Wage hike calls ring louder as falsity of reason to reject it emerges
MANILA, Philippines—With inflation having only an insignificant dip after relentlessly accelerating for five straight months, real wage in Metro Manila, the region with the highest minimum wage, has already gone down to P482.
As defined, real wage is the “wage adjusted for inflation,” and as stressed by the think tank Ibon Foundation, the decline in the price readout last month “doesn’t mean prices are going down —only that they aren’t going up as fast.”
The Philippine Statistics Authority (PSA) said inflation decelerated to 8.6 percent from 8.7 percent, but the think tank said “even if inflation declined slightly, Metro Manila minimum wage’s real value keeps falling as prices keep going up.”
This was the reason that lawmakers proposed an across-the-board increase in the wages of private sector workers, with Senate President Juan Miguel Zubiri stressing that “a decent life costs a decent wage.”
Zubiri, in filing Senate Bill No. 2002 on March 14, said “if workers are putting in hours and hours of labor, day after day, and yet are still unable to afford their rent, bills, and basic necessities, then there is a problem.”
Representatives Arlene Brosas (Gabriela), France Castro (ACT Teachers), and Raoul Manuel (Kabataan) filed a bill, too—House Bill (HB) No. 7568—to seek a P750 minimum wage regardless of employment status, industry classification, and location of the enterprise.
According to Makabayan bloc lawmakers, the minimum wage of workers across all regions have failed to keep up with the acceleration of inflation, which even hit an all-time high of 8.7 percent last January.
Sen. Raffy Tulfo filed a resolution to seek the review of existing policies on minimum wage increases to “improve the standard of living and quality of life of workers, particularly those in the lower income bracket.”
Tulfo, last Feb. 15, said “while there was a minimum wage increase last year, it will not be able to sustain the living conditions of workers, considering that many of them are facing financial difficulties brought about by rising inflation.”
Conflict with gov’t
But no less than Socioeconomic Planning Secretary Arsenio Balisacan said increasing minimum wages by legislation “does more damage,” pointing out that “it’s harmful to the economy if wages are forced to increase by legislation.”
He argued that this would hurt the country’s competitiveness: “If wages rise not because of productivity, how can we export and how can our products become more competitive? If we cannot export, we cannot increase economic activity.”
Instead, “the safest thing to do is to increase wages by way of expanding economic activity, and that means a lot of investment in labor,” Balisacan said at a committee hearing last month.
However, as stressed by Ibon Foundation, “wage-setting should give more consideration to what workers need to live decently, especially since employers really do have the capacity to pay much more than they do.”
“Worker wages can be increased if employers were only individually and collectively more willing to give up a share of their profits,” it said. “It’s perplexing for the economic team to speak about workers and their wages as if they are a burden to the economy.
“It’s people who most of all create value in the economy and for whom the economy is for. So, to speak of ‘the economy’ as something different from their conditions and welfare is insensitive and unfair,” said the think tank.
‘NEDA making excuses’
Ibon Foundation said the “most obvious flaws” in what Balisacan reasoned out are those where the arguments are “inconsistent” with government statistics and indeed, with the economic team’s own words.
As to the question of whether economic activity is expanding enough to increase wages, Ibon Foundation said it should be recalled how he and Finance Secretary Benjamin Diokno made a big deal when the 7.6 percent 2022 growth in gross domestic product was announced last month.
“He gushed that this is ‘our best full-year performance in 46 years’ and ‘among the highest growth rates among major emerging economies in the region’,” Ibon Foundation said.
The think tank also said the Department of Finance implied that the demand for labor is high when the 4.3 percent jobless rate for December 2022 was announced, raving that this was “the second lowest since April 2005.”
Worker productivity is also increasing, it stressed, stating that official statistics clearly show that worker productivity has been rising, with Metro Manila having a 42 percent increase in the last decade from P791,344 per worker in 2012 to P1,120,551 in 2021.
Despite all these, however, “there has not been a corresponding increase in workers’ wages, sharing that over the same period, the nominal wage in Metro Manila only went up by 18 percent.
Back in March 2022, Karl Chua, who led the previous administration’s economic team, said proposals to increase wages have a serious implication, stressing that it would lead to higher inflation, which is a “tax on all.”
“This will affect all Filipinos,” he said, pointing out that while minimum wage earners will benefit from the wage hikes, “informal workers who are not earning the minimum wage […] those whose pay is lower than the minimum wage would also be affected.”
He said: “We should be concerned not only for one sector or one type of worker. We should be concerned about everybody. If we raise the minimum wage and if the fares in jeepneys and buses also increase, our inflation rate will rise by 1.4 percent.”
But in filing HB No. 7568, the Makabayan bloc lawmakers asserted that hiking wages would not lead to higher inflation since as economists said, “increasing wages has a strong multiplier effect.”
As economist Sonny Africa told INQUIRER.net, out of the 47.35 million employed Filipinos in January, 12.8 million are self-employed, while 7.2 million are informal workers as domestic help or in their own family farms or businesses.
But Africa, executive director of Ibon Foundation, said “many of these informal workers will also benefit from the wage hike because many of our low-income wage earners are actually heavy spenders on this informal economy.”
This “informal economy,” he stressed, is in markets or bangketa, for food outside the home, on tricycles and jeepneys, and in small sari-sari stores and the rest of informal establishments in communities.
“They will not be left out because more money will be spent and circulated in the informal sector in communities.”
Africa said the positive multiplier effects are also magnified by diverting resources from employer profits to workers who have much higher marginal propensity to consume from additional income.
“The inflationary effect of greater aggregate demand can also be mitigated by how small enterprises will be spurred to produce more, and especially by government support to small farmers, fisherfolk and other producers.”
“But of course the quickest way to help families struggling with low earnings from informal work is with more systematic and more substantial emergency cash assistance,” Africa said.
Wage hike needed
According to data from the Philippine Statistics Authority (PSA), inflation only slightly decelerated to 8.6 percent in February from 8.7 percent in January after a relentless rise for five straight months.
Last year, the readout was 3 percent in February, 4 percent in March, 4.9 percent in April, 5.4 percent in May, 6.1 percent in June, 6.4 percent in July, 6.3 percent in August, 6.9 percent in September, 7.7 percent in October, 8 percent in November, and 8.1 percent in December.
Based on Ibon Foundation computations on data from the National Wages and Productivity Commission and PSA, the P570 minimum wage in Metro Manila, which is the highest in the Philippines, is not even half of the estimated P1,161 family living wage.
In the Bangsamoro Autonomous Region in Muslim Mindanao, the P341 minimum wage, which is the lowest in the Philippines, is only 17.54 percent of the estimated family living wage of P1,944.
As shared by Tulfo, the latest minimum wage increase took effect last June 4, 2022, with rates ranging from P533 to P570 a day in Metro Manila. The increase in minimum wage outside Metro Manila, meanwhile, took effect between June 6 to June 30, 2022, with rates ranging from P306 to P470.
Africa said “the government needs to give much more priority to supporting household welfare that has been compromised by overly protracted and harsh lockdowns, that is not recovering even with reopening, and that threatens to be shaken even more with the looming economic slowdown.”
“Inflation is complex and should be addressed in a well-rounded way and not by fragmented shows of action. Ultimately, the best way to keep domestic prices low is from a wider base of domestic production of basic goods and services; this minimizes the adverse effects of external shocks like more expensive imports.”