By Jenina P. Ibañez, Reporter

When canned food company Mega Global Corp. studied the new workplace physical distancing rules, it estimated the drop-off in productivity at 50% at least. So it decided to bring in robots.

Mega Sardines Vice-President for Business Development Michael Tiu Lim said the company had already automated processes like fish cutting to minimize contact with the food, and was planning to expand further. The pandemic, and the resulting adjustments to workplace safety, accelerated these plans.

“We’re just waiting for (lockdown) to be lifted but once it’s lifted, within one year’s time most of us if not some of us (in manufacturing) will have some form of automation in place… So it’s just a matter of fast-tracking some of these plans.”

He said the company does not want to remove jobs in favor of automation, but it will have to do so to continue producing quality goods within the safety norms.

That trend might accelerate the job losses that were already high when the lockdowns forced businesses to close, leading to a second wave of layoffs.

Employment in the Philippines started falling after lockdown measures ground business to a halt. The total number of unemployed hit at least 7.3 million in April, for record jobless rate of 17.7%. At least 40,000 overseas Filipino workers have been repatriated due to the pandemic.

Mr. Lim said fully automating the company’s facilities could cut employment by up to half.

“Equipment doesn’t get sick. Maybe they need down time, but they don’t get sick,” he said.

SAFE OPERATIONS
Physical distancing measures are being applied globally in an effort to protect people from the coronavirus disease 2019 (COVID-19) pandemic. While employers wait for a vaccine, the private sector has been looking at all the possible ways to operate safely.

Some companies are trying to mitigate the workplace risk by offering rapid antibody tests, though doctors have warned that these tests produce high false positive rates.

Many others are thinking of taking the automation route.

Asian Development Bank (ADB) Southeast Asia Technology and Innovation Specialist Sameer Khatiwada said that the bank had projected in 2018 that technology will impact routine jobs in the manufacturing and services sectors. He expects the pandemic to hasten this trend.

More than 40% of business leaders in a 45-country survey conducted by auditing firm Ernst & Young released in March said that they are accelerating investment in automation in response to the crisis.

But just because businesses can automate, does not mean that they will.

“This will depend on the cost,” Mr. Khatiwada said in an e-mail.

“Businesses will weigh labor and other costs associated with hiring workers against the cost of acquiring and maintaining a new machinery or an AI (artificial intelligence) enabled service delivery system.”

COST OF TECHNOLOGY
Electronics exporters, for now, are prioritizing returning to their previous levels of production after manufacturing operations were disrupted by lockdown restrictions.

Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI) President Danilo C. Lachica said the sector has always been moving towards expanding automation, and that companies will look at using these technologies to improve physical distancing.

But he also expects a combination of automation and manual labor in the industry.

“It’s cheaper to do it manually than maintaining the robots — expensive parts and all that. So it has to be a good balance. You don’t just automate for the sake of automating.”

Automation is less expensive than it was a decade ago, according to Allan S. Angeles, the president of industrial automation company Tenshi Technology. He said China started producing cheaper equipment and now accounts for up 60% of the automated systems in Philippine manufacturing.

Mr. Angeles cited as an example surgical mask production, where machines can easily outpace human workers, 10 of which can make around 100,000 masks a month, he said.

“When you do it fully automated, only three persons can produce three million in one month.”

MIGRATING TO WHERE THE FUTURE JOBS ARE
Automation, for some sectors, moves job availability from one area to another. Mr. Khatiwada said that as retail moves to e-commerce, there will be fewer people needed to work in malls and shop floors but there will be bigger demand for delivery drivers.

For manufacturing, he said training institutions will have to adapt to changing labor demand.

Mega Sardines’ Mr. Lim said that if he automates the jobs of 200 people, he will hire five to work on the machines that replaced them.

“It won’t be at the same level. Yes, we’ll probably create 10 jobs, 20 jobs but we’ll probably lose 10 times more (than) that.”

