Growing clamor for wage hike echoes urgency, justness and doability — IBON

March 31, 2023

by IBON Foundation

Research group IBON said that recently proposed legislation and petitions for a wage hike by lawmakers and labor groups, respectively, affirm that this is urgent, just and doable. Amid the poor jobs situation, low incomes and high prices, the minimum wage has not been enough for many Filipino families to live decently. The group added that raising wages will not only benefit workers and their families but the economy as well.

The Makabayan bloc has filed House Bill No. 7568 proposing a Php750 wage increase, while Senator Miguel Zubiri has filed Senate Bill No. 2002 for a Php150 wage increase. Under both bills, wage hikes would be given to all agricultural and non-agricultural workers in the private sector. Meanwhile, labor coalition Unity for Wage Increase Now! (UWIN) filed a petition to increase the National Capital Region (NCR) minimum wage to Php1,100 for non-agricultural workers. The Workers Initiative for Wage Increase (WIN4WIN), another labor coalition comprised of 12 labor organizations, also filed for a daily minimum wage increase to Php750 in the CALABARZON region. IBON said that these calls only resonate how urgent, just and doable a minimum wage increase is.

Raising the minimum wage is urgent because the current nominal minimum wage of Filipino workers is unable to keep up with the rising cost of living. IBON estimates that inflation pushed up the family living wage (FLW) in the NCR for a family of five to Php1,161 in February 2023. The NCR daily nominal wage however is not even half (49.1%) this, meaning there is a wage gap of 50.9% or Php591. Meanwhile, the FLW for a family of five nationwide rose to an average of Php1,165. The average daily nominal wage of Php409 nationwide is just one-third (35.1%) of the nationwide FLW.

Higher inflation is eroding the nominal wage, but due to infrequent and meager wage increases, the real value of the nominal wage has even declined. For instance, despite a Php33 increase in the NCR minimum wage in June 2022 raising it to Php570, IBON estimates that the real value has dropped further from Php508 in June 2022 to just Php482 as of February 2023, measured at 2018 prices.

IBON said that a wage hike is also justified considering that wages are barely increasing even while workers’ productivity is constantly improving. Over the decade 2012-2021, labor productivity in the NCR grew by 42%, measured as gross regional domestic product divided by employment. The increase in productivity went to bloating corporate profits, which for the top 1,000 firms, soared by 68% over the same period. Yet the minimum wage only rose by 18 percent.

The research group said that a wage increase is also doable and need not be inflationary if large corporations are willing to take a cut in their profits instead of passing on the wage increase to the prices of commodities. Latest available data from the 2020 Annual Survey of Philippine Business and Industry (ASPBI) indicate that 238,036 establishments of all employment sizes have Php1.8 trillion in total profit and 6.2 million employees. Raising the Php442.97 average daily basic pay (ADBP; 2018) of workers to, say, Php750, will only transfer 29.2% of these profits. Applying this to bigger establishments (with 200 workers and over) that account for Php1.1 trillion in profits and 3 million employees just transfers 24.9% of profits. IBON computations are based on limited available data and may be underestimated considering the average is used for the daily basic pay and does not reflect actual wages that may be higher or lower than this.

Meanwhile, the Marcos Jr administration can support micro, small and medium enterprises (MSMEs) to help them provide higher wages to their workers. IBON is proposing wage subsidies for micro and small establishments that would cover the total cost of the proposed wage hike for one year – Php64.6 billion for micro and Php159.8 billion for small enterprises. This one-year subsidy can be alongside policy measures to assist micro and small enterprises to increase their productivity, and correspondingly, future ability to pay higher wages. Government can also raise revenues for wage subsidies by, for example, taxing the super-rich – a wealth tax on 2,495 billionaires can contribute Php469 billion.

The group added that increasing wages will have a strong economic multiplier effect. The additional income from wage hikes will allow workers and their families to buy more. Wages will be spent locally and on MSMEs including informal enterprises in their communities. This in turn will spur local economic activity, small businesses, and job generation. Also, Filipino families spend around 43% of their income on food. Increased spending on food items can stimulate demand and thus economic activity in the country.

IBON said that if the Marcos Jr administration really wanted to help millions of wage earners and their families cope with soaring prices, it would support workers’ demand for a nationwide wage hike. This would mean having the political will to ensure that big corporations are transparent about their earnings and contribute a portion of this to wage increases, as well as to impose a tax on the richest. Big companies and the super-rich have long benefited from workers’ productivity and government resources and incentives that boost their immense profits and wealth, while workers have been consistently left behind.