Asia 21 Alumni Series: Will Social Enterprises Create the New Middle Class?
by Anna Meloto-Wilk, Asia 21 Young Leader, Class of 2016
Despite economic gains in the recent years and public-private campaigns towards job creation and entrepreneurship, many working Filipinos remain in poverty due to low quality jobs that don’t pay enough to meet basic needs, nor they provide for any training to upskill or job security for the worker and his family. If we are to make any progress in eradicating poverty in the Philippines, society must find a way to move up the working poor into the middle class.
According to recent World Bank study, “Pervasive in-work poverty, where workers remain below the poverty line despite having jobs, is the main challenge for the Philippine labor market despite economic growth in the last decade.”[1]
Businesses can play a unique role in creating the new middle class among the working poor. Inclusive businesses due to their sustainable for-profit model can offer large scale, systemic solutions to social ills. Businesses can look at thresholds that keep people in poverty -- like the legal minimum wage, contractual or non-permanent status of many workers that keep them from enjoying health and other employment benefits, and buying prices of raw materials from farming communities -- and cross it.
Social enterprises prove that progressive business policies can permanently reverse poverty
Human Nature had its beginnings in 2008 with three co-founders who have their roots in the non-profit sector. Anna Meloto-Wilk and Camille Meloto are daughters of GK (Gawad Kalinga, which means to give care) founder, Tony Meloto, a mature non-profit in the Philippines that set out to eliminate poverty by transforming slums into dignified communities through values formation and activating volunteerism among ordinary citizens. The sisters came up with the idea to start Human Nature to provide sustainable livelihood to GK communities in farming communities by sourcing cosmetic ingredients for their personal care business. Together with Anna’s husband, Dylan Wilk, another GK volunteer, they founded the company with the values of being Pro-Philippines, Pro-poor and Pro-environment. Soon after they incorporated, they hired employees from poor areas in the city to populate their logistics, retail merchandising and manufacturing departments. Despite its small beginnings, Human Nature has grown to more 500 employees, 34 stand-alone branches, product distribution in 179 doors of Robinson’s Supermarket, Rustan’s Supermarket, Shopwise and other major retail chains as well as export to Singapore, Malaysia, UAE, Canada and USA.
The low-skilled working poor make up 58 percent of Human Nature’s total employees. This segment of workers go into the labor force with numerous inherent limitations: minimal education and skills, poor health and a value system that’s not geared towards optimal work. It’s also common for the working poor to spend years moving from one manufacturing or sales company to another without being regularized. Human Nature designed programs and interventions to address these inherent limitations and help the working poor rise to become part of the new middle class. These include: providing almost double the minimum wage in salaries, regularization for permanent positions, life skills to teach financial stewardship and navigating conflicts, calamity assistance, housing assistance, private health insurance and soon
a childcare facility for parent employees. They also close all their offices, stores and branches even in the malls on Sundays as a way to value rest, family life and spiritual nourishment for their employees and franchisees despite lost sales in a very competitive retail environment.
Dina Ocampo was just a high school graduate when she became one of Human Nature’s first employees. She came from a GK community in Quezon City wherein most of the residents were out of school youth, working in construction or other contractual work arrangements. While Dina’s lack of work experience and personal circumstances made her much harder to train, Human Nature decided to invest in her professional skills and values development.
Today, Dina has gone from an unskilled recruit to an empowered leader. She is currently a Merchandising Operations Coordinator handling a team of 14 merchandisers assigned to 3 supermarkets and department stores in Metro Manila.
Aside from rising in the ranks, Dina’s own outlook has also changed. She’s gone from a tambay (an idle youth) and mediocre performer to a responsible member of her community. Dina has gone beyond meeting her family’s basic needs: with her own savings she’s been able to buy a house and is now paying off a mortgage for a second house for her parents.
