privately managed regular industrial zones and the government-run
export processing zones. Union avoidance can be both covert and overt.
In the first case, it entails the use of proactive IR / HR measures such as
establishment of a grievance machinery, maintaining a functioning labor-
management council, conducting team-building exercises, keeping lines of
communication open, and so on.
The overt antiunion strategies include the firing of union activists, refusal
to bargain, threatening employees with dire consequences if they join the
union, forcing decertification, and so on. In the export processing zones,
there is a de facto informal nonunion policy enforced by regional governors
and zone administrators because having a union-free workforce is seen as a
major draw in attracting foreign investment.9

9
There are about 35 export processing zones in the Philippines. Some of these export processing
zones are administered by the Philippine Economic Zone Authority (state-owned), whereas others are
special export processing zones managed privately. The contribution of export processing zones to
exports is large and growing, from 4.6 percent in 1984 to 25 percent in 1996. The prevalent method of
avoiding unionization is through selective hiring and employer/government intimidation of unions.
Clearly, what motivates these policies is the justification of economic development. And most often zone
administrators view unions as significant deterrents to the attraction of foreign investors.
 Recent Developments in Employment Relations in the Philippines / 387
TABLE 9
S  L
Year Strikes/Lockouts
1970 104
1976 91
1980 62
1985 371
1986 581
1987 436
1988 267
1989 197
1990 183
1991 182
1992 136
1993 122
1994 93
1995 94
1996 89
1997 93
1998 92
1999 58
2000 66

SOURCE: National Conciliation and Mediation Board (NCMB), Department of labor and Employment (DOLE).

The economic crisis has acted as an important lever in reducing the milit-
ancy of unions at the industry or firm level because it has created a climate
where unions see the movement to cut costs as inevitable. There have been
two types of effects here. On the one hand, it has driven unions to be more
acquiescent in their approach to workforce reduction. This also has coin-
cided with employer initiatives in some sectors and firms to develop more
collaborative labor-management relations. Note the historically low level of
strikes, even during the economic crisis (Table 9). On the other hand, it has
made many unions and workers bitter about the companies, resulting in a
few highly contentious and visible strikes, such as the actions of the unions
at Philippine Airlines in 1998 over job security (Ofreneo 2000).
Since the l997 Asian economic crisis, the most strike-prone industries
were the transport industry, utilities, and the hotel industry—industries where
investors, unlike in light manufacturing, cannot pack up and seek invest-
ment areas elsewhere in Asia. However, even in these industries where past
strikes usually were settled in favor of the workers, the trend is not in favor
of the unions. More and more, employers are willing to slug it out with the
unions and shut down operations, temporarily or permanently, if necessary
because of what happened in the case of Philippine Airlines and, more
recently, the private operator of the Light Railway Transit.
388 / CHRISTOPHER L. ERICKSON ET AL.

