Meager wage for Labor Day

Should I congratulate  Filipino workers for today’s celebration of Labor Day? I am not sure, but what I am sure of is that many Filipino workers, whether working for others or self-employed, still find themselves in dire situations with their meager income or from being chronically unemployed or underemployed.

In January this year, 60 percent of employed workers in the country were wage and salary workers while 27 percent were self-employed without any paid employee. The rest, 9.4 percent, were employed in their own family-operated farm or business or worked without pay in their own family-operated farm or business (3.5 percent). In the same month, 28 percent of the work force were either unemployed (7.1 percent) or underemployed (20.9 percent).

The low wage or income from employment or self-employment and  high unemployment and underemployment rates are the reasons poverty incidence is still very high in the country despite the reported improved performance of the economy since the start of the new millennium compared to the second half of the last century.

For the entire country, a family of five needed P5,458 (the food threshold), to meet basic food needs every month. The same family needed P7,821 (the poverty threshold) to meet basic food and non-food needs every month and be considered out of poverty. After adjusting for inflation, this should be a little higher by now. Usually, also the poor have more than five members in the family. Thus, for them to stay above the poverty threshold, they must earn more than the indicated poverty threshold or at least P 1,564 more for every additional member of the family. This is a problem because workers are not paid according to the size of their family. At most, they get only the minimum wage but I also know that many people do not receive the minimum wage.

What is the current minimum wage in the country? Nationally, there is none. Republic Act  6727 or the Wage Rationalization Act of 1988 abolished the minimum wage for the entire country. What it put in place instead is the Regional Tripartite Wage and Productivity Board (RTWPB) which is authorized to determine the minimum wage level in their respective regions based on the demand for living wage, wage adjustment vis-à-vis the consumer price index, the cost of living and changes or increases therein, the needs of workers and their families, the need to induce industries to invest in the countryside and other factors obtaining in each region.

Including the National Capital Region (NCR), there are  17 regions in the country. Presently, the daily minimum wage set by the RTWPBs for non-agriculture workers varies from P419 to P456 at the NCR, the highest, to P205 to P275 in Region IV-B or Mimaropa, the lowest. It is P282 to P327 for the Central Visayas Region. Multiply the daily minimum wage by 24 or the average number of working days in a month and one gets the monthly minimum wage. After deducting for contributions to SSS, Philhealth and Pag-ibig, the minimum wage earner will be left  with a very small  amount.

With very little money, how do they provide for their clothing and shelter or for the education of their children? For clothing, ukay-ukay; for shelter, squatting or living in slums; and for education, well, hopefully, from the 4Ps or  Conditional Cash Transfer program of the government, otherwise their children study only for few years then join the growing number of child laborers. I know that there are not enough funds for the 4Ps to cover all those earning the minimum wage rate and below.

So why are wages in the country low? For those who have taken a course in economics, the most common answer lies in the supply and demand for labor. When there are more people willing to work than demanded, wages will fall. Basically, supply of labor is determined by population growth and demand determined by new investments. In the country, there are simply more workers wanting to be employed than demanded by employers because of rapid population growth and the prevailing low level of investments. Had it not been for the  minimum wage set by the RTWPB in each region of the country, many more would have been paid less than they receive now or down to subsistence or food threshold level.

The Reverend Thomas Malthus wrote that when workers are paid less than the subsistence wage, they perish and thus cut down the supply of labor. When labor supply is low, wages would again go up but that in turn would also encourage the poor to increase their numbers and thus pressing down the wages again. In the classical world of economics, such a phenomenon is called the iron law of wages which condemns the poor to perpetual poverty.

Of course, we know now that Malthus was wrong. Technological progress enables productivity to increase which enable workers to receive more for their work. Western Europe, the US and other countries populated by Western Europeans managed to wipe out much of their poverty before the 20th century after applying new technology in their industries. In the second half of the 19th century, Japan closely followed their example and  became the first country in Asia to industrialize and join the developed world by the end of that century. When is our turn?

To be a developed or first world economy, a country must have at least at gross domestic product (GDP) per capita of about US $12,000. We have just over US $2,000. Assuming our GDP grows by 6 percent a year with  population also growing at 2 percent a year, this will leave us with a 4 percent annual increase in per capita GDP. At this rate, it will take us 46 years to join the rich country club status. Who says our GDP will grow at this rate? But then again, why not?