And the training available for the highly technical automation jobs does not provide the needed skills.

Tenshi’s Mr. Angeles said the graduates he hires to work on industrial automation systems are largely unprepared for the challenges.

“Karamihan ng mga engineers natin, technicians natin… pagka pinasok mo kaagad sila sa (multinational), almost zero knowledge sila. Ite-train pa sila ng company (Most of the engineers and technicians who join multinationals have almost zero knowledge and need to be trained by the company),” he said.

He added that one possible response would be to create an automation industry of our own, which would require related industries like steel to ramp up if a company is to build the machinery domestically some time in the future.

The payoff would be an employment boom in the automation industry, to perhaps double its current level of about 5,000 workers.

The Philippine manufacturing sector in total, according to 2017 government data, employed over 1.2 million people.

LOSING BARGAINING POWER
The pace of automation will be dictated, at least in part, on what the pandemic does to the cost of labor.

“If keeping a large number of workers in a confined space becomes more costly in terms of healthcare measures that will need to be undertaken, then businesses will rethink their production lines,” ADB’s Mr. Khatiwada said.

The history of pandemics before COVID-19 typically saw wages rise because surviving workers had to pick up the slack and do the work of the dead, giving them more bargaining power.

According to Rene E. Ofreneo of the UP School of Labor and Industrial Relations, the immediate concern is the millions of jobs being lost now, noting that the pandemic will have a years-long effect on employment, especially if there are waves of reinfection.

“Ang bargaining power ng labor ngayon is so weak. In fact, nakakaawa (The bargaining power of labor right now is weak, and pitifully so).”

He also wonders if health safety measures could spell the end of contractualization — the illegal practice of maintaining staff on short-term contracts, which denies them a path to permanent-employee status and the resulting protections and benefits.

It is possible, he said, that companies applying physical distancing will prefer to retain a small number of versatile staff, throwing out of work large numbers of contractual employees who have to work in close proximity.

JOB CREATION
The pandemic, Mr. Ofreneo said, has the potential to shift the global manufacturing supply chain.

He said the economic downturn caused by the pandemic could cause more countries to apply protectionist measures, with developed countries reshoring production previously located in cheap-labor countries.

“Tinamaan ang global value chain ng mga multinationals… diyan nakadikit ang ating mga semiconductors, electronics, auto parts. Nagkakaroon ng restructuring. (The global value chain was hit by the pandemic, and that’s what our semiconductor, electronics and auto parts industries are attached to).”

“Some countries like (the United States)… have become very protectionist… technology is giving them a means to make this happen.”

He said for some time now jobs in the Philippines have been migrating to the US or Germany for on-demand production.

The global supply chain had been shifting because of the US-China trade war, with some multinationals considering reshoring manufacturing based in China or moving these operations to Southeast Asia.

SEIPI’s Mr. Lachica said that electronics multinationals temporarily moved some operations out of Philippines after facilities that were unable to fully operate during the lockdown, but he believes that the right incentives regime could keep attracting new foreign investment into the country.

To create jobs, Mr. Ofreneo said the Philippines should focus on moving up the value chain, and expanding industries geared towards the domestic market.

“Everywhere is very grim. In a situation like this, napakahalaga ng papel ng gobyerno (the government’s role will be critical),” he said.

“They are in a position to create jobs. That’s why bakit ganun pa rin ang obsession -— ’yung campaign for foreign direct investment (I am wondering why the obsession remains with FDI). I’m not against it (but) assuming may makuha kang magiinvest… bago manganak ng trabaho ’yung investment siguro two to three years (It will take two to three years for such investment to translate to expanded jobs)… What we need are jobs now.”

ADB’s Mr. Khatiwada believes the government infrastructure program will create plenty of construction jobs, despite the challenges on job creation from advances in robotics and computing power.

“We should not be pessimistic. New and better jobs will also be created,” Mr. Khatiwada said.

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