Moving from a Minimum Wage to a Living Wage Model
Starting a business means paying people the legal minimum as a compulsory requirement. However, apart from the fact that many businesses don’t pay the minimum wage anyway, what the government itself requires is not enough for Filipinos to have a decent quality of life. Recently, inflation rates have sky-rocketed to 6.4%, the highest it has been in 9 years and minimum wage is still at Php 512 barely enough to cover basic goods as the prices are becoming out of reach for daily wage earners.
In Human Nature, the company believes in paying a living wage instead of just meeting the required minimum wage. Since 2008 when Metro Manila minimum wage was only at Php 383/day in Metro Manila, the company had been paying 23% more with the goal of paying the living wage as the company improves profitability. In the last 10 years, minimum wage has just increased 25% to Php 512 in Metro Manila although the living wage is now at Php 995/day according to Ibon Foundation, a non-profit economic and social research organization. Meanwhile, Human Nature as a company started paying regular employees Php 500/ day in 2008 and over the last 10 years has steadily increased their internal minimum wage to Php 910 in 2018, putting the company’s minimum salary much closer to the 2018 living wage of Php 995/day.
For warehouse staff Jade Estor, receiving living wages became the lifeline his family needed. In 2012, Jade became part of Human Nature. He was able to support his nieces and nephew’s schooling as well as provide for his family’s other needs.
“In Human Nature, I learned to work and value what I earn, not for myself but for my family,” he adds. He adds that the Life Skills program of the company helped him manage his finances. “Dati kasi ubos lahat lagi.” (In the past, all of my salary would get spent all the time.)
Today, Jade and his wife live in their own home in Laguna which the company helped them acquire. He decided to move to Human Nature’s Laguna Campus when the company started a re-location program to de-congest their Metro Manila office and attract more people outside the city where there is less traffic, less stress. The Laguna Campus has shown significant improvements in productivity and has noted a decrease in tardiness and absences as well as increases in over-all output due to proximity to work.
“Pangarap namin ito. Ang saya gumising sa sariling bahay”, muses Jade as he reflects on his life. (This was our dream. To wake up in our home.)
Does it work and does it make business sense?
In 2017, Human Nature began working with the Institute for Social Entrepreneurship in Asia (ISEA) to measure the impact of Human Nature’s programs and policies on workers from poor communities.
The study found that GKI programs and policies have enabled 73% of workers from the working poor to enjoy dignified work, decent standard of living, freedom from usurious debts and better financial management.
“The results also showed that most of the respondents were able to manage household finances better such that they were able to keep their expenses below their income level. Moreover, it seemed apparent that they were enabled to leave some funds for savings. In the event that there was a need to borrow money for emergency or important situations, most workers would opt for low to zero cost loans and were responsible in fulfilling their financial obligations.” [2]
Clearly, Human Nature’s progressive business policies are working to address poverty and move up their people towards becoming members of the new middle class. The policies seem to also make business sense since the company has posted double digit growth year on year since 2008. Co-founder, Dylan Wilk shares, “When we were just starting out, big business owners said we could only implement these policies because we were small. Now that we’re much bigger, small business owners say we can only do it because we’re big! But the truth is, no business is too small or too large to make a start on taking their employees out of poverty.”
Social enterprises are no longer just start-ups or charities posing as for-profit businesses anymore. Any business can become a social enterprise by seeing their role not just to make profit but as a way of decreasing the number of employed poor and moving them up to create the new middle class. Businesses can adapt policies that can provide good jobs which are described by the World Bank as (jobs that) “pay better, are in the formal sector and provide social protection. [3] With a critical mass of new and old businesses taking on this national goal of creating the new middle class, not only do the poor and their businesses stand to benefit but it well maybe our country’s ticket to real and sustained economic progress.
[1] “In work Poverty Remains in the Philippines”, The Manila Times, June 17, 2016
[2] Pelejo, Meldy A., Crafting a Development Index to Measure the Impact of GKI on Workers from Marginalized Communities, September, 2018
[3] The Manila Time, “In-Work Poverty Prevails in the Philippines”, June 2016