Marcos Bans Strikes in U.S. High-Tech Plants

Philippine President Ferdinand Marcos once again demonstrated that he is a dear friend of U.S. multinational corporations when he announced in July that he was outlawing strikes in the U.S.-dominated semiconductor industry.

Marcos, who "lifted" martial law in January, 1981, retained for himself the power to ban strikes in areas he deemed vital to the national interest. His July executive order grants the semiconductor industry this special status.

For the Marcos regime, the industry is indeed vital. It represents the only reasonably bright spot on an otherwise grim economic landscape. Almost by default, the semiconductor assembly business has come to serve as the main engine powering the Marcos government's export-oriented industrialization drive begun in the early 1970s.

By 1981, as export prices for such traditional foreign exchange earners as sugar and coconut products remained depressed and developed country quotas limited garment exports, semiconductors (consisting mostly of integrated circuits) moved to the top of the Philippine's export earners, bringing in $636.2 million in foreign exchange. And the labor-intensive character of integrated circuit assembly had created some 40,000 jobs (mostly for young women) a sevenfold increase in semiconductor employment since 1976.

With few ideas as to how to keep exports and employment growing should the foreign semiconductor firms in the Philippines close up shop, Marcos has felt compelled to cater to their every need. Above all, this has meant trying to keep a lid on wages. The principal reason foreign (mostly U.S.) semiconductor firms began opening up plants in the Philippines in the mid-1970s was its widening labor cost advantage over such neighboring states as Malaysia and Singapore - previous preferred sites for offshore assembly (see chart).

Intel led the pack, starting up operations in rented facilities in 1974. With the industry's rapid expansion after the 1974-75 global recession, Intel moved into a new facility, and other major U.S. firms, such as National Semiconductor, Advanced Micro Devices, Motorola, Signetics, Fairchild, Texas Instruments, and Zilog, soon followed suit.

Workers in manufacturing - and here semiconductors are no exception - saw their real wages decline by almost one-third during the 1970's; by the end of the decade they were becoming increasingly outspoken in their demand for higher pay.

Marcos sought to appease workers by periodically raising the statutory minimum wage and the emergency cost-of-living allowance for the lowest paid workers. The last such pay raise occurred in mid-1980, bringing the effective take-home pay of a Manila worker to $3.90 per day.

Even such a marginal concession to labor, however, brought Marcos criticism from foreign business. Investors in such labor-intensive, export-oriented industries as semiconductors led the chorus of protest against his back-sliding. One such multinational indicated to a Business Asia reporter that "labor is now becoming a critical factor in production costs."

Marcos succumbed to business pressure, backed as it was by exhortations from the International Monetary Fund (IMF), a key architect of the country's export strategy, (see MM, June, 1982). For two years Marcos has resisted pressures to raise the minimum wage in the face of a double-digit inflation rate which has cut deeply into workers' living standards. Thus, when he `lifted' martial law in January of last year Filipino workers seized the opportunity. Strikes proliferated, totalling 260 in 1981 as opposed to only 49 in 1979.

As yet no major U.S. semiconductor firm in the Philippines is known to have been hit by a strike, but the accelerating growth of the radical labor movement clearly has many a manager worried. "There is heavy organizing going on in our plant and everyone else's," one executive of a U.S. semiconductor maker recently confided to Business Week.

If foreign investors have reason to worry, Marcos appears to be nearing the point of desperation. In early August he lashed out verbally at his opponents from organized labor, who he alleges are planning to stage a national strike sometime in September, possibly during his scheduled visit to the U.S.

To show he means business, Marcos arrested on August 18 the 79-year-old president of the National Federation of Labor Unions, Felixberto Olalia, on charges of seditious plotting to "wreck the economy." Olalia also serves as chairperson of the militant May First Movement, whose influence has spread rapidly among workers - including those in the electronics industry - since its formation two years ago.

No doubt Marcos holds Olalia and the May First Movement at least indirectly responsible for the upsurge of labor organizing which threatens to spoil the extended holiday the semiconductor multinationals have been enjoying.

-Report by David O'Connor, a freelance journalist living in
New York, who specializes in Philippine affairs.