Filipino workers productivity increasing but real wages falling — IBON

May 8, 2023

by IBON Foundation

Research group IBON observed that labor productivity has been increasing while workers’ real wages are falling. The gains from growing productivity are not going to workers as higher wages but to the profits of corporations and the wealth of the super-rich, said the group. IBON said giving workers their fair share through decent wages will uplift their lives and also spur economic progress.

Worker productivity has been a driving force of economic growth in the past decade, said IBON. Measured at constant 2018 prices, labor productivity increased by 28.9% from Php330,035 per worker in 2012 to Php425,511 in 2022, according to data recently released by the Philippine Statistics Authority.

Meanwhile, also measured in real terms, the economy grew by 60.2% with gross domestic product (GDP) increasing from Php12.4 trillion in 2012 to Php19.9 trillion in 2022. Labor productivity is measured by dividing GDP by the total number of employed.

However, real wages have risen by much less than productivity and the growing economy. Average daily basic pay (ADBP) grew by less than 21% from Php391 in 2012 to Php472 in 2022, measured at constant 2018 prices. Wages have not kept up with inflation where the consumer price index increased by 35.3% from 85 in 2012 to 115 in 2022 (2018=100).

The gap is even starker looking at the situation before the government’s excessive lockdowns – real ADBP grew by just 21% or by barely half the 40% increase in productivity over the period 2012-2019.

IBON said that wages lagging behind labor productivity implies that the benefits from economic activity are disproportionately going to corporate profits. For instance, the profits of enterprises of all sizes increased by over 72% from Php2 trillion in 2012 to Php3.4 trillion in 2019 before the lockdowns. For the Top 1,000 corporations in the country, profits increased by nearly 35% between 2012 (Php1.1 trillion) and 2019 (Php1.5 trillion), and then by another 25% between 2019 and 2021 (Php1.8 trillion).

As it is, the nominal ADBP across all industries still falls far short of the family living wage (FLW). The nominal ADBP of Php544 in 2022 is not even half (49%) of the FLW of Php1,103, with a yawning wage gap of Php559. The Duterte administration gave the least and lowest wage hikes compared to other post-Marcos Sr administrations. The current Marcos Jr administration has also not mandated any wage increase despite growing clamor for it amid high inflation.

IBON said that it is high time for the country’s’ lawmakers to legislate a minimum wage hike that will raise the ADBP to approximate the family living wage. This will stimulate the economy because wage hikes have stronger demand multiplier effects than profit hikes.

First, low-income worker families receiving additional wages will more likely spend this than save it because their consumption of basic and immediate needs is at such low levels. Secondly, this is more likely to be spent locally and in communities which will help spur local economic activity. Lastly, much of this additional income will likely be spent on food which will spur food production in the countryside.

IBON stressed that large legislated wage hikes for wage-earners will be well-deserved, and should be accompanied by parallel legislation that raises social protection or emergency subsidies to those not covered by wage hikes. These will benefit poor and vulnerable families, stimulate the economy, and reduce inequality, the group said.###