Bill Against Call Centers?

In the US House of Representatives, there is a pending bill (the U.S. Call Center and Consumer Protection Act) that seeks to discourage companies from transferring their Call Centers abroad. [Bishop Introduces Bipartisan Bill to cut off Taxpayer Dollars for Call Center Outsourcers ] This law, if passed, threatens to lessen the demand for Philippine-based call centers. The proposed bill will penalize US companies outsourcing their call centers by cutting their Federal grants and loans.

No Effect
The proposed bill with probably not pass the US House of Representatives. There is a Republican majority there, which is pro-free trade and  pro-corporation. Outsourcing of call centers is a significant way of reducing operating costs of companies, and thus will be supported by Republicans.

Even if it passes, though, the law’s effect is likely to be minimal. It would be easy for companies to go around it. For one, a lot of US companies already have call centers abroad, or they hire the services of a BPO (Business Process Outsourcing) company. They will not be affected by a ban on ‘transferring’ call centers abroad.

Then, there are some companies which combine an in-house US-based call center with a call center based abroad. The more difficult problems are addressed by the in-house staff, while the routine questions are handled in the Philippines or India.  With this arrangement, a company could conceivably expand its overseas customer service staff without reducing its in-house staff.

Another way of ‘going around’ the law would be to have specialized US-based BPO companies get contracts from US-based companies to handle their customer service work. The BPO company then assigns Third World based personnel to do the Customer Service work.  This means that the BPO company is the one which outsources work abroad, and thus be deprived of Federal grants and loans, but that won’t be a problem for them.

Up the BPO Ladder
Call centers (also called ‘voice BPO services’) are the part of the BPO services which are the target of the protectionists. Right now, this comprises the largest part of the Philippine-based BPO services. There is the impression among many in the US that call centers in India or the Philippines are ‘cheap’ – in the sense of being both low cost and low quality. They do not realize that Philippine-based call centers are perhaps better than US-based ones in terms of quality; due to highly motivated Filipino agents.

But there are other kinds of BPO work, which are growing even faster than call-centers. There is the medical transcription work, which is the transcribing of medical records for US-based doctors. There are back-office operations (accounting etc) for US banks and other financial firms. Back office work is especially lucrative because of the time difference – Phil or Indian workers work on the transactions when it is nighttime in the US. Back-office operations are less language-dependent than call center work, and thus could be done for companies from countries other than the US.

There are also virtual tutors, remote publishing, virtual personal assistants, and a host of other virtual services which could also be provided by Philippine-based BPO companies. Eventually, all kinds of non-voice BPO will become the bigger part of Philippine BPO services.

Cut the Beef
Even though we know that Cong. Bishop’s proposed law will not have much of an effect on Philippine call center services, the Philippines should still express its concern at what is a protectionist act aimed directly at a key Philippine export.  If we do nothing, there could later be other laws that will be more effective.

The Philippines should tell the US that it will consider possible responses to this hostile act, in terms of restricting the entry of some US products to the Philippines in the name of protecting Philippine jobs. Preferably, these would be US service exports of an equivalent value – perhaps something like insurance, advertising or consulting services. We should also consider imposing extra levies on imports such as beef or chicken, or orange juice.

Philippine political leaders are known to be timid in relations with the US, and may not see such moves as ‘proper’. The public should make it clear to the politicians and technocrats in government that such ‘proper’ behavior does not serve the Philippines’ interest. The Philippines should flex its muscles whenever Philippine interests are in possible jeopardy. Otherwise, the US would simply trample on our interests at will.

Where are all the Katulongs ?

Philippines, 9 January 2021. The past decade has seen great progress in the Philippines.  And of all the changes that have happened is one which we didn’t expect would affect the country a lot. And this is the widespread disappearance of live-in domestic servants, otherwise known as katulongs, maids, kasambahays. We are now several years after the era of katulongs is over, and we are living normal lives, losing all our katulongs didn’t result in widespread disaster after all. We learned to live with it, and to thrive even.

Strictly speaking, there are still katulongs in the Philippines. According to the statistics, there are about 50,000 left – domestic servants who are live-in. But this is a far cry from the 2.5 million that were katulongs in 2010. These residual katulongs work mostly for the really rich Filipinos, and the statistics include live-in drivers. They are also quite well paid, if we compare with the 2500 pesos minimum wage for kasambahays in 2011. It is quite common to find katulongs being paid upwards of 8000 pesos per month these days.

What Happened?
A number of things happened. First, the government’s Conditional Cash Transfer program reached millions of families; and it required families to send their children to school, in exchange for a cash payment. Many families opted to join this program, rather than send their teen daughters to work as domestic help.

