Wage Hike Increase

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The Cebu Furniture Industries Foundation Inc. (CFIF), on behalf of the furniture industry in Cebu, respectfully submits its position paper on the proposed across-the-board increase.

 

Backgrounder

 

The Cebu Furniture Industries Foundation Inc. (CFIF) is an organization of furniture and furnishings manufacturers and exporters whose mission is to contribute to the sustainable growth of the Philippine furniture export industry through promotions, human resource development and advocacy.

 

Throughout its 35-year existence, CFIF has adhered to its commitment to conform with standards of excellence, integrity, social and environmental stability without forgetting its responsibility to provide opportunities and rewards to its highly skilled and, therefore, valuable work force.

 

Exporters have been the ones most hurt by the recent global financial crisis, particularly furniture exporters. The crisis—which placed the US, the Philippines’ major market, in recession—has forced all furniture exporters in Cebu to downsize with about 200 direct hires and 1,600 subcontract workers per company. Orders for Philippine furniture declined, and stopped for some.

CFIF’s membership includes about 80 percent of furniture manufacturers and exporters in Cebu and some companies inNegrosIsland. From 180 members in 2007, CFIF’s membership is now down to 118 due to company closures.

 

The crisis has crippled even the top 50 furniture exporters inCebu. Overall, export furniture shipments fromCebufell about 70 percent in from 2007 to 2009, according to Bureau of Customs data. For 2009 alone, the shipment volume of top 50 furniture exporters inCebuwent down to 4,500 containers or 46 percent less than 8,500 containers in 2008. Some of these industry leaders suffer a decline in shipment volume by as much as 70 percent in 2009 compared to 2008.

 

All these indicate that theCebufurniture industry is down on its knees. An across-the-board increase in minimum wage now would send the industry crashing.

 

Our Position

 

1. Major markets of Philippine export furniture are still very weak

 

TheUSmarket, which accounts for 80 percent of Philippine furniture exports, is still very weak and will remain so for many years. The unemployment rate in theUSin January this year remains at a high of 9.7%. According to the Consumer Confidence Survey, consumers’ short-term outlook, while moderately more positive, does not suggest any significant pickup in activity in the coming months.

Price pressure in theUScontinues to be strong. The higher-end market, which is the traditional market for Philippine furniture, continues to realign itself. Consumer preference for low-end furniture is becoming stronger.

No exporter can afford to increase wages until the markets have improved. At the moment, everyone is just trying to survive or break even.

2. While markets remain weak, competition from China, Vietnam and Indonesia has become stiffer

Cheap furniture fromChina,VietnamandIndonesiaare becoming more popular among markets that are beset with uncertainty. With economic recovery still beyond their sights, international markets will try to postpone their home renovation plans. Those who do redecorate would go for low-end furniture or avoid purchase of complete furniture systems/units.

 

3. Any increase at this time would cause more job losses

The furniture industry is responsible for generating thousands of jobs, both at the level of furniture manufacturers and their subcontractors. But the crisis has caused many furniture companies to fold, resulting in a number of displaced employees. Those who have continued to operate during the crisis had to right-size or reduce work-hours just to survive. Being made to pay higher wages at a time when its finances are at an ultimate low would bring an end to a furniture company’s existence, thereby causing more job losses.

The National Statistics Office had reported that the country’s exports (overall) plunged by 21.9 percent to $38.33 billion in 2009 from $49.078 billion in 2008 with the declining demand for Philippine-made products.

In Central Visayas, total exports in 2009 fell 37 percent from 2008 levels, with the furniture sector being the hardest hit. The Department of Trade and Industry 7 reported that total exports inCentral Visayasin the first semester of 2009 went down to US$447 million from $1.207 billion in 2008 and $1.042 billion in 2007. Of the total exports, the furniture sector accounted for 1.41% in 2009 (or $6.3 million), which fell from 7.50% in 2008 ($90.5 million) and 8.55% in 2007 (or $89.1 million).

By looking at these numbers, there is no doubt that the furniture sector is unhealthy.

 

5. An across-the-board increase would provide incentives to non-deserving employees and punish furniture companies that are already suffering

Aside from making furniture companies to suffer more, an across-the-board increase would provide incentives to employees who do not deserve a raise. Increase should be based on a worker’s productivity and should serve as an award to those who are committed to their jobs and continue to exert efforts to improve their skills.

 

6. If there has to be an increase in wages, it should be postponed until market recovery is certain. Individual companies should be allowed the discretion to decide when they can afford to increase the wages of their workers and, if so, how much.

 

We understand that the government’s primary thrust is to provide jobs. The industry helps the government achieve this objective. Being compelled to pay for an increase it cannot afford prevents the industry from being an effective partner of government in job generation.

Former dean of the Ateneo School of Economics, Dr. Fernando Aldaba said in study that the recent crisis has left 15 million Filipinos in need of full-time jobs. He said Philippine business must be able to create an average of three million quality jobs a year for the next five years, to be able to bridge the real unemployment gap and bring down unemployment rate at two percent by the end of the fifth year.

In arguably, the manufacturing sector—which include the furniture industry—is labor intensive; it can create thousands of jobs, provided investments continue to come in. In the furniture sector, for instance, an investment of P30,000 is needed to create one job. How can a furniture company create jobs if its pockets are left empty by non-existent orders and ill-timed wage increases?

Having raised all these points, we believe that an increase at this time is tantamount to a death certificate for the export furniture industry.

We hope you will consider our position and concerns in your deliberation over the proposed across-the-board increase.

 

For the Cebu Furniture Industries Foundation Inc.

 

ANGELA F. PAULIN

President

 

March 9, 2010

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