Carlo's Think Pieces

Reflections of a Filipino in the Netherlands

BPO sector wages still low

Posted by butalidnl on 22 July 2009

The Business Process Outsourcing (BPO) sector in the Philippines is growing fast despite, and perhaps even because of, the current economic crisis. A big portion of this is in the form of call centers doing customer service. It now employs 400,000 people, and is projected to earn $11 billion a year by 2010. Wages in this sector have increased 10% yearly for the past few years, and some people are calling for a slowing down of wage increases because they fear that the Philippines would be priced out of the BPO market.

I do not share this view.  The BPO sector is not like the textile sector, which kept transferring to countries with cheaper labor. The BPO sector requires workers with English and IT proficiency, which the Philippines has in large numbers. For the call center subsector, the Philippines has the added advantage in that Filipinos’ accent is relatively easy to neutralize (this is in contrast to the Indian accent, for example).  Countries with better English proficiency have higher labor costs than the Philippines.  In addition, Filipinos are more service-oriented, which is quite an advantage when it comes to customer-service work.

While wages may have increased rather rapidly, they are doing so from a low base. Call center agents earn about 10% of what US-based call center agents earn. Wages in India (which is the number one in BPO) are higher than in the Philippines. We can say that wages are still low (PhP 13,000 for entry-level agents) in that they are not yet attractive enough for many potential workers.  The BPO also indirectly competes with OFW labor, in that they are an alternative for overseas contract work; and compared to what workers could earn overseas, BPO compensation is still low.

The Philippine BPO sector is far from saturated or overpriced.  The 2010 target earnings of $11 billion is a small part of the world total BPO services which will be $180 billion in 2010. The bigger problem that the sector faces in the Philippines is the potential lack of workers.  BPO companies need to go to the provinces in the hope of tapping the labor pool there. Also, there needs to be stepped-up training of “near-hires”(those who barely failed to qualify for call-center work) to improve their English proficiency and other skills.

In order for the BPO sector to keep growing, it is important to improve the quality of our college graduates, and also to provide the necessary infrastructure e.g. broad-band internet, reliable electricity supply,  office space etc.  And more efforts need to be made to broaden the range of BPO services, beyond the present reliance on mainly call centers.

Higher wages for BPO workers will more likely help its long-term development than hinder it. It would give its workers an incentive to make BPO work into a career rather than a short-term job, resulting in less turnover of workers. It would give an incentive to develop other kinds of BPO services.  And more, higher paid, workers would strengthen the local economies of regional centers, which in turn would make it possible to improve the quality of infrastructure and education.

5 Responses to “BPO sector wages still low”

  1. Shahnawaz said

    many could cry hoars of ” low wages” but is it not about skills too.

  2. Smith said

    Yes…I think the BPO companiesare bound to do that in this tough market.

  3. Hi..Butalidnl,This article tells us about your great insight into the BPO Industry.Ya Its true that many BPO’s paying low wages to its employees.But I dont think that this will effect this segment.

  4. Ya..at this recession,Its Alternate thing for BPO firms to reduce the wages rather than lay offs.I hope this will be a short time,Surely this service sector will be back to its greatness.

  5. backoffice said

    Have the low wages in UK&US made the concept of a BPO company financially irrelevant? Actually there is a lot more to outsourcing than just the benefit of low salaries.

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