Bulatlat - The Philippines's alternative weekly newsmagazine

This story was taken from Bulatlat, the Philippines's alternative weekly newsmagazine (www.bulatlat.com, www.bulatlat.net, www.bulatlat.org).
Vol. VII, No. 2, Feb. 11-17, 2007

Commentary

P125-Wage Hike and Arroyo’s Economic Boom

BY ARNOLD PADILLA
Ibon Foundation

Posted by Bulatlat

In a televised forum on Edsa Dos’s sixth anniversary, President Gloria Arroyo declared that Filipinos are experiencing the benefits of the country’s economic boom but “they just don’t know it yet.”

The statement came after she proclaimed more than a week before that she would veto any legislation for a substantial wage hike after the House of Representatives passed House Bill (HB) No. 345 last December which proposes an increase of P125 ($2.58 at an exchange rate of $1=P48.305) in the daily minimum wage over a three-year period.

Pres. Arroyo’s pitch of a booming economy amid renewed calls for a substantial wage hike has two implications. First, an increase in workers’ pay at this time may undermine economic growth and second, there is no need for a wage hike since people are already reaping the gains of an economic boom.

But economics is not only about the creation of wealth but its distribution as well. Thus for 2007, Pres. Arroyo said government would focus on ensuring that the masses got the social payback by continuing to spread the wealth brought about by economic gains. But Pres. Arroyo, who was a long-time economics professor before she entered politics, seems too overlook that one of the most important ways to increase the share of workers to the pie of social wealth– that was in the first place created only through their labor power– is to increase their wages.

Meaningless ‘growth’

Pres. Arroyo’s recurrent and triumphant theme in the past few months has been how the country is supposedly on track to achieve First World status. The gross domestic product (GDP), by National Economic and Development Authority (NEDA) reckoning, would hit 7.10% this year or three years ahead of the original program. Full-year GDP growth from 2001 to 2005 at constant prices averaged a respectable 5.05% and posted 5.40% in three quarters of 2006.

Beneath this considerable economic growth, however, is the reality of widespread social discontent. In the October 2006 round of IBON’s nationwide survey, 70.56% of the respondents considered themselves poor; 62.80% said that their income is not enough for their family’s needs; and 51.65% said that their livelihood worsened compared with the previous year.

Obviously, the economic system has failed to equitably distribute the increasing social wealth that the economy has produced in the past years thus alienating the workers from the supposed economic growth and from the fruits of their own labor. The $1,400 GDP per capita (i.e. the value of domestic production as equally divided among each Filipino) that Pres. Arroyo projected this year is meaningless because wealth is actually concentrated in a very small segment of society. According to the 2000 Family Income and Expenditure Survey (FIES) of the National Statistics Office (NSO) only 28.83% of the total number of families account for 65.24% of the total national income while 71.17% share the remaining 34.76 percent. The top two income classes, which represent only 13.23% of the total number of families, account for 44.45% of the total national income.

Poverty amid increased profits and productivity

Thus, only this small portion of the population felt whatever gains the economy has produced in recent years. In concrete terms, capitalist profits have been growing tremendously while workers’ pay has remained depressed. Between 2001 and 2005, for example, the net income of the biggest 1,000 corporations in the country expanded by 327.23% with an annual growth of 37.86% while their gross profit margin has steadily increased during the same period averaging 19.56% per year. Profits rose remarkably as labor productivity (or the average value created by each worker in a given period) went up by 34.64% in nominal terms and 10.23% in real terms between 2001 and 2005 based on figures from the National Wages and Productivity Commission (NWPC).

On the contrary, the minimum wage has barely moved since the Arroyo government took over. Data from the NWPC show that from 2001 to 2006, the minimum wage (including the cost of living allowance or COLA) in all regions of the country fell by 3.96% in real terms. In nominal terms, the minimum wage has increased by almost 23.66% during the same period but this was not enough to cope with the increase in cost of living. Using the family living wage of the NWPC as standard, the daily cost of living in all regions for each family has grown by 51.57% between 2001 and 2006.

This only means that while capitalists get richer from the sweat of labor, workers and their families become even poorer. In 2006, the average daily minimum wage (with COLA) for all regions was P229.35 ($4.74) which was short of P447.98 ($9.27) to meet the estimated daily cost of living (i.e. family living wage computed by NWPC) for all regions of P677.33 ($14.02). The gap between the minimum wage and the cost of living has widened by 72.27% between 2001 and 2006, increasing by 11.60% annually during this period.

Wrong economic policies

These statistics, culled from government agencies, strongly support the argument for a P125-wage hike. These provide a reasonable basis for a substantial increase in workers’ pay.

But more importantly, these also illustrate the moral urgency of a wage hike to give the direct producers of social wealth and their family some breathing space from seething poverty worsened by the relentless price hikes, tax increases, diminishing public spending for social services, etc.

They belie the doomsday scenario repeatedly raised by the business sector, and loyally echoed by Pres. Arroyo and her economic managers that a substantial wage increase would result in massive bankruptcy, widespread displacement, high inflation, and overall economic slowdown. This doomsday scenario is already a reality that Filipino workers are forced to face everyday and Pres. Arroyo only has her own economic policies to blame.

Thousands of small local firms become bankrupt due to lack of government support and undue exposure to foreign competition. From January 2001 to June 2006, for instance, 3,540 firms closed shop or reduced their workforce because of competition, displacing 105,010 workers in the process; due to financial reasons: 3,902 affected firms with 91,345 displaced workers; and due to reorganization: 7,826 affected firms with 113,109 displaced workers. In contrast, only 104 firms closed shop or reduced their workforce that displaced 1,793 workers due to minimum wage adjustments in the last six years.

Inflation rate, meanwhile, has been on the rise averaging 5.55% annually from 2001 to 2006 as utilities, for instance, are monopolized, privatized, and deregulated. During this period, Meralco rates for residential users have jumped by 51.82%; water rates in Metro Manila have increased by 259.37% (Maynilad) to 333.54% (Manila Water); and diesel pump prices have soared by 150.36 percent.

Social payback

Pres. Arroyo must undo her economic mismanagement if she seriously wants to reverse the trend of bankruptcy, displacement, and spiraling prices and not further burden the poor workers by sabotaging HB No. 345 (and its Senate counterpart – Senate Bill 2030 that proposes a one-time P100-wage hike).

If Pres. Arroyo wants to talk about “social payback from the booming economy”, the only acceptable and meaningful social payback that Filipino workers deserve today is a substantial increase in what they take home to spend for the daily needs of their families. And even this is not enough as current wage hike proposals would still not enable many families to meet the decent living standard. Thus, it must be complemented by price controls, tax reforms (i.e. repeal the regressive VAT on socially sensitive products and services), and drastic increases in spending for education, health, housing, and other social services.

Of course, the ordinary Filipino worker knows too well that Pres. Arroyo and the capitalist class she protects and represents will not give the substantial wage hike demand on a silver platter. It took more than seven years since the P125 campaign was launched before Congress can even pass a bill on it. HB No. 345 is nonetheless an initial victory, even as it paves the way for more struggles– to consolidate and strengthen the rank of workers and further expose and weaken the rotten regime– that can only be won through uncompromising militancy. IBON Features/posted by Bulatlat

Permission is granted to reprint or redistribute this article, provided its author/s and Bulatlat are properly credited and notified.