In manufacturing, the situation is even more dire for unions. Not only
were there numerous cases in the past of companies closing down opera-
tions permanently in response to strikes, e.g., Mattel, but also there are
companies that are not facing any labor disputes or even financial losses
that have decided to phase out manufacturing operations in the Philippines
in favor of relocation in even cheaper industrial sites in Indonesia, Thai-
land, China, and other countries. Most of the multinational companies that
closed down their Philippine manufacturing plants in early 1999 had CBAs
with the FFW.
Overall, the economic crisis has proved to be an important vehicle to
accelerate the movement toward restructuring for either functional or numer-
ical flexibility. In many cases, the financial crisis has modified union posi-
tions in bargaining and forced compromise in areas where compromise was
not forthcoming earlier (see Erickson and Kuruvilla 1998; Esguerra et al.
1999; Legardo and Ortiz 2000).
This has all come at a time of political change where unions are losing
their political influence. Weak in terms of density, Philippine unions argua-
bly have had considerable political influence; for example, Philippine unions
were an important part of the opposition to President Ramos’ attempt at
constitutional change in 1997 to allow him to serve another term (Ranald
1999). However, with the inability to show a united front and the loss of
labor-friendly congresspeople and senators in recent elections, the ability of
unions to push through reforms favoring their position (such as the aboli-
tion of labor-only contracting) is seriously compromised. The left-wing
unions in particular have been weakened by political disagreements and
splits since 1993.
The fractured nature of the labor movement and the inability to merge
are also critical problems. Although mergers would be one way of present-
ing a united front, personality and ideological differences apparently stand
in the way. However, Philippine unions recently have attempted to form
broader alliances with other social movements and beyond the borders of
the Philippines, e.g., in the Manila People’s Forum in 1996, which ran in
parallel to the APEC Forum (Ranald 1999). A more recent development is
the formation of the Labor Solidarity Movement (LSM), which unites both
the moderate TUCP and the FFW with breakaway groups from the KMU
and some socialist-leaning but independent labor organizations. LSM enjoys
the support of both the Friedrich Ebert Stiftung (FES) and the American
Center for International Labor Solidarity (ACILS) of the AFL-CIO.
Unions also have made some recent advances in organizing in the export
processing zones. By the end of 1999, there were 158 unions operating in the
export processing zones, with 13,595 members, or 5.5 percent of the 247,076
 Recent Developments in Employment Relations in the Philippines / 389
workers employed in the zones. Twenty-three percent of the unions act as
bargaining agents, covering about 80 percent of the union members and 4
percent of the total workers in the zones (Bureau of Labor Relations 2001).
Another silver lining for trade unions is the fact that competitiveness
does not depend solely on the ability of the corporation to have a flexible
labor force and the ability of the organization to right-size; it also depends
on the degree of cooperation and support given by a motivated workforce
to competitive and productivity programs being initiated by the corpora-
tions. This observation is reinforced by the findings of the World Competi-
tiveness Report for 1998 and 1999, which show that the Philippines vis-à-vis
other Asian countries enjoys an advantage in skilled labor but none in
semiskilled labor. This clearly provides the unions a major bargaining chip,
specifically in having a voice on modernization plans, sharing of benefits,
and so on. However, to be able to exploit such an opportunity, the unions
must by necessity also upgrade themselves.
There have been, in some companies, some gains for labor unions in
terms of voice over decision making, and in the wake of the economic crisis,
there have been some gains in voice at the national level as well, with the
introduction of a tripartite social pact (see below). What is absent is a
grand strategy on the part of trade unions, and the grand strategy is absent
largely because the labor movement continues to be divided and frag-
mented. Although there is little talk of union mergers, there is some talk
about coordination between different labor groups, often on an issue-by-
issue basis.
In sum, the labor movement is small and therefore weak in terms of
collective bargaining. Second, the fragmentation of unions is extreme, and
competition among unions continues to make the labor movement weak.
The fact that bargaining representation is subject to elections every 5 years
leads to a lot of union raiding across and within industries, and thus unions
spend their energies vying for existing membership rather than organizing
new members (Anonuevo 2000). Third, absent the ability to expand collec-
tive bargaining beyond these small numbers, the ability of unions to signi-
ficantly voice the larger concerns of labor in the economic development
process is seriously compromised. The inability of unions to resolve juris-
dictional problems and come together to cooperate also implies another
outcome, i.e., the limited ability to focus on the development of solid soli-
darity work or collaboration.
Finally, the ability of unions to counteract the adverse impacts of restruc-
turing are also limited by the nature of Philippine IR institutions, in parti-
cular the fact that there is no formal centralized bargaining and the use of
minimum wages as the basis for pattern bargaining.
390 / CHRISTOPHER L. ERICKSON ET AL.

