Untrammeled capital mobility continues to demobilize labor.
The service sector accounts for the largest share of the country’s workforce yet again, as it has for the last three decades, comprising six in every 10 workers per the latest Labor Force Survey. Those in this segment contribute around 60% of the Philippine gross domestic product. Yet the absence of a robust domestic industry imperils these laborers and leaves them to the whims of foreign firms.
This is because most service employees are in the distributive subsectors, such as wholesale and retail trade. Thus, a galvanized service sector is partly driven by inter-industry demand of manufacturing to facilitate its processes and goods. Yet in the face of the contraction of manufacturing to almost a four-year low, the Philippines cements this trend by further depending on volatile foreign demand while pushing to attract outsourced and offshore investments.
As such, the Philippines’s service-led model of development entrenches a cycle that deepens a transnational exploitation of workers and disempowers them from contesting such conditions.
In its two decades of being embedded in the country, the business process outsourcing (BPO) industry has employed more than a million people. Its impact has been so profound that a World Bank report acknowledged its role as crucial in the country’s shift away from an agriculture-based economy without a manufacturing base. Other offshored services have also surged. Around 1,500 offshore firms, including the likes of Intel and Nexperia, operate in the country and are expected to expand.
Like other developing countries, buttressing the low-wage service sector is appraised as prudent because it is less capital-intensive and thus easier to pursue. But most other associated jobs are typically tied to the informal economy, like the two million Filipinos rendering services to foreign artificial intelligence startups that need cheap service work.
Having abandoned the traditional vertically integrated model of production, the global commodity chain permits leading multinational firms to engage in “regime shopping,” compelling developing nations to eschew their workers’ welfare in their race to the bottom for investments.
While it is true that some BPOs and offshored firms offer better wages and benefits than domestic jobs, the cost of labor in the Philippines is still much lower than their counterparts in the Asia-Pacific region. It is almost half of the average compensation in India and Malaysia. To continue this, the Philippine government rejects calls for wage hikes and heeds businesses’ demand for lower taxes and better benefits, seen in the proliferation of special economic zones and the legislation of the CREATE More Act.
These conditions are maintained by the very nature of deterritorialization entailed by outsourcing, blunting workers’ capacity to contest the exploitation foisted by firms thousands of miles away.
Threats of dissent or other unfavorable business conditions can push firms to simply shift their operations to countries with cheaper, more docile labor and terminate employees without accountability. Intel’s recent decision to retrench 20% of its workforce in the Philippines is emblematic of this.
The levels of subcontracting have severed the worker's connection to their principal employer. Such is the case with Nexperia workers, who had to strike after enduring abusive conditions from employers who are not directly accountable to the laborers. This is affirmed by the continuous drop of the Philippines in the Labor Rights Index—its score in the recent report falling below the global average because of its restrictive laws on unionization.
Thus, surmounting this perpetual cycle of exploitation must occur through a sustainable developmental path, where workers need not be subjected to the profit-motive rationality of foreign firms.
Doing so means committing to developing a domestic manufacturing sector that will forge a link with the country’s service sector. Its realization lies in strengthening the state’s active role in building industries, and heavily regulating foreign investments to ensure that permitted transnational capital flows will directly contribute to long-term national development.
While this occurs, legislative measures must be enacted to formalize regulations for informal service workers, hike minimum wage to a livable P1,200, and strengthen mechanisms for unionization. As the Nexperia workers’ strike demonstrated, collective defiance from workers can secure considerable gains despite repressive retaliation.
It is thus a united, mobilized working class that will stunt a mobile capital’s motive to disempower. ●
First published in the May 1, 2025, print edition of the Collegian.
