Raising minimum wage can revitalize domestic economy–IBON

July 23, 2016

by IBON Foundation


Days away from the State of the Nation Address (SONA), research group IBON said that Pres. Rodrigo S. Duterte can support raising the mandated minimum wage to improve the situation of millions of wage and salary workers. It is an achievable demand that can help revitalize the domestic economy.

IBON said that most wage and salary workers receive below the already low mandated minimum wage. Government data from 2013 shows that almost half (46.1%) of wage and salary workers earn below the minimum wage, 24.6% are able to receive the minimum wage, and only 29.4% receive higher than the minimum wage. Yet, the mandated minimum wage is already lower than what is needed for a decent living.

The gap between the highest mandated minimum wage in the country, which is in the National Capital Region (NCR), and the family living wage or what a family of five needs for decent living is widening, said the group. The current NCR minimum wage of Php481 is less than half of the Php1,096 estimated for the NCR family living wage.

IBON also noted that the average daily basic pay that wage and salary workers nationwide actually receive is even lower at only Php378 in 2015.  Wages were further pressed down when the Aquino administration implemented a nationwide two-tier wage system.  This is comprised of a government-determined mandatory “floor wage” which is lower than the mandatory minimum wage, and a productivity-based incentive which is merely optional for employers to implement.

The country’s biggest labor groups have already proposed an achievable demand of Php125 increase across the board nationwide for private sector workers in preparation for a Php750 national daily minimum wage, and a Php6,000 increase for government workers in preparation for a Php16,000 national monthly minimum wage.

Using official data sets, IBON has previously estimated that hiking the average daily basic pay of wage and salary workers is possible and would only mean a 30% decrease in profits, leaving employers a significant 70% of their clean profits. The country’s largest corporations and wealthy families are more than capable of absorbing the wage hike, while government can ensure special support for micro, small, and medium enterprises (MSMEs), said the group.

IBON said that meeting the demands of wage and salary workers for a pay increase is a positive step that the Duterte administration can take.  Higher wages and salaries, along with benefits and decent working conditions, can increase worker productivity and their demand for goods and services, which will in turn revitalize the domestic market.  By taking these first significant steps in tandem with a national industrialization strategy, the Duterte government can set the foundation for the country’s genuine development with the Filipino truly reaping the fruits of economic growth. ###