The excuses they give: Kung ayaw ng wage hike, maraming dahilan

February 20, 2024

by Sonny Africa

The Senate’s approval on third reading of their proposal for a legislated Php100 minimum wage has triggered a flood of disinformation and misinformation on the part of those opposed to making employers share just a little bit more of their profits to workers. They say it will be “catastrophic” – cause inflation, lead to layoffs, and bankrupt firms. They say it will only help a few and only for a little while. None of these arguments holds water.

As it is, the wage hike bill passed by the Senate is the least that government can do to support millions of Filipino workers forced to survive on low wages especially amid the high costs of goods and services.

The reason the wage hike should be legislated is because the situation is so desperate. The reason naysayers insist on using the regional wage board mechanism is that this has worked so well for the interests of capitalist profits. There have been 367 wage orders since the regionalization of wages in 1989, which seems like a lot.

But the only thing the regional wage boards have done is to make the real value of the minimum wage in 16 out of 17 regions today, in January 2024, lower than they were 35 years ago. The only exception is the National Capital Region (NCR) where wages are a negligible 0.6% higher – which is to say, stagnant. But even this is tenuous and a month or so of more inflation will drive this down to even lower than before.

Put another way, minimum wage earners are worse off now than they were 35 years ago. Which means that employers and business owners are better off than they were 35 years ago. They are the beneficiaries of wages being repressed for so long because all the productivity gains of workers go to them as profits.

Nominal minimum wages today range from a low of Php336 in the Bangsamoro Autonomous Region of Muslim Mindanao (BARMM) to Php610 in NCR which seems much higher than the Php89 prevailing in July 1989. The infrequent and trifling increases that RWBs give haven’t kept up with decades of inflation though. The real wage has actually declined by 26% on average across all regions. The biggest decline is in BARMM where the real minimum wage has fallen 54% with NCR’s measly 0.6% gain simply being inert.

Computed at 2018 prices for comparability, the average value of the real minimum wage across all regions in July 1989 was Php474 which dropped precipitously to Php349 today.

Opponents claim that the Php100 wage hike is inflationary. However, IBON estimates that even a Php100 across-the-board (ATB) wage hike – meaning not just for minimum wage earners – is equivalent to just a tiny 7.1% of private establishment profits. Employers can easily afford to absorb this wage hike and don’t have to pass this on into higher prices of their goods and services.

The impact on profits is only slightly more in micro, small and medium enterprises (MSMEs) than in large enterprises. The Php100 ATB hike is equivalent to just 7.5% of MSME profits – 7.9% in micro, 7.6% in small and 6.7% in medium size firms – and to just 6.7% of large establishment profits.

These were computed using data from the latest 2021 Annual Survey of Philippine Business and Industry (ASPBI) and on average daily basic pay in the same year from the Philippine Statistics Authority (PSA). The ASPBI is the largest regular survey of private businesses in the country with some 38,000 respondents.

The alarmism of employers is baseless. On average and across all establishments of all sizes in all sectors nationwide, employee compensation is only 10.9% of total business expenses, also according to the 2021 ASPBI. By size of enterprises, compensation is 7.7% of expenses in micro, 8.4% in small, 7.8% in medium and 13.9% in large enterprises.

Opponents like to hide behind how MSMEs account for 98.6% of all establishments in the country. However, looking at employment, the majority of employees are still in large firms which account for 54.4% of employees with only the remaining 45.6% in MSMEs.

Private firms are also apparently already well into recovering from the pandemic. Between 2020 and 2021, profits of all establishments grew 28% to Php2.5 trillion and of the Top 1000 corporations by 104% to Php1.8 trillion. The average minimum wage across all regions meanwhile remained unchanged.

There’s also disinformation about the Philippines having among the most expensive wages in the region. This isn’t true and Philippine wages are more accurately only the 5th or 6th highest in Southeast Asia.

IBON looked at minimum wages in the region and computed the mid-range for each country with minimum wages, or the average between the lowest and highest prevailing today. The monthly mid-range minimum wage of Php13,890 in the Philippines is lower than in Malaysia (Php15,823) and Thailand (Php16,309) and certainly lower than in Brunei and Singapore which don’t have statutory minimum wages.

By another reckoning of the Japanese External Trade Organization (JETRO) in 2023, Philippine manufacturing wages are lower than in Singapore, Malaysia, Thailand, Indonesia and Vietnam. Meanwhile, non-manufacturing wages are lower than in Singapore, Malaysia, Thailand, Indonesia, Vietnam and Cambodia.

Filipino workers and their families certainly and urgently need a wage hike as the current minimum wage is not enough to cope with the high cost of living. For instance, the NCR daily nominal minimum wage is already the highest in the country. But it is just a little over half (51.1%) of the Php1,193 family living wage (FLW) for a family of five in January 2024. Meanwhile, the average daily nominal wage of Php438 nationwide is just one-third (36.5%) of the Php1,198 average nationwide FLW.

Wage-setting should give more consideration to what workers need to live decently especially since employers really do have the capacity to pay much more than they do. Workers and their wages should also not be seen as a burden on the economy, but as people creating value in the economy and for whom the economy is for.

Finally, the wage hike will benefit not just minimum wage earners and their families but also their communities and the economy as a whole. It’s true that some three-fourths (74%) of the country’s 48.2 million employed are self-employed, informal, or in informal establishments beyond the purview of labor regulations. But increasing wages and putting more money in the pockets of workers will have a strong economic multiplier effect, certainly much more than if these remained as profits.

Workers and their families will be able to buy more with the additional income from a wage hike. They will spend their wages locally and on MSMEs including informal enterprises in their communities. This in turn will spur local economic activity, small businesses, and job generation. Kung gusto ng wage hike, maraming paraan.