IBON Features - In the face of record-high unemployment and uncertainty for new graduates who will soon enter the labor force, the Philippine government says that the call center industry poses great opportunities for Filipino workers - especially amid the global crisis when firms turn to outsourcing more to save costs. But is the industry indeed a sunshine sector for Filipinos seeking employment? First, the country's business process outsourcing (BPO) sector is closely tied to the US economy, which is facing its worst recession in history. According to a study made by the Bangko Sentral ng Pilipinas, the US was the largest market for IT-enabled services (composed of call centers, medical and legal transcription, animation, software development and other BPOs). The US accounted for 90% of total exports revenue, most of this generated by call centers. The US was also one of the largest sources of foreign investments in call centers, along with Australia and Europe, accounting for over 2/3 of total foreign equity.
Moreover, 86% of BPO service exports were to the US market with the remaining going to countries that are also experiencing economic difficulties: Europe (7.1%), Japan (3.2%), Australia-New Zealand (1.3%) and other Asian countries (2.4%). The deeper the crisis is in these countries, the greater will be the cutbacks in consumption and consequently, the demand for BPO services.
Before the recent economic downturn, the government has targeted jobs in the BPO to swell to 940,000 by 2010 as US firms outsource more of their operations. As of end-2007, the BPO sector reported only a total of 320,000 employees in some 500 BPO firms. Although recent growth in the BPO sector is reportedly fuelled by the shift to higher-end outsourcing such as legal services and medical transcription, the industry is still driven by traditional low value-added services such as inbound and outbound marketing and technical support which relies on client-operator interaction by phone.
Meanwhile, even as the Philippine government continues to bank on BPOs for job generation, India, Asia's leading outsourcer, is already turning away from call centers as the country finds that this sector 'simply does not pay anymore'. In an article in BusinessWeek, India's leading outsourcers note that US corporate clients are continually trying to "ratchet down prices."
What this means for the Philippines is that US clients, hard-hit by the economic slowdown, may negotiate for cheaper contracts with local BPO companies. Contact call center operators may opt to protect their profits by cutting down on salaries and benefits of their employees. They may also opt for contractualization or hiring their workers on short-term contract basis to reduce operation costs. This is especially so as there may eventually be a glut of call center workers due to concerted government and private-sector efforts to employ more call center agents to meet demand.
Note also that major call centers in the country such as US firms Accenture, which recently reduced 3% of its redundant workforce in the country, Sykes Asia, Convergys and People Support are hiring fewer call center workers compared to previous years.
Alternatively, call centers are also shifting their operations from Metro Manila, where 80% of BPO employees are currently located, to other regions in the search for a cheaper pool of English-proficient workers. This trend is slowly becoming evident with the setting up of call centers in Baguio, Cebu, and Davao City.
The Business Processing Association Philippines (BPAP) has already said that profits in the sector were down by at least 15% in 2007 because of the appreciating peso. The US recession and falling BPO sector profits are seen to exert downward pressure on the wages and benefits of BPO employees. As it is, Filipinos are already paid the lowest among over 30 countries for the same skills. Filipino team leaders, supervisors, managers and senior managers are paid 36% to 57% less than their counterparts in China, India, Malaysia and Vietnam.
The government is in denial if it claims that the heavily US-dependent BPO sector will not be adversely affected by the US economy's troubles. It will be affected and worse, will likely pass the burden of adjusting on its employees in terms of lower wages and benefits, longer working hours, or more oppressive working conditions.
It is clear that the country's so-called call center industry will not escape the global economic crisis unhurt - and it is therefore unwise to pin the hopes of fresh graduates and the unemployed on this sector that is an unsustainable source of jobs.
More importantly, it serves to point out the weakness of a government that continues to rely on external sources for job creation for the country's labor force, instead of building the country's domestic economy that will generate sufficient and stable employment for Filipinos. IBON Features