Transforming labor-management relations

It is essential to incorporate the perspectives of global thought leaders to enrich our understanding of labor-management dynamics in the Philippines. In this article, we explore key insights from Dr. Manuel Muñiz, Provost of IE University in Madrid, one of Europe’s premier institutions for business and public policy education.

With this in mind, allow me to deviate from our format of answering reader questions so we can compare notes with Dr. Muñiz, a former Spanish Secretary of State. But first, a disclaimer.

IE made me the first Filipino to win the Prize for Asian Economic Journalism in 2022, in recognition for more than 1,600 articles that I’ve written in this space since 1993. This includes the article “What’s the Best Employee Feedback Mechanism?” which was cited by IE during the award.

IE (formerly Instituto de Empresa) consistently ranks among the top business schools for its MBA and special master’s programs. In 2024, the Financial Times ranked IE’s MBA in the top 30 globally, while the QS Global MBA Rankings put it in the top 10 to 15 programs in Europe and top 40 globally.

IE’s point of view allows for critical reflection on entrenched practices, fresh theoretical insights, and innovative policy recommendations that are grounded in global standards while adaptable to local realities.

CRITICAL REFLECTION
With experience in analyzing management systems across diverse contexts, Dr. Muñiz can identify patterns, best practices, and pitfalls that may not be visible from within the local framework. Here are the key insights of Dr. Muñiz on five major issues:

​One, improving labor-management relations. The key “lies in fostering a culture of empowerment and participatory decision-making, ensuring the inclusion of all workers while promoting open communication, skills development, and merit-based leadership, leading to better collaboration and higher productivity.

​“A possible policy recommendation would be to implement leadership training programs focused on emotional intelligence, ethical decision-making, and collaborative management.”   

​Two, sharing of productivity gains. Any cost savings achieved (done through kaizen or any continuous improvement efforts) can serve as a reward that all employees may benefit from in one way or another. A win-win solution requires the creation of an incentive-based system, where employees feel that their contributions to productivity improvement are recognized and rewarded for enhancing decision-making processes.

“Employers who make better decisions based on these ideas can also receive bonuses for their productivity gains. This would increase trust in the system and encourage everyone to collaborate. From a public policy perspective, tax incentives could be offered to companies that adopt profit-sharing models, thus promoting a more equitable distribution of earnings.”

​Three, ideas for minimum wage-fixing. One of the most divisive and pressing issues in labor relations is minimum wage fixing. One “sustainable solution could be to shift from a fixed minimum wage model to a dynamic living wage system, where salaries adjust automatically based on inflation, economic growth, and cost-of-living indices.

“This could be facilitated by AI-driven economic models, enabling wage boards to make real-time, data-based decisions that better reflect current economic conditions. Additionally, the government could experiment with pilot programs for universal basic income or tax credits for low-income workers, providing a safety net that complements wage adjustments.”

Four, harnessing Artificial Intelligence (AI). “Both AI and data analysis can assist in collective bargaining negotiations by processing large volumes of historical data on wage trends, economic conditions, and political developments to accurately predict potential worker demands and management counterproposals.”

“Additionally, machine learning models can simulate various economic scenarios, allowing both unions and management to negotiate based on data-driven insights rather than assumptions. However, AI should be used as a decision-support tool, not a substitute for human judgment, as negotiations involve complex social and emotional factors that technology cannot fully capture.”

Five, ending the endo and related 5-5-5 schemes. “A win-win solution involves transitioning from short-term subcontracting to flexible yet secure employment models. One effective strategy could be the adoption of portable benefits systems, allowing workers to accumulate entitlements such as healthcare and retirement funds regardless of employer changes.

“Another possible approach is to incentivize long-term employment by offering tax reductions to companies that convert a higher percentage of temporary workers into regular employees. Moreover, sector-wide agreements, in which entire industries establish common labor standards, could help reduce reliance on the endo system while maintaining global competitiveness.”

TRIPARTISM
These ideas require the collaboration of all stakeholders under the age-old principle of tripartism, which is deeply rooted in the Labor Code (Presidential Decree No. 442), and reinforced by the Labor and Employment Tripartism Act (Republic Act No. 10395) that created the National Tripartite Industrial Peace Council and Tripartite Industrial Peace Councils.

Tripartism is a key tool for social dialogue and labor governance, aligning the interests of the state, employers, and workers to achieve equitable and sustainable development. Tripartism is not unique to the Philippines; it is an internationally recognized labor governance model led by the International Labor Organization.

Unlike other versions, the Philippine tripartism model is exceptionally notable for being constitutionally enshrined and relatively well-institutionalized. Let’s not waste that vision. It may not be easy. But that should not mean we must not try. It’s better than rehashing the old zero-sum arguments of the stakeholders.

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