Bu-lat-lat (boo-lat-lat) verb: to search, probe, investigate, inquire; to unearth facts
Volume III, Number 48 January 11 - 17, 2004 Quezon City, Philippines
Wage Erosion Despite Low Inflation
a person in Metro Manila now needs P1 ($0.02) to buy goods and services that can
be bought at only P0.56 ($0.01) in 1994, then all this hype about the low
inflation rate means nothing to the average consumer. Wage erosion estimates
show that the peso has lost almost half of its value due to increased prices in
the past 10 years.
DANILO ARAÑA ARAO
good news, at least for the administration, is that the inflation rate in
December 2003 is pegged at 3.1 percent. This puts the average inflation rate for
2003 at 3.0 percent.
the wake of the presidential election, expect the administration to stress that
this is a substantial improvement from the 6.9 percent inflation rate in January
2001 when President Gloria Macapagal-Arroyo assumed office.
a low inflation rate means that prices did not increase that much in 2003. What
is not fully explained, however, is the inflation rate’s implication on the
people’s purchasing power and how prices of goods and services have fluctuated
through the years.
on the consumer price index (CPI) which is used as the basis for computing the
inflation rate, the purchasing power of the peso (PPP) has not substantially
improved and still remains low. Purchasing power is the buying capacity of a
currency compared to a given base year.
Metro Manila, the PPP is pegged at P0.56 ($0.01, based on an exchange rate of
P55.11 per US dollar). In areas outside Metro Manila, the PPP ranges from P0.51
or $0.01 (Autonomous Region in Muslim Mindanao or ARMM) to P0.62 or $0.01
of peso value lost
simply means that a person in Metro Manila currently needs P1 ($0.02) to buy
goods and services that can be bought at only P0.56 ($0.01) in 1994. The latter
serves as the base year in computing the CPI. The situation implies that in the
Philippines, the peso has already lost almost half of its value due to increased
prices in the past 10 years.
current data on PPP also show that the low inflation rate does not reflect the
reality of economic disempowerment of poor people.
increases may have been gradual in 2003 as reflected in the single-digit
inflation rate, but the continuous increases through the years have taken their
toll on the plight of the people.
fact, those who are earning minimum wage can barely provide for the basic needs
of their families. According to the Department of Labor and Employment (DoLE),
the daily minimum wage rates for non-agricultural areas range from P140 or $2.54
(ARMM) to P280 or $5.08 (Metro Manila). (See Table)
from the fact that there were no wage increases in 2003, Bulatlat.com
computations show that wages have been eroded by 43 percent on the average. The
ARMM has the worst wage erosion at 49 percent since the region has both the
lowest minimum wage and PPP. (See Table)
erosion refers to how much value has been lost in the real value of wages since
the start of the base year, which, in this case, is 1994.
There is indeed more than meets the eye as regards the single-digit inflation rate. Only a cursory analysis of the given data will expose the glaring contradiction of low inflation and high wage erosion. Bulatlat.com