Downsizing
Teodoro Estacio
When company sales figures start to plateau and targets are not being met for years, while Capital and Operating expenditures continue to rise, most companies look at downsizing as their last resort to continue their operations, protect their market, recover their margins and improve their bottom lines. Results could be more devastating as workers are laid off, departments are collapsed, local manufacturing facilities of multinationals are closed down in favor of their foreign subsidiaries.
Therefore when business reacted to the moves in Congress to legislate a R125 increase for workers, there must be serious and valid reasons for saying that it is not easy to take. Less we forget, labor and government are not the only stakeholders in this issue. We have forgotten the stockholders who for years have survived with minimal returns on their investments out of the meager profits of the company.
Already, the country’s wages was considered one of the highest in the region, hence we find competition from countries like China, Vietnam and even Indonesia. Instead of going to local manufacturers, many would rather import their supplies from these countries and still find their final product cost still very effective.
Congress should probably do their homework. Do they even have statistics how many multinationals have closed shop in the country the past 3-5 years and the many who are still in the process of downsizing? Do they have the number of local manufacturers who have succumbed to competition from Chinese manufacturers? The best measure perhaps is the number of OFWs risking their lives to work even in countries w ith political turmoil in exchange for lost jobs in their own country.
As a consultant to a multinational firm who provide transition guidance to workers that have been displaced by downsizing, I was surprised to learn that many displaced workers, specially coming from a unionized environment had better take home pay than some new OFWs because of their tenure and CBA agreements. However, they have no choice as their companies took action to control rising cost of operations.
There is no politics here. Business should not be accused of blackmailing the government. The business sector have been cooperating with the government all these years in their tax collection programs, imposition of new tariffs, increase tax rates and even the most recent EVAT.
The benefits of the EVAT might have improved a lot the government’s coffers and therefore it is able to start many socio-economic programs. This has emboldened government planners to announce ambitious programs for the people.. However, its positive impact has yet to be felt by the business sector.
Let us look at status quo and let the regional wage boards work again. There is a need to listen to the labor sector, but they must also understand that legislating wages could bring more difficulties among their ranks.
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