Second, there was a surge in demand for high school graduates in the labor force.  Millions of workers were needed to work at the many companies that sprouted as a result of the “ASEAN Supply Chain” industries. These were companies that worked on various electronic and appliances, with various parts made in different ASEAN countries. This grew starting 2010 to big proportions, especially with the “China plus 1” policy of Japan and Taiwan, which encouraged companies to have a foot in China, and another in ASEAN (as insurance against possible problems in China). This trend was reinforced by the Chinese raising of wages and US extra taxes on Chinese products.

Initially, the development of the ASEAN Supply Chain, and the booming Business Process Outsourcing (BPO) industries, and growing number of Overseas Filipino workers,  led to more, not less, people having katulongs. But, with the growth of the economy, there grew the need for people in all kinds of work, like producing consumer products and services.

Separation of Services
People started to pay separate for services previously done by the live-in katulongs.  There would be cleaning women who would work for a four hour period every week for a given household. These women would work for more households, and it pays more for them to contract out their cleaning services than to just stay and live-in with one family.
There would be the labandera who would do all of a family’s laundry on a certain day of the week.  Children are now brought to school and back by FX drivers who are contracted by groups of parents. And day care centers have sprouted to take care of people’s pre-school children. This has taken the place of yayas, for the most part.

Most families have coped  by distributing cooking duties among themselves. The mother/wife is no longer automatically the one who does this task. Very often, it would be the father or the eldest son or daughter who would cook the meals.  And if there are more children, setting and clearing the table and washing dishes are done by the younger ones. And midday meals are more often eaten at work or schools anyway; so there is only breakfast and supper that needs to be eaten at home. One could get a warm cooked meal from someone who cooks in the neighbourhood. Supermarkets also sell meals that are easier to cook, with all ingredients put together.

Children now are burdened with less homework as compared to 2010. Now, elementary school children are expected to spend more time at play and doing chores at home. So, teachers don’t give them too much assignment. And it turned out that they learn about the same as before. So, it worked out well for everyone.

Good for Economy
Why distribute the functions, instead of having the one live-in katulong? Well, the main reason was it was getting too expensive, and there were no more women who were willing to do the work.  But, on hindsight, distributing the functions is more efficient, and good for the economy. Less people, in total, are needed to do all the cleaning and washing.  And cooking – well, this has transformed the kitchen; with people investing in all kinds of kitchen appliances and instruments. And now, trained people are taking care of the babies, instead of the teen barrio girls who used to do this; resulting in a better upbringing of children.

This whole thing has been good for the economy: there are more products and services that are made, and everybody gets to work more efficiently and fully. Things like day care and cafeterias have grown, giving employment to many people. And since more people are efficiently employed, there is more buying power for consumers overall. Thus, the bigger demand for products of all kinds.

It is going so well with the economy, that people are talking about there being a labor shortage.  There are lesser people who want to work abroad.  This has led to a situation where deployment of some kinds of workers is drying up (e.g. domestics for Hong Kong etc), and the recruiting fees for other work has gone down dramatically.  Some say that this would be bad for the economy, with less foreign exchange coming in. But I think this is a good trend; I’m quite happy about it.

Protecting Call Center Agents

On 20 November 2010, Senator Miriam Defensor-Santiago  filed Senate Bill 2604, also known as the “Magna Carta for Call Center Workers Act of 2010,” to protect thousands of call center employees in the country. I believe that this bill is quite needed, and timely, especially with the rapid growth of Call Centers in the Philippines.

The bill will grant call center workers the following:

• the right to organize and join labor unions;
• the right to a safe and healthy working environment;
• the right to at least a one hour continuous meal break in the middle of every eight hour shift;
• the right to privacy;
• safety for night shift employees;
• the right to be informed of the terms and conditions of their contract.

Nurturing a Valuable Resource
I think the thread behind this law is that the Philippines has a growing Business Process Outsourcing (BPO) industry, which is mainly composed of call centers at the moment; and that in order to ensure the continued growth of this industry, the country should treat its call center agents well. We need to nurture them as a valuable resource. The country has everything to lose if it treats Call Center Agents (CCAs) as if they were disposable, which is how some call centers treat them now. They are not. And, we should start treating them well now.

The very first thing that needs to be fixed are the CCAs’ working conditions. CCAs should be entitled to sufficient rest periods. I’m not that so sure about the one hour rest period in Santiago’s bill. There is no real “lunchtime” during the graveyard shift, after all. Perhaps shorter rest periods that are spread out may be better.

Call Centers often do not allow enough breaks, in an effort to maximize the time the agents spend on answering calls. But by doing so, the quality of the work of the agent is bound to suffer. Or that, through stress, the agent is burned out much quicker than otherwise.

