Would there be GDP without labor?

In 1989, RA 6727 fixed the daily minimum wage nationwide at P89 per worker and created the Regional Tripartite Wage and Productivity Board (RTWPB).

That was more than 20 years ago. What exactly does the RTWPB do? What has the workers gotten from the RTWPB?

RA 6727, otherwise known as the “Wage Rationalization Act,” declared as the policy of the State to rationalize the fixing of minimum wages and to promote productivity-improvement and gain-sharing measures. This is to ensure a decent standard of living for the workers and their families and to guarantee the rights of labor to its just share in the fruits of production while at the same time enhance employment generation in the countryside through industry dispersal and allow business and industry reasonable returns on investment, expansion and growth. It requires the State to promote collective bargaining as the primary mode of setting wages and other terms and conditions of employment and that, whenever necessary, the minimum wage rates shall be adjusted in a fair and equitable manner, considering existing regional disparities in the cost of living and other socioeconomic factors and the national economic and social development plans.

For policy and program coordination, RA 6727 created a National Wages and Productivity Commission, which is attached to the Department of Labor and Employment (DOLE). With the commission, RA 6727 also created the Regional Tripartite Wages and Productivity Boards in all regions, including autonomous regions as may be established by law. The regional wage boards are given the power to determine and fix minimum wage rates applicable in their region, provinces or industries therein.

RA 6727 says that the regional minimum wages to be established by the regional wage boards shall be as nearly adequate as is economically feasible to maintain the minimum standards of living necessary for the health, efficiency and general well-being of the employees within the framework of the national economic and social development program.

In the determination of such regional minimum wages, the Regional Board shall, among other relevant factors. These include the following: (a) The demand for living wages; (b) Wage adjustment vis-a-vis the consumer price index; (c) The cost of living and changes or increases therein; “(d) The needs of workers and their families; (e) The need to induce industries to invest in the countryside; “(f) Improvements in standards of living; (g) The prevailing wage levels; “(h) Fair return of the capital invested and capacity to pay of employers; (i) Effects on employment generation and family income; and (j) The equitable distribution of income and wealth along the imperatives of economic and social development.

It is interesting to see what happened to the country’s minimum wage rates, since the passing of RA 6727 in 1989. For one, the minimum wage rates now vary from one region to another. Whereas it was only P89 in 1989, the minimum wage rate at the National Capital Region was fixed at P404 as of last year.

This is in sharp contrast to Cebu’s P285 (maximum for those in Class A cities and towns), which was 70.5 percent only to that at the NCR. Why the big difference? The reasons, the wage board in Central Visayas might point out, is the large differences in the cost of living between the NCR and Central Visayas or Cebu in particular. Is this correct?

The government data does not publish the actual cost of living by regions or specific local government units in the country but it does show how much an individual needs to be officially counted out of poverty. As of 2009, this country’s poverty threshold was placed at P16,841 per capita. This was of course higher at P19,801 per capita if you live at the NCR where the cost of living is supposed to be the highest in the country or P16,334 in the Autonomous Region of Muslim Mindanao where the cost is lowest. In Central Visayas where Cebu is part, this was placed at P17,848, which was equivalent only to 90.1 percent of the NCR. Compare this with Cebu’s minimum wage rate, which was equivalent only to 70.5 percent that of the NCR.

Based on the poverty threshold, which the government computed based on the cost of living in the different regions of the country, the minimum wage approved by the regional wage board for Cebu is relatively much lower than in Metro Manila. If only for this reason alone, there is no reason why Cebu’s workers should not be given another increase in the minimum wage.

There is also another way to justify another increase in the minimum wage rate. This is the inflation rate. There should be no question to this because the increase in the minimum wage based on inflation will only give back to labor their lost purchasing power due to inflation. The problem is that the increase in the minimum wage based on inflation alone will not correct any other malaise suffered by labor through the years since RA 6727. For example, deflated for inflation, the country’s GDP per capita in 2009 was 1.33 times that of 1989. With inflation, it was 5.36 times. In Central Visayas, without inflation, the per capita GDP in 2009 was 1.46 times that of 1989. With inflation it was 5.08 times. What was the minimum wage rate in Cebu in 2009? It was only P285 at the most, which was only 3.2 times that of the P89 minimum wage rate in 1989. Can’t you see how ordinary minimum wage earners are deprived of the fruits of their labor?