Government Policy. It is the government whose response to the changes

in employment relations has been the slowest and most unsure. On the one
hand, the government has promoted the skills-development system through
extensive reorganization of existing skills-development institutions. One govern-
ment agency, the Department of Trade and Industry Center for Industrial
Competitiveness (DTI-CIC), has attempted to foster the growth of labor-
management collaboration through encouragement of labor-management
councils. Yet the weakness in the government’s response is in the area of
protection of union and worker rights, in enforcement of the law, and in
ensuring that contract, casual, and temporary workers’ interests are pro-
perly protected.
If unions are seen as a bulwark against worker exploitation and subcon-
tracting, then it is clear that government should do more to make the pro-
cess of union formation and maintenance easier. Even more important than
the process of union formation has been the weakness of public policy in
curbing overt and covert antiunion and union-avoidance strategies, which,
as in the United States, is illegal yet widespread. The willingness of the
government to overlook clear violations of labor law in several areas and
the inability of the Department of Labor to police workplaces adequately,
especially where unions are absent, constitute government failure. Much has
been written about the various labor law changes that are required in the
Philippines (e.g., Gonzalo and Sanchez 1998; Ofreneo and Azucena 1999).
With respect to the economic crisis, the Employers Confederation of the
Philippines (ECOP) and the government have managed to orchestrate a
tripartite forum to discuss the adjustment to the crisis (see Ofreneo 2000).
A social accord on industrial harmony and stability was signed between
the ECOP and the major trade union federations that sought to encour-
age mutual restraint on layoffs and industrial disputes in February 1998.
Although difficult to quantify, the accord has helped to ease the tensions
engendered by the crisis and has become a vehicle for educating employers
on how to humanize the process of adjustment to the crisis. The Depart-
ment of Labor has organized conferences that have resulted in regional
social accords, whereas the ECOP succeeded in bringing the accord to the
industrial zones. However, absent a more formal government intervention,
it is unlikely that these accords will have teeth.
The biggest challenge to the government, however, is how it can arrest
the continuing stagnation of the industrial sector while protecting the
welfare of workers. A central and unresolved historical question is, What is
different about the Philippines? Why did the export-oriented industrializa-
tion strategy fail to provide rapid development for the country and sub-
stantial improvements in standards of living for workers? And why did the
 Recent Developments in Employment Relations in the Philippines / 391
Philippines fail to move through different stages of export-oriented indus-
trialization, especially from the stage where low wages are the major source
of advantage to the stage where low wages become less relevant in their
strategy? After all, other East and Southeast Asian nations, such as South
Korea, Singapore, and Malaysia, benefited to a greater extent from export-
oriented industrialization strategies (Gereffi 1996). And standard interna-
tional trade theory, such as the Heckscher-Ohlin model, suggests that labor-
abundant countries specializing in labor-intensive products should see a
benefit to labor from engagement in trade (Krugman and Obstfeld 1987).
We argue that one key reason that the export-oriented industrialization
strategy did not contribute to greater growth of the Philippine economy
compared with some of its neighbors is that the government did not play
as effective a role in facilitating both domestic and foreign direct invest-
ment, particularly as regards the development of physical and human-
capital infrastructure but also in terms of changing the incentives to attract
differing types of foreign investment10 (Aldaba 1994; Medalla 1998). And,
for whatever reasons, the Philippines has remained a labor-surplus econ-
omy, with resulting adverse impacts for labor’s bargaining power and for
the government’s incentives to invest in (and provide multinationals incen-
tives to invest in) skills development (Ofreneo, Amante, Ortiz 1998).
Thus the combination of the ongoing labor surplus and the historical
lack of government focus on infrastructure improvement and skills develop-
ment favored continued emphasis on the low wage development strategy.
However, as even lower-wage countries open up to the global economy
(e.g., China, Vietnam, and Indonesia), this strategy becomes even less viable
(Ofreneo 2001). The unfortunate outcome is that the Philippines has so far
missed out on the high-skill export-oriented approach taken by Singapore
and Malaysia, and at the same time it is losing its low-wage advantage.
Turning this situation around requires a serious rethinking of the existing
but failed policy of simply liberalizing the economy without undertaking
needed institutional and infrastructural reform programs (e.g., bureaucratic
reform, skills development, physical infrastructure improvement, improving
corporate and government transparency, entrepreneurship development, etc.).
The government also could more seriously engage in proactive strategizing