Their work stations should be large enough to work in without too much stress.  And the chairs and desks should be such that they will not cause too much strain on the neck and back of the workers. At the same time, the chairs and work stations shouldn’t be TOO comfortable, such that they will get sleepy.

If a safe and healthy working environment is not provided; this will result in a greater turnover of personnel, with many falling sick as a result of work.

And while call centers are still able to recruit new people to replace those who fall off, this will not be the case for much longer. The call center industry is expanding, and the country could ill afford qualified personnel dropping off. So it is imperative that call centers provide healthy working environments now.

Government Action Needed
Trying to press the maximum amount of work from their work force, call centers economize on the space per worker, and force workers to work long uninterrupted hours. And while this may be good for the short term for particular companies,  in the long run this is bad for the industry as a whole.  This calls for government action to ensure that a certain level of working conditions is maintained, since individual companies would not willingly do such things.

Even now, rather than improve the working conditions, companies resort to pirating call center agents from other companies with the promise of higher wages. But this is counterproductive for the industry as a whole.

It is  not true that improving working conditions and increasing benefits will lessen our competitiveness in the world market. Our call center agents are still by far quite cheap for the quality of work they deliver. However, it may be true that the competitiveness of companies among each other may suffer if one gives benefits or better working conditions than the others. Thus, it is important for the government to step in;  obliging the call centers to do things for the good of the industry, that they won’t be able to do alone.

The Future of BPO in the Philippines

The BPO (Business Process Outsourcing) industry in the Philippines is going to quadruple in size in the next 5 years. Thus, it will grow from employing about 500 thousand people now, to about 2 million in 2015. This is not only be an expansion in terms of size, but it will also come with significant changes.
Here are some of them.

Careers, Higher Salaries
When the BPO industry grows to two million, it will have to outgrow the current model of young people doing this for a few years and then moving on. When the industry will be 2-million employees strong, it will be too big to afford the present level of turnover.  This means that the industry will have to find better ways to retain personnel, to make them want to stay on longer and make their work in the BPO industry their careers.

For one, this means that salaries need to rise somewhat. From about PhP 12 thousand entry-level now, to about PhP 20 thousand entry-level in 2015. And that staying on will result in  increased pay with experience. This increase will not price out Philippine BPO, since it will be then about 4 times cheaper than their US counterparts.

A BPO agent receiving a  PhP 10 thousand salary would easily be enticed by a salary of $1000 abroad. However, at a salary of PhP 20 thousand, they would not consider leaving unless they receive an offer of $2000 or above. BPO jobs will have to compete with the Overseas job market for qualified workers, and this is another reason why its salaries will have to go up.

And there needs to be certain amenities for BPO workers, especially for those working the night shift: shuttle buses, 24-hour fast food eateries, 24-hour groceries etc. , gyms, etc. And then, there need to be pension plans in place, which are preferably industry-wide plans.  I foresee that BPO centers will then tend to cluster in the same areas, so that the attached services are located together also.

English Proficiency
There needs to be a thoroughly new way in which English proficiency is taught to call center agents. While a lot of the training will probably remain at the company level, the education especially in English, needs to improve significantly. English proficiency for admission as call-center agents may then be done by special courses offered in the various universities.

All this would mean that the demand for good English teachers will increase. English teachers will then be in short supply, and they need to do a lot more teaching, and thus the salaries for English teachers will have to be increased.

Other BPO
As the call-center type of BPO expands, other types of BPO will also logically be brought in. For example, if a BPO center does the accepting of orders for a certain product, then it may be logical to also base that company’s product distribution for Asia or Southeast Asia in the Philippines. And then, logically, also the accounting functions associated with this.  This could be done by BPO companies or by the mother company setting up a Philippine office.

Then consider medical transcriptions. It may be logical to also outsource the analysis of Xrays and Echos to the Philippines.

Qualitative Changes in Economy
The BPO industry, if it succeeds in quadrupling in size by 2015, would also have led to the transformation of the Philippine economy as a whole. While todays 400 thousand workers seem to be able to do there thing without too much effect on the overall economy; 2 million workers will have a more pronounced effect.

For one, 2015 may see a new trend of lower OFW deployments. With BPO work getting more attractive, more Filipinos will opt to stay in the country. OFWs will have to be either more qualified than the BPO workers (and thus earn more than $2000) or less qualified than BPO workers (and earn less than $1000). The layer in-between will be a battle-ground between BPO and OFW.

