Reforming the system of Minimum Wages in the Philippines



We support the thrust of the National Wages and Productivity Commission (NWPC) of the Department of Labor and Employment (DOLE) to reform the minimum wage fixing machinery of the country, based on conclusive findings of empirical studies.

The NWPC’s latest two studies can serve as a starting point for this thrust, but care should be taken, as the studies themselves emphasize, that:

• Further empirical studies are needed to validate their findings; and
• Causality of factors in minimum wage fixing has not been conclusively shown.

We express our concern that the present machinery has had little success in achieving its many purposes and objectives, because it has become cumbersome, too complex, unclear as to which of its purposes to really pursue, and conflicting in several of its many objectives as well as the factors used to determine the minimum wage rates. Because of these, among others, compliance have not been widespread and its administration not quite efficient.

We are also concerned that the system of minimum wage fixing may be partly contributing to the diminishing coverage of collective bargaining agreements, which should be reversed.

There is need to simplify the concept, process and administration of the minimum wage and to link it to increasing the coverage of collective bargaining.

We are convinced that a minimum wage must follow a single purpose of establishing a floor wage below which no employer should be allowed to pay. It is also more efficient to have only a single national rate that is negotiated by the national tripartite partners, as against the present practice of establishing several hundreds of minimum wage levels and rates.

A single floor wage is not only easier to implement, it is also more rational:

• The differences in the actual prices of basic goods and services bought by wages among regions are not that wide to justify regional wage fixing.
• There is also a trend to the “homogenization” of prices, such that certain basic goods and services have the same or similar prices across regions.
• An analysis of the minimum wage rates and increases among regions would also show that, in practice, the levels and rates of increases track each other very closely, except in two or three regions.

One national minimum wage will also contribute towards more relevant and coherent socio-economic policy in two important ways:

• Removing a major incentive for rural migration to major cities (such as the NCR, Cebu and Davao) and areas with higher minimum wages;
• Building and expanding the domestic market by increasing the purchasing power of workers and their families.

The many objectives of the present system, some of which are conflicting, make the whole system cumbersome and inefficient, which result more to frustration than to protecting the most vulnerable sectors.

By its very nature, the minimum wage alone cannot be made a tool for socio-economic development. This objective is better achieved together with a package of other policies. The main objective of minimum wage is to protect the most vulnerable sectors and to reduce wage inequality at the bottom of the pay scale. Increasing wage rates beyond the minimum is the proper function of collective bargaining. This is why we think it is important to revisit and revise policies constraining the exercise of collective bargaining.

The policy of regional development by dispersing industries to the countryside through regional minimum wage fixing has failed; it merely accelerates the race to the bottom in terms of labor standards. In any case, there are more than enough policy tools and better ones too, to achieve regional development, instead of just anchoring this on a policy on regional minimum wage fixing.

Linking employment growth to minimum wage adjustments moves away from the main purpose of minimum wage. Again, we think that employment growth is the function of investment and of reducing the other costs of doing business, likewise, in the consistency of policies, and in promoting good governance in the corporate and public sectors, in order to attract investments.

There are too many determinants used to establish minimum wage rates or to increase its level. This adds to confusion in the process of minimum wage fixing. As a floor wage, minimum wages cannot be linked to productivity. Productivity is better linked to collective bargaining, since the latter provides a fairer bargain on wages that is linked to performance and the growth of productivity.

We think that the more valid and main determinant for minimum wage increase is to periodically or regularly adjust it based on the upward movement of prices, at least of the prices of wage goods or goods that minimum wage earners usually buy. This way, the protective purpose of minimum wage is better achieved.

That minimum wage levels and upward adjustment will have more adverse effects on micro and small enterprises than on medium and/or large enterprises is a valid concern. However, we think that multi-employer bargaining and extending the wage bargain resulting from multi-employer bargaining to the industry or value chain plus the exercise of corporate social responsibility such that large enterprises should adjust their contract payments to their value chain as a result of the wage bargain or bargaining extension or the increase in minimum wage, are better ways of protecting the small enterprises and the workers that they employ.

In this manner, both the concept and machinery of minimum wage fixing are simplified. The NWPC can then shift its attention to providing the parties with more accurate and relevant information, not only for minimum wage fixing, but also for collective bargaining; and to assisting the parties to conclude negotiated productivity agreements as well as continually improving productivity at the micro, meso and macro levels.

Labor is not a commodity whose price is to be treated like the other factors of production. Labor is human, and must be treated as such. Establishing a floor wage is a beginning towards realizing this common commitment.

Joint Statement of Workers’ Group – Manila, Philippines, 27 October 2009
On the occasion of the 20th year of Republic Act No. 6727 or the Wage Rationalization Act of 1989, which defines the minimum wage fixing policy of the Philippines

Alliance of Progressive Labor (APL), Associated Labor Unions (ALU-TUCP), Confederation of Independent Unions in the Public Sector (CIU), Construction Workers Solidarity (CWS-NLU), Federation of Free Workers (FFW), Lakas sa Industriya ng Kapatirang Haligi ng Alyansa (LIKHA-TUCP), Labor Education and Research Network, Inc. (LEARN), National Labor Union – Kongreso ng Pagkakaisa ng Manggagawang Pilipino (NLU-KPMP), National Mines and Allied Workers Union (NAMAWU), National Union of Bank Employees (NUBE), National Union of Building and Construction Workers (NUBCW), Partido Manggagawa (PM), Philippine Employer-Labor Social Partners, Inc. (PELSPI), Public Services Labor Independent Confederation (PSLINK), Trade Union Congress of the Philippines (TUCP), Union Network International-Philippine Liaison Council (UNI-PLC)

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