10
In Singapore, for example, the government has provided incentives for high-tech foreign direct
investment through subsidizing company-provided training and giving the companies exclusive access to
the trainees, thereby building up general workforce skills by linking foreign direct investment and skills
development (Kuruvilla, Erickson, and Hwang 2002). Of course, conditions are very different in the
Philippines, which is much larger and has a different history and form of democracy from Singapore.
However, Singapore does provide an example of successful government policy to upskill the workforce and
attract high-tech foreign investment, a strategy that has been followed to some extent by Malaysia as well.
392 / CHRISTOPHER L. ERICKSON ET AL.

on how the Philippines can realistically emerge as an industrial winner

given the state of competition in Asia and the rest of the world.

Conclusions
The effects of increased international competition on employment rela-
tions in the Philippines can be seen in two main trends. In a few cases, there
is development of functional flexibility or high-commitment HR practices.
However, the majority of Philippine industry is focused on numerical flexi-
bility or reducing headcount through layoffs, retrenchments, subcontract-
ing, labor only contracting, and casualization; this has severely affected the
labor movement and the plight of many individual workers.
These two broad trends support the Frenkel and Kuruvilla (2002),
Kuruvilla and Erickson (2002), Frenkel and Royale (1996), and Kuruvilla
(1996) hypotheses about the effects of international product market com-
petition on employment relations: that it induces companies and firms to
adopt strategies to emphasize their competitiveness and that these strategies
may be “high road” strategies (such as the movement to functional flexibil-
ity) or “low road” strategies (such as the emphasis on casualization, sub-
contracting, and other methods of attaining numerical flexibility).
The Philippines lacks a strong labor movement or effective government
policies to counteract the predominant trend toward numerical flexibility.
The most critical problem areas that require urgent attention are in the
areas of labor-management cooperation (and the whole issue of reducing
legalism in IR), the issue of protecting workers’ rights during adjustment,
and most of all, developing the skills-formation system so that it can be
more effective. There have been some developments that are a counter to
the argument posed earlier. Although union coverage has dropped substan-
tially and union militancy also has declined in the 1990s, there is some
indication that there is increased cooperation and coordination among
labor unions, as well as successful attempts to organize the workers in the
burgeoning (and mainly nonunion) export processing zones. Another posi-
tive sign is the renewed interest in tripartism (which waned in the 1980s) and
the development of cooperative structures, particularly labor-management
councils, which are actively encouraged by the government. However, these
are small steps, not giant leaps, and by themselves, we argue, they do not
mitigate fully against the impact of the drive for numerical flexibility.
We also want to briefly relate our findings to contemporary debates about
economic integration and employment relations more generally. There is an
increasingly large literature on the impact of economic integration on
 Recent Developments in Employment Relations in the Philippines / 393
employment relations worldwide. Those with a more positive view tend to
highlight the economic growth that comes with integration into the world
economy. The World Bank, for instance, touts the higher economic growth
rates and also makes an argument that economic openness tends to reduce
poverty and inequalities both within and across countries (World Bank
2000a, 2000b). On the other hand, critics argue that unregulated markets
have detrimental impacts on workers, inequality, and the environment and
call for some form of regulation (Greider 1997; Martin and Schuman 1996).
The World Bank response is that where appropriate public policies are in
place, the costs of structural adjustment and environmental degradation
can be minimized (World Bank 1993, 1995). In essence, we find that those
public policies are mostly not in place in the employment relations arena in
the Philippines. Thus the Philippines is an important case for assessing
approaches to economic development in that it highlights the potentially
negative impacts of economic integration on employment relations and
workers generally in the absence of substantially countervailing policies and
institutions.