The extension of high-speed fiber-optic lines all over the country (which is necessary if BPO companies are to spread to more cities) would cause the rapid improvement in internet connectivity throughout the Philippines. Internet access will be faster and cheaper, and a lot of people (even in the more remote towns) will have access to the Internet. And this will have a profound effect on business throughout the country.

The mere volume of the BPO industry will have effects on labor laws, zoning rules, and laws governing ICT.  Transportation networks will have to consider people travelling at the middle of the night. Or, if brownouts are still a problem – there may be “brownout-free” zones established where BPO firms are located.

Lowering Electricity Prices

The Philippines has one of the most expensive electricity rates in the whole world. And this is due to corruption, inefficiency, and the onerous contracts the government went into with the IPPs (Independent Power Producers).  There are various ways of reducing electricity prices; some are relatively straightforward, while others more complicated. I suggest that people look into these to see which ones should be done.

Abolish the VAT for Electricity
This is the easiest to do in a technical sense. But of course, it all depends on how the government handles its finances. Eliminating VAT for electricity will mean a reduction of at least PhP 1/KwH.  This would be great for residential consumers; although it will make no difference for commercial/industrial consumers.

Renegotiate with IPPs
The Philippine government should renegotiate the contracts with the Independent Power Producers (IPPs). The provision that they get paid for capacity instead of actual electricity supplied should be changed.  Instead, they should merely be paid for the actual amount of electricity produced. After all, these days, with many shortages, we can safely say that a well-managed electricity supplier will surely be able to find buyers for all the energy they can produce.

The government is afraid to do this because it fears that investors will shun the Philippines as a result. I don’t think this will happen. We are giving investors too good a deal – this is not normal in the world, and the investors are taking unfair advantage of us. I think we should simply offer investors a good deal; and our growing energy market is indeed a good deal in itself. We will offer them a deregulated market, with no upper or lower limits. This should be enough for them.

Day/Night Rates
The electricity distribution companies e.g. Meralco should implement day/night rates. By this, I mean that the rates for use in the evening and at night should be significantly lower than that for the “day”. Let’s say that the day rate will be valid from 7 am to 7pm, and the night rate for 7pm to 7 am. Then, let the electricity during the night be 30% cheaper than during the day. This will encourage consumers to shift their electricity consumption to the nighttime. Thus, washing machines, flatirons, etc. could perhaps be used more at night.  Even companies will be encouraged to shift their production when possible to the nighttime.

The advantage of the lower night rates is that it will make the consumption of electricity more distributed across a 24 hour period, thus maximizing the utilization of the grid and the generating power. At the same time, consumers will benefit because part of their consumption will inevitably fall at night. Many BPO companies will benefit a lot from this, since most of their operations are done at night.

The problem with having day and night rates is that consumers need to have new electricity meters installed. This will cost money, and it will take time. I believe, though, that it will all be worth it.

Allow more Direct Sourcing of Electricity
Business of a certain size should be able to directly acquire energy from other providers, and not only the one which holds the distribution system for an area. This would mean, for example, that a hotel should be allowed to source its electricity from some other company than say, Meralco. Or a factory. Or a subdivision. This can be done. It is the system here in the Netherlands. The geographic distributor merely charges a (reasonable) fee for transporting the electricity to the customer. The various providers would then source their electricity from whichever generating source gives the best price.

This way, there would be more competition in the whole system. And Meralco will no longer be able to simply pass on the generating cost charged to them by their suppliers, but would have to shop around for the best source of electricity themselves. And consumers will be able to get a chance to buy electricity directly for the cheapest price possible.

In the Netherlands, the system is such that all customers could shop around for the cheapest energy provider. Thus, the electricity provider for my neighbors are different from ours – and all providers simply pay the holder of the local grid money for transporting electricity.

The possible problem with this approach will be how the distribution companies behave. They could harass consumers who seek to change providers; and they could also harass the other providers by imposing too high transport fees. The government will need to enforce good rules regarding these and other steps that distribution companies will take to hinder the process.

Make Electricity Companies Declare Prices for 6 Months at a Time
Electricity companies should no longer have the present assured profit system. What kind of business is that? Business means risk taking, and electric utilities should be no exception. We should not pay for all the “passed  on” costs of these companies. Electric companies should take on longer-term contracts (i.e. 6 months) that have a fixed price for everything from fuel oil to exchange rates. These should all be fixed through longer term contracts, warrants or options. Then, these prices should be offered to the public as a choice. If some people don’t want this, they should have the option (above) of transferring energy providers.

This would make energy distribution more predictable, and prices more stable. And the contracts, warrants or options, if handled correctly should prevent electricity distributors from suffering losses. This is the way pricing is done in other countries; the Philippines is rather unique in that its electricity prices jump from month to month.

See also:Why Meralco Rates are High