Philippines needs a raise

Philippines needs a raise

NEDA envisions a Philippines becoming a middle-class economy by 2040. It is a vision of an economy where all Filipino families shall have decent homes, social protection and access to health, education and other basic services and necessities in life. In a middle-class economy, all workers shall have decent quality jobs.

How can such a vision be fulfilled if majority of our Filipino workers remain trapped in low-wage, low-productivity employment in a very unequal society?

Dios por santo, for five long decades, real wages in the Philippines are either stagnant or stagnating like our manufacturing sector, which has been left behind by our Asian neighbors. The Philippines needs a raise. Filipino workers, both formal and informal, need a raise in wages and incomes.  

For our middle-class aspirations to happen, we need to overhaul the overall economic development framework and the narrow wage-employment system we have.  

The minimum wage increase proposals advanced by the Senate and the House deserve the collective support of the nation.  

P100 or P150 additional? Is this doable?  

It is. In fact, corporations such as those in the power industry, telecommunications industry, water industry, banking industry, big construction industry, mining industry, logistics industry and malling/entertainment  industry have been reporting openly on their multi-billion profits that are near a trillion-peso level. They should share more of their earnings with the workers and with the larger society in terms of taxes.  Konsiyensiya lang po.

For the rest of the industries, there should be dialogues on transitioning, meaning labor-industry negotiations on how to comply with the new minimum wage. The Labor Code has explicit provisions on the importance of labor-management consultations and concertations on issues such as wages and working conditions even if an enterprise is non-unionized. Article 255 (renumbered as Article 267) states that workers shall have the right…to participate in policy and decision-making processes of the establishment where they are employed insofar as said processes will directly affect their rights, benefits and welfare.” The Article explains, “For this purpose, workers and employers may form labor-management councils.”  

How to implement the minimum wage adjustments in small and medium companies having financial difficulties? One way is to copy the solution advanced in Malaysia by the government of Prime Minister Anwar Ibrahim: give these companies transition wage subsidy. As a backgrounder, major industrial relations actors in Malaysia today have been  discussing the Malaysian government’s proposal for a “progressive incremental  wage increases across industries.” The objective is not only to raise the workers’ take-home pay but also to push industries to invest more on technology upgrading and productivity-raising measures as part of a broader win-win program to make Malaysia more competitive. The Malaysian progressive wage increase proposal is an expansion of the Singapore’s Progressive Wage Model, which seeks to progressively increase the wages of the lowest-paid workers while providing them at the same time opportunities for upskilling and career advancement. 

Unfortunately in the Philippines, some of our economic planners are stuck with the old idea that the best way to make the country’s growth robust and sustainable is to rely on the cheapness of labor. Hence, the labor-intensive export-oriented formula of Neda in the 1970s. This was reinforced in the 1980s with the World Bank’s policy conditionality asking the Philippine government to continue the policy of “wage restraint” for workers. Thus, the 1970s and 1980s were decades of horrible wage declines for the Filipino workers.  

From the 1990s onward, there has been limited advancement in the wage situation. Limited because the wage fixing system of the Regional Wages Boards simply links wage adjustment to inflation, resulting in the annual changes of minimum wages in nominal, not real  terms. Eventually, there has been a deterioration over time of Philippine wages in real terms, as documented by both the Philippine Statistics Authority and the Social Weather Station. 

Compare this to China, where according to the ILO, real wages, not nominal wages, increased by 896 percent between 2000 and 2021! This surge in real wage increases in China was used by the Chinese government in transforming some cities such as Shenzen into high-tech and high productivity ones that are now competing head to head with the Silicon Valley of America. China literally forced these cities to get out of the low-tech labor-intensive industries to enable China to move up the higher rungs of the technology and industry ladder. This is Industrial Policy in action!

The point is that it is time to abandon the old thinking that the way forward is to rely on the relative cheapness of Philippine labor in making the economy competitive.  Limang dekada pong bagsak ang bansa sa ganitong pag-iisip. Time for a more pro-future and pro-worker transformation program for the country.

Of course, we should not neglect the informal workers and the informal sector enterprises. They constitute the majority of the workers and enterprises. Sa usaping ito, mahalaga na naman ang pag-uusap at konsultasyon. A program for the general upgrading of MSMEs and income situation of informal workers requires a more thorough consultation  process with all the sectors. 

Two major doables can be done: one, linking the economic and technological upgrading of our informal economy with the promotion of the newly-passed law on “Tatak Pinoy”, and two, passage of the Magna Carta for Workers in the Informal Economy or MCWIE. A re-development of communities and towns all over the archipelago under the Tatak Pinoy program can be pursued. On the other hand, the empowerment of the informals in terms of freedom to form their organizations and become productive partners of society in building a new economy is a good way out of the “low-income, low-productivity” system in the country.

In summary, it is high time that the government economic planners abandon their neo-liberal thinking that allowing wages to sink based on the interplay of supply and demand forces will eventually make the economy competitive and will ultimately benefit the workers and their families as the economy grows with the increased flow of investments. Kailan po kaya ito mangyayari? Two or three more decades? 

Above is a slightly edited version of the statement read by the author in the Congressional hearing on the proposed national minimum wage adjustments in the country.

Dr. Rene E. Ofreneo is a Professor Emeritus of the University of the Philippines.