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.

BPO sector wages still low

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.