P125 wage hike increase necessary, possible and good for economy–IBON

September 20, 2016

by IBON Foundation

Research group IBON said that the P125 across-the-board wage hike proposed by the Department of Labor and Employment (DOLE) is necessary, possible and good for the economy. The group further said that the prices of goods and services do not have to rise and workers do not have to be laid off if employers accept the resulting 12.3% cut in their profits instead of passing this on to consumers.

According to IBON, the economy has more than enough profits to support the hike. The latest 2013 Annual Survey of Philippine Business and Industry (ASPBI) of the Philippine Statistical Authority (PSA) indicates Php1.58 trillion in profits for some 35,000 firms with 3.9 million employees. Assuming 13 months of pay, the hike means that employers will spend an additional Php49,427 per employee per year, IBON noted.

The PSA survey only covered firms with total employment of 20 and over. Smaller firms including those not covered by the survey who may not be able to afford the wage hike can be supported with tax breaks, cheap credit, and other support to lessen the burden on them. IBON said that the total cost of the proposed wage hike will only be a cumulative Php193.4 billion. This is only 12.3% of their profits and will still leave establishments with Php1.38 trillion in profits, said the group.

The hike will give workers an additional PhP3,802 per month, IBON said, which is very welcome relief because wages fall far short of providing for decent living. The group noted that the average daily basic pay of wage and salary workers in 2015 for instance averaged just Php379 nationwide. Pay is highest in the National Capital Region (NCR) but the average here of just Php530 is still barely half the some Php1,090 living wage for the region.

The group further observed that wages have also barely kept pace with inflation or even labor productivity. Despite economic growth, the real value of the minimum wage in the NCR has only increased by 6.5% and the average daily basic pay nationwide by only 5.3% between 2010 and 2015.

IBON stressed that a large wage hike is beneficial not just for workers and their families but also the economy. The transfer of money from rich to poor households increases aggregate demand and will stimulate the economy. High-income households have a higher propensity to save and low-income households that are deprived even of basic necessities have a higher propensity to consume.

According to IBON, the benefits for workers and their families is clear and a wage hike will provide immediate relief, even if not yet necessarily bringing all of them up to a decent standard of living. The proposed Php125 nationwide across-the-board wage hike for private sector workers can also serve as the prelude to an eventual Php750 national daily minimum wage. Similarly, a Php6,000-hike for government employees can be a step towards a Php16,000 national monthly minimum wage for them, said the group. [End]