The Market Monitor Minding the Nation's Business
The research group IBON says the P125 across-the-board wage increase proposed by the Department of Labor and Employment (DoLE) is necessary, possible and good for the economy.
The independent think tank also said the prices of goods and services do not have to rise, and workers do not have to be laid off if employers accepted the resulting 12.3-percent cut in their profits instead of passing this on to consumers.
According to IBON, the economy has more than enough profits to support the wage increase.
The latest 2013 Annual Survey of Philippine Business and Industry (ASPBI) of the Philippine Statistical Authority (PSA) shows P1.58 trillion in profits for some 35,000 firms with 3.9 million employees. Assuming 13 months of pay, the wage increase means employers would spend an additional P49,427 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 benefits to lessen the burden on them.
IBON said the total cost of the proposed wage increase would only be a cumulative P193.4 billion. This is only 12.3 percent of their profits and would still leave the establishments with P1.38 trillion in profits, the think tan said.
The increase would give workers an additional P3,802 per month, IBON said, which would be a 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 P379 nationwide.
Pay is highest in the National Capital Region (NCR) but the average here of just P530 is still barely half the some P1,090 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 percent and the average daily basic pay nationwide by only 5.3 percent between 2010 and 2015.
IBON said a large wage increase 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 would 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 are clear and a wage increase would provide immediate relief, even if not yet necessarily bringing all of them up to a decent standard of living. The proposed P125 nationwide across-the-board wage rise for private-sector workers can also serve as the prelude to an eventual P750 national daily minimum wage. Similarly, a P6,000 increase for government employees can be a step toward a P16,000 national monthly minimum wage for them, IBON said.