Raising the bar: Demanding a decent minimum wage

June 22, 2018

by IBON Media

Before being retrenched for protesting condiments manufacturer NutriAsia for its various labor rights violations, Alvin Lascano, a machine operator, used to receive Central Luzon’s (Region III) minimum wage of Php380.00. According to the government, wages in the country have to vary because of varying costs of living in the different regions.

Pero hindi naman nagkakalayo ang presyo ng mga bilihin sa Maynila at sa Bulacan,Alvin said. Asked what items in Bulacan are almost the same as in Metro Manila, he answered, “Gasolina, delata, bigas, noodles, tinapay, softdrinks, kape, asukal, sabong panlaba at panligo – lahat naman po (Gasoline, canned goods, rice, noodles, bread, softdrinks, coffee, sugar, laundry and bath soaps – everything actually).”

Alvin remains a contractual worker at NutriAsia even after serving the company for 10 years. His take-home pay depends on the number of days that he is called to work, averaging 20 days per month, erratically-renumerated overtime work, and how much the company deducts in terms of Social Security System (SSS) and Pag-ibig Mutual Development Fund (Pag-ibig) benefits. The amount, which he combines with the small income of his parents from fishing, averages just a little over Php500 per day.

Hanggang pagkain, tubig, kuryente at pang-upa lang ang pilit namin pinagkakasya (We have to stretch our budget to cover food, water, electricity and rent),” Alvin said. Also providing for 7 siblings going to school, Alvin said that they barely have anything left to spend on maintenance medicines for their mother who recently had a stroke.

Spiralling prices because of oil price spikes and additional Tax Reform for Acceleration and Inclusion (TRAIN) levies are only making things more difficult for workers like Alvin and millions of other low- and even no- income households. His family’s plight points to the imperative for a substantial wage hike nationwide, among other calls in the assertion of Filipino workers’ rights.

Necessary

A substantial wage hike – and not an increase of a few pesos only – is much-needed by workers and their families to be able to cope with the rising cost of goods and services.

The currently highest minimum wage of Php512 in the National Capital Region (NCR) is Php461 short of the Php974.2 per day family living wage (FLW) or the amount needed by a family of five as of May 2018 per IBON estimates.

Moreover, the real value of the minimum wage has been eroding. Inflation reached a five-year high at 4.6% last month. As it is, the real value of the minimum wage has already eroded by Php14.67 since the last wage hike in October 2017 to Php449.52 in May 2018. Since President Rodrigo Duterte was sworn into office, the real value of the minimum wage has eroded by Php17.20.

Not all wage and salary workers receive the minimum wage. According to latest available data, only 24.6% of over 26 million wage and salary Filipino workers receive the minimum wage, while 29.4% receive more than the minimum wage. A huge 46.1% of wage and salary workers get less than the minimum in wages.

Possible

Firms and the economy as a whole have more than enough profits to support a substantial minimum wage. A government determined to take the necessary steps for the people to be able to cope with rising prices should be able to wield its authority for employers to comply.

First off, a considerable amount of wealth is being produced by Filipino workers. In fact, their contribution to total gross domestic product (GDP) has been rising. According to the Philippine Statistics Authority (PSA), the contribution of each worker to total GDP increased from Php196,179 in 2015 to Php198,215 in 2016.

Secondly, computations show that a substantial wage hike is doable.

The 2015 Annual Survey of Philippine Business and Industry (ASPBI) of the PSA shows that the 34,740 establishments employing 20 or more have Php1.7 trillion in total profits and 4.5 million employees.

Raising the average daily basic pay of wage and salary workers to, say, Php750, as demanded by labor groups, transfers just Php473.2 billion to workers’ pockets.

This is only a 28.3% decrease in profits – and should not affect business operations. This should not drive up inflation as long as employers agree to trim their fat profits instead of passing on the higher costs of production entirely to consumers.

In particular, the country’s largest corporations and the wealthiest families owning these can easily absorb the abovementioned substantial wage hike. Smaller producers in micro, small and medium enterprises (MSMEs) will also be able to afford the wage hike with government support such as cheap and easy credit, marketing support, nurturing locally-integrated supply chains, and improving their scientific and technological capabilities. MSMEs will also benefit from increased worker demand for their goods and services in the domestic market.

Beneficial

A substantial wage hike can be beneficial not only to workers and their families, but to the Philippine economy. For instance, setting a Php750 minimum wage across all regions will raise the Filipino worker’s take-home pay by Php8,076 per month. Though it may still fall short of the FLW, raising the minimum wage to Php750 nationwide will inarguably increase workers’ purchasing power.

In turn, workers and their families’ increased demand for goods and services can necessitate a higher level of production, thus stimulating more economic activity.

Additionally, a substantial wage hike can ease inequality as specific amounts of wealth, otherwise concentrated in the hands of a rich few, are transferred directly to workers and their families.

Instituting a meaningful national minimum wage can also help address the high levels of poverty incidence across the regions.

Couple with long-term reforms

As for the claim of employers and government’s economic managers that raising wages will drive away foreign investors and make the country less competitive, studies show that lower wages do not necessarily attract more investments. Among the factors that attract foreign investment are domestic markets to buy their products – and local purchasing power is increased by raising minimum wages. Thus, while FDI can contribute to national development if properly regulated, government should not be passing the burden of attracting foreign investors onto workers by ensuring low wages.

This is not to say that increasing FDI in the Philippines has ever solved joblessness and underdevelopment under a business-biased—instead of people-centered—policy environment. If anything, the need for the country to develop internally instead of relying on external hence shallow sources of growth—such as investments, debt, overseas workers’ remittances and business process outsourcing—is underscored.

A Php750 minimum wage nationwide can be the opening salvo to reversing market-oriented policies that have kept millions of the Filipino working people poor and the nation underdeveloped. Labor flexibilization and contractualization also need to be corrected. These have to be done as part of a comprehensive national development plan that strengthens agriculture as well as steadily builds Filipino industries, which will generate the quality, secure, and decent-paying jobs the country needs.