Issue 1

February 2017


Issue 1: February 2017

Duterte’s Solution to 'Endo': Rendering Exploitation More Efficient

Before the year ended, media reported that President Rodrigo Duterte gave the go-ahead to Labor Secretary Silvestre Bello III to sign the administration’s much-hyped solution to contractualization --- a new Department Order (D.O.) replacing the current D.O. 18-A. The Labor Department had circulated a draft of the new D.O. last December 12, 2016.

However, Bello denied the truth of the media report a few days later in a dialogue with various labor groups under the Nagkaisa labor coalition. He instead promised the Nagkaisa leaders that any new issuance would have to undergo consultations with labor groups under the National Tri-Partite Industrial Peace Council.

What he did not emphasize, though, was that he was not replacing the draft D.O. with a new one; and it was precisely the contents of this draft D.O. that drew flak from organized labor rather than the absence of consultations prior to approval.

While not yet final, the draft D.O. continues the established policy on contractualization, i.e. that it must be regulated rather than prohibited. The  Duterte administration shows no indication to abandon this policy despite the President’s rhetoric against “endo”.

All past regulatory issuances have not curbed contractualization. On the contrary, they promoted it. Successive improvements on regulation (as what the draft D.O. intends to be, i.e. to be the latest) merely served to reinforce the trilateral work relationship between principal, contractor and workers by forcing it to evolve from various stages of primitiveness to its relatively developed forms. 

In a word, successive improvements on regulation merely render contractualization more efficient, therefore, further strengthening it as an instrument of exploitation.

The primitive level of contractualization is that contractors or service providers do not have sufficient assets, machines, tools and equipment or do not act independently but are mere agents of the principal. 

Under the Duterte administration’s proposed regulations, there are stricter registration and capitalization requirements that would not allow such conditions. It requires service providers to be truly independent in terms of their own capital and control of contractual workers.

However, this is not to say that preventing the primitive type of contracting is something new that came about only with Duterte. Fact is, this type of contracting by mere alter-egos of the principal is precisely “labor-only contracting”, declared illegal, albeit by lip service, by the Labor Code and all of the past implementing rules and regulations.

What is new, though, under the Duterte draft D.O. are proactive mechanisms to ensure that existing trilateral work arrangements do not fall under “labor-only contracting.” Before, these mechanisms did not exist and the lack of regulation allowed the mushrooming of illegal labor-only contractors.

However, far from ending contractualization, the Duterte draft D.O. is merely re-tooling it as an institution at that precise historical stage when service providers have amassed enough capital and, therefore, can move from primitive accumulation as illegal labor-only contractors towards legitimate accumulation as independent contractors.  

What appears, therefore, as a progressive advance from less to more strict regulation by the State simply reflects the actual material development of service providers from initially operating as alter-egos of the principal to becoming capitalists themselves.

At this historical stage, the State can demand that the PALSCO** or AsiaPro model of labor-contracting must be the exclusive norm. From here on, based on the Duterte draft D.O., service providers would no longer be tolerated if they had no capital or investment of their own in the form of tools, equipment, machineries and work premises. The State, from here on, shall strictly monitor compliance and punish violations. From here on, contractors’ workers shall be their own regular employees, who are therefore entitled to minimum wage and all legally-mandated rights and benefits.

These changes do not spell an end to exploitation. They merely seek to end primitive exploitation to pave the way for modern exploitation at a time when the exploiters can already afford to embrace modern means.

In fact, the idea of stringent regulatory measures to address contractualization is welcomed not by organized labor but by the capitalists themselves through the Employers Confederation of the Philippines (ECOP), though they are supposedly the ones affected by the State’s adoption of exacting standards and departure from past leniency.

In contractualization, where lies the exploitation? It lies in how the workers are cheated in the sale of this special commodity and the only one they possess, labor-power. Political-economy teaches that labor-power may be different in so far as it creates surplus value, but it is similar to any other commodity under capitalism in all other respects.

In the sale of commodities in general, sellers can negotiate for a better price if they sell direct to the end-users. What happens in labor contracting is that instead of workers being able to sell their labor-power direct to the capitalist end-user, a middle man is introduced so that the workers are forced to sell cheap.

In a word, the transaction is made artificially trilateral instead of bilateral. It is artificial because unlike in tangible commodities where physical restrictions of location and geography may give rise to middle men as intermediaries between sellers and end-users, in labor-power, as a rule, there are no such restrictions. The worker can himself go direct to the capitalist to apply for a job, or sell his labor-power. 

In the long run, the trilateral arrangement in the sale of labor-power depresses the social average of the value of labor-power as purchased by the capitalist as a class.

It does not matter whether the middle man is merely an alter ego of the capitalist (primitive type) or an independent capitalist himself (modern type). As long as the trilateral arrangement is forced artificially upon the transaction, the exploitation subsists. The workers sell cheap, depressing the social average of the value of labor-power and, therefore, the capitalist buys cheap even if in the short run he had to spend extra by sharing with the middle man a portion of the surplus value created by the use of labor-power.

Therefore, anything short of abolishing the trilateral work arrangement in favor of direct or bilateral transaction between workers and the capitalist is nothing but continuing the same exploitation in a different form.

The solution to contractualization is to do away with middle men altogether, may they be called labor-only contractors or legitimate service providers. They are a superfluity serving no productive function except to add another layer to the sale of labor-power.

 In fact, the law provides Secretary Bello the alternative of requiring the direct hiring of workers by the principal and prohibiting all forms of contractualization.

 Under Article 106 of the Labor Code, the Labor Secretary may, by appropriate regulations, restrict or prohibit the contracting-out of labor to protect the rights of workers.

Two powers are conferred here. First is mere regulation and second is outright prohibition of the contracting-out of labor.

So far, all the past Secretaries up to Secretary Bello have gone the route of regulation. No one has ever prohibited contractualization.

Mere regulation, like the Duterte draft D.O., can never solve the problem because it presupposes or creates the problem first. “Regulating” the trilateral work arrangement means instituting it a priori and preserving it as an institution.

Decades of regulation have brought workers to economic misery, loss of bargaining power at the workplace and in-security of tenure. Not regulation but only the complete abolition of all forms of contractualization can improve the lives of millions of Filipino workers.


* Luke Espiritu is the President of the militant labor federation, SUPER.

** Philippine Association of Legitimate Service Contractors

Editorial Board

Ramani Silva

Sonny Melencio

Ric Reyes

Ed Tadem

Luke Espiritu

Merck Maguddayao

Walden Bello

Kat Leuch

Ellecer 'Budit' Carlos

Aaron Pedrosa

Cover and layout artist

Zeus Agustin


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