REFERENCES

Aganon, Marie E. 1995. “Human Resources Management: A Comparative Analysis of Japanese,

Chinese, and Western Models in the Philippines.” In Human Resources Approaches in the Philip-
pines: A Study of Japanese, Filipino-Chinese, and Western Owned Firms, edited by M. Amante,
pp. 18–52. Quezon City: University of the Philippines.
Aguilar, V. 1990. “Subcontracting, Employment and Industrial Relations in Selected Philippine Export
Manufacturing Establishments.” Working paper, University of the Philippines.
Aldaba, L. 1994. “Foreign Direct Investment in the Philippines: A Reassessment.” PIDS Research Paper
Series no. 94-10, Makati, Philippine Institute for Development Studies.
Amante, Maragtas S. V. 1995. “Labor Relations and Enterprise Competitiveness in the Philippines.”
Philippine Journal of Industrial Relations 16:31– 49.
———. 1997. “Converging and Diverging Trends in HRM: The Philippine ‘Halo-Halo’ Approach.”
Asia Pacific Business Review 3(4):111– 32.
———. 2000. “Diversity in Contingent Employment Practices in the Philippines: Policy Options.” Paper
presented at International Industrial Relations Association 12th World Congress, Tokyo.
Anonuevo, Carlos A. Q. 2000. “Philippine Trade Union Profile.” Friedrich-Ebert-Stiftung Philippine
Office.
Barranco-Fernando, Nenita. 1994 –1995. “Globalization and Its Impact on the Philippine Labor
Market.” Philippine Journal of Labor and Industrial Relations 16(1–2):69 – 98.
Bitonio, B. 2000. “Unions on the Brink: Issues, Challenges and Choices Facing the Philippine Labor
Movement in the 21st Century.” In Philippine Industrial Relations for the 21st Century: Emerging
Issues, Challenges and Strategies, edited by J. Gatchalian, M. Amante, and G. Gust. Quezon City:
University of the Philippines.
Bureau of Labor Relations. 2001. http://www.info.com.ph./~phblrnet/.
Employers Confederation of the Philippines. 2000. “Country Report on the Philippines.” Paper for the
26th ACE Board of Directors Meeting, Denpasar, Bali, February 25.
Erickson, Christopher L., and Sarosh Kuruvilla. 1998. “Industrial Relations Implications of the Asian
Economic Crisis.” Perspectives on Work 2(2):42 – 7.
394 / CHRISTOPHER L. ERICKSON ET AL.

