P125-Wage Hike and Arroyo’s Economic Boom

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 wage increase complemented by price controls, tax reforms, and drastic increases in social services spending

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).

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