Friday, March 27, 2015

Meaningless minimum wage

SOCIAL Welfare Secretary Dinky Soliman said so herself. Even the Aquino administration’s conditional cash transfer (CCT) program can’t keep up with inflation.
Soliman admitted the CCT is not enough to help the poor cope with high food prices.
Well, guess what, our workers are staggering from high food prices too. They are getting squeezed, not able to get ahead because the anemic growth in their wages is not keeping up with the fast rise in prices of food and other household expenses.
The typical Filipino workers are no longer able to keep up with the rising cost of living. And the government is apparently not concerned about whether or not they can afford to pay for food, housing, electricity, water, medical care, tuition and other costs that keep rising.
The Tripartite Wages and Productivity Board of the National Capital Region (NCR) last week issued a P15 wage hike, increasing the daily minimum wage to P481.
But this is meaningless according to research group IBON Foundation, because the new minimum daily pay of Filipino workers is only two-fifths (44 percent) of the estimated amount needed for a family to live decently.
IBON said the increase is so small, it fails to even come close to the estimated family living wage, which is pegged at P1,088 for a family of six. This is aggravated by how the increase is insignificant to keep up with the rising cost of living.
Families of workers receiving fixed wages are really suffering from the high cost of food commodities, including rice, which is the staple food of Filipinos.
The reason for this is simple. Workers spend up to three-fourths of their wages on food — and food prices tend to increase at a faster rate than non-food products.
The National Economic and Development Authority (NEDA) attributed the worsening poverty to “very high food prices,” especially of the staple food rice, and the devastation wrought by Supertyphoon “Yolanda” in Eastern Visayas in November 2013.
Rice, garlic, onion and other basic food commodities have exhibited increases that have extended beyond the ordinary consumers to the financial markets.
One option is to substantially lessen the income tax burden on workers. Right now, up to 32 percent of salaries are withheld as taxes.
But this administration seems keen on overtaxing those they can easily tax—the salaried workers–rather than going after the smugglers and tax evaders they can’t catch. They like to keep hunting in the zoo.
Another option, of course, is to raise wages, considering that the Constitution mandates a “living wage” for labor.
But with the recent wage increase in Metro Manila, it is obvious the government has a different idea of what a living wage really is.
Malacañang even pushed through with the fare increases for the Light Rail Transit Lines and the Metro Rail Transit Line, as if to add insult to injury.
By doing so they only aggravated the plight of employees who use the trains to go to work every day.
The country’s minimum wage is already among the lowest in the region, compared to other countries at P481 (private, non-agricultural) while in other private sectors, at P429.
A Business Insider survey conducted in 2013 pegged the Philippines’s minimum wage at $0.61, higher only than Afghanistan, India and Sierra Leone.
The current minimum wage rates according to the DOLE are as follows: NCR, P429-P481; Cordillera Administrative Region, P247-P280; Region 12, P213-P253; Region 2, P219-P255; Region 3, P228-P349; Region 4A, P219-P362.50; Region 4B, P205-P275; Region 5, P236-P260; Region 6, P245-P287; Region 7, P275-P340; Region 8, P220.50-P262; Region 9, P235-P280; Region 10, P279-P306; Region 11, P286-P317; Region 12, P255-P275; Region 13, P248-P268; and Autonomous Region in Muslim Mindanao, P250.
Ibon said that a low wage increase stifles the potential of the labor market to spur economic activity, a point that I have often stressed in this column.
“More than half of the total labor force are wage and salary workers, and this is a potentially very large market, whose demand for and consumption of various goods and services could spur economic activity. However, this considerable potential is stifled by how only 71 percent of these workers receive the minimum wage, or even less than the minimum wage,” the think tank said.
According to IBON, higher wages have dynamic multiplier effects on the economy, because a wage-led growth is an internal and more sustainable source of economic growth than external markets.
Moreover, low-income households, which are lacking in basic necessities, have a higher tendency to consume than high-income households that are inclined to save.
“A substantial wage increase will also benefit micro, small and medium enterprises that produce goods for the local market that will be consumed by those who receive a wage hike. It will also benefit the informal economy in worker communities, when additional wages will be used to pay vendors, sari-sari stores, small eateries, jeepney and tricycle drivers and others,” IBON said.
The research group added that the workers’ demand for a P16,000 monthly minimum wage is affordable, and will only cost firms an average of 17.1-percent cut in profits.
“Accepting this slight reduction still leaves them with considerable profit, and will not be inflationary by not passing the costs to consumers. Granting workers a substantial wage increase will improve the welfare of workers and will provide their families much-needed respite from the increasing cost of living,” it said.

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