Low Purchasing Power Negates Recent Wage Hikes

The good news is that all regional wage boards in the country have granted wage increases. This obviously means that private sector workers nationwide are now entitled to higher wages. The bad news, however, is that the increase in wages is not enough to offset the decline in purchasing power.


That all Regional Tripartite Wages and Productivity Boards (RTWPBs) in the country approved wage increases in July and August does not mean that they had the workers’ interests in mind. On the contrary, workers have every reason to question the wage increases not only as being “too little, too late” but as being “too callous, too obnoxious.”

Effective July 11, private sector workers in the National Capital Region (NCR) are entitled to a daily minimum wage rate ranging from P313 ($6.11) for agricultural workers to P350 ($6.83) for non-agricultural workers. In late July and early August, other RTWPBs followed suit in granting wage increases, the last ones being Regions I (Ilocos) and II (Cagayan Valley).

The regional wage board in Region I granted a P3 ($0.06) to P13 ($0.25) wage hike and integrated into the basic wage the P12 ($0.23) cost of living allowance (COLA). The regional wage board in Region II, on the other hand, granted a P10 ($0.20) wage increase. The two decisions took effect last August 9.

At present, the daily minimum wage rate for non-agricultural workers ranges from P200 or $3.90 (Autonomous Region in Muslim Mindanao or ARMM) to P350 or $6.83 (NCR). While one may argue that a wage increase, the amount notwithstanding, is better than nothing, it is still necessary to assess how the recent wage increases now affect a person’s buying capacity.

Based on the July 2006 consumer price index (CPI) released by the National Statistics Office (NSO), it appears that the Philippine peso has lost 28% of its value if one were to analyze the prices of goods and services six years ago. The CPI is used to monitor fluctuations in the prices of selected commodities and is necessary to compute the purchasing power of the peso (PPP). The latter, after all, is derived from the equation (1/CPI) x 100.

Purchasing power measures a person’s buying capacity by comparing how prices fluctuated through the years. In the case of the current CPI data sets, 2000 is used as the base year.

In July 2006, the real value of P1.00 ($0.02) was only P0.70 ($0.01) in the NCR. This means that compared to prices six years ago, a person needed only, say, P70 ($1.36) in 2000 to buy the same goods and services that are now worth P100 ($1.95).

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