Esguerra, Jude, Arsenio Balisacan, and Nieves Confessor. 1999. “Philippines: Labor Market Trends and
Government Interventions Following the East Asian Financial Crisis.” Paper prepared for World
Bank Labor Markets in the East Asian Crisis Project.
Frenkel, S., and S. Kuruvilla. 2002. “Logics of Action, Globalization, and Employment Relations
Change in China, India, Malaysia, and the Philippines.” Industrial and Labor Relations Review
55(3):387– 412.
——— and C. Royal. 1996. “Globalization and Employment Relations.” Paper prepared for the ILO
Conference on Globalization and Employment Relations, Bangkok.
Gatchalian, Jose C. 2000. “Employee Representation and Workplace Participation (Focus on Philippine
Labor Management Councils).” Paper presented at International Industrial Relations Association
12th World Congress, Tokyo.
Gereffi, Gary. 1996. “Commodity Chains and Regional Divisions of Labor in Asia.” Journal of Asian
Business 12(1):75 –112.
Gonzalo, J., and M. T. C. Sanchez. 1998. “Philippine Employment and Industrial Relations Policies: An
Assessment.” Philippine Institute for Development Studies.
Greider, W. 1997. One World, Ready or Not: The Manic Logic of Global Capitalism. New York: Simon
& Schuster.
Karnow, Stanley. 1989. In Our Image: America’s Empire in the Philippines. New York: Random House.
Krugman, P., and M. Obstfeld. 1987. International Economics: Theory and Policy. Glenview, IL: Little,
Brown.
Kuruvilla, Sarosh 1996. “The Relationship Between Economic Development Strategies and Industrial
Relations: India, Malaysia, Singapore and the Philippines.” Industrial and Labor Relations Review
49(4):635– 657.
——— and C. Erickson. 2002. “Change and Transformation in Asian Industrial Relations.” Industrial
Relations 41(2):171– 227.
———, ———, M. Anner, M. Amante, and I. Ortiz. 2000. Globalization and Industrial Relations in the
Philippines. Bangkok: International Labour Organization Regional Office for Asia and the Pacific.
———, ———, and H. A. Hwang. 2002. “An Assessment of the Singapore Skills Development System:
Does It Constitute a Viable Model for Other Developing Nations?” World Development
30(8):1461–76.
Lainez, A. M., J. C. Lerma, and R. Ofreneo. 1994. “HRD Dilemmas in the Electronics Industry.”
Working Paper, University of the Philippines.
Legardo, Vicente, Jr., and Ina Ortiz. 2000. “Review of Human Resource Management and Industrial
Relations Practices in Response to the Asian Financial and Economic Crises.” Philippine Country
Paper, NICC-ACE Workshop, Bali, Indonesia, February 23 – 24.
Martin, H. P., and H. Schumann 1996. The Global Trap: Globalization and the Assault on Prosperity and
Democracy. Pretoria: HRSC/RGN.
Medalla, E. M. 1998. “Trade and Industrial Policy Beyond 2000.” Paper no. 98-05, Philippine Institute
for Development Studies.
Ofreneo, R. 1994. “Labor and the Philippine Economy.” Unpublished manuscript, University of
Philippines, School of Labor and Industrial Relations.
———. 2000. “Globalization and the Asian Economic Crisis: An Assessment of the Social Accord
Initiatives in the Philippines.” Paper presented at International Industrial Relations Association
12th World Congress, Tokyo.
———. 2001. “The Philippine Dilemma: Preserving and Creating Quality Jobs in a Globalizing Econ-
omy.” Paper presented 7th Asian Congress on Labour Law and Social Security of the Interna-
tional Society for Labour Law and Social Security, Manila.
——— and C. Azucena. 1999. “Competitiveness and Urgent Labor Reforms.” Advocacy paper,
Employers Confederation of the Philippines, Manila.
——— and N. Fernando. 1993. “Job Search and Employment /Unemployment Flows Among Young
Workers.” Working paper, University of the Philippines.
——— and ———. 1994. “The Industrial And Labor Challenge of Subcontracting.” Working paper,
University of the Philippines.
 Recent Developments in Employment Relations in the Philippines / 395
——— and I. Ortiz. 1998. “Globalization and Employment Relations in the Philippines.” Working
paper, University of the Philippines.
———, M. Amante, and I. Ortiz. 1998. “Skills Development in the Philippines.” Working Paper,
University of the Philippines..
Personnel Management Asspciation of the Philippines (PMAP). 1995. Human Resource Practices in the
Philippines. Research Report. Manila: PMAP.
Ranald, Patricia. 1999. “Analysing, Organising, Resisting: Union Responses to the Asian Economic Crisis
in East Asia, South Korea and the Philippines.” Journal of Industrial Relations (June):295 –325.
Villegas, E. 1988. The Political Economy of Philippine Labor Laws. Quezon City: Foundation for Nation-
alist Studies.
Windell, J., and G. Standing. 1991. “External Labor Flexibility in Philippines Industry.” Working paper
no. 2-43, World Employment Program Research.
World Bank. 1993. The East-Asian Miracle: Economic Growth and Public Policy. New York: Oxford
University Press.
———. 1995. World Development Report: Workers in an Integrating World. New York: Oxford Univer-
sity Press.
———. 2000a. Global Economic Prospects and the Developing Countries 2000. New York: Oxford Uni-
versity Press.
———. 2000b. “Assessing Globalization: Does More International Trade Openness Increase World
Poverty?” Briefing paper, World Bank, New York.