Bu-lat-lat (boo-lat-lat) verb: to search, probe, investigate, inquire; to unearth facts

Issue No. 31                       September 16-22,  2001                    Quezon City, Philippines

Economic Justifications for P125 Wage Increase

In reality, the need of workers for immediate relief from the effects of the deepening socio-economic crisis in the country is irrefutable while the so-called disadvantages of a wage hike are either false or exaggerated to dampen the burning campaign for P125 across-the-board wage increase nationwide.

By ecumenical institute for labor education and research (eiler)
Bulatlat.com

It is a familiar doomsday scenario.  Workers demand a substantial wage hike in the wake of spiralling costs of basic goods and services.  On cue, big business screams even louder that inflation, closures and lay-offs would be the result of any such wage hike. 

Columnists and commentators who otherwise wouldn’t deign to speak about workers’ rights and welfare are suddenly concerned about jobs and job losses, echoing the perennial refrain of big business.  If only they were as vociferous in their protest against the shameless profiteering of the oil cartel, the multinational drug companies, and other TNCs in the country, the privatization and commercialization of social services, as well as the fanatical liberalization of the economy that is the real culprit behind the country’s job-loss growth pattern. 

In reality, the need of workers for immediate relief from the effects of the deepening socio-economic crisis in the country is irrefutable while the so-called disadvantages of a wage hike are either false or exaggerated to dampen the burning campaign for P125 across-the-board wage increase nationwide.

The need is undeniable

The current minimum wage of P250 in Metro Manila (where it is highest) is less than half of the daily cost-of-living estimate of IBON Databank  or even compared to the living wage according to the government’s own National Wages and Productivity Commission (NWPC).   It can barely cover the minimum food basket for a family of six as prescribed by the Food and Nutrition Research Institute (FNRI). 

Table 1.  Minimum and Median Wages vs. Daily cost-of-living

Notes:
/1 Average monthly basic pay divided by 26 working days, for all time-rated rank-and-file workers in firms employing more than 50 employees. A median wage of X means that half of all employees receive wages lower than X while the other half receive wages higher than X.
/2 Daily cost-of-living (DCOL) for a family with six members

Sources:
Nominal minimum wage data from NWPC.
Data on average daily wage in non-agriculture industries and median daily wages from DOLE-BLES Labstat Updates Vol. 5 Nos. 11-14.
DCOL data from IBON Databank Foundation.

If we look at the median wages in different industries, we can also see that the overwhelming majority of rank-and-file workers receive wages below decent living standards – including those receiving above-minimum wages. That is why workers need a substantial wage increase across-the-board. 

Contractual workers are worse-off, receiving between 40-50% less than their regular counterparts on the average.

Big business using SMEs

While working families experience new depths of deprivation, the share of profits in the national pie has been growing.  The profits of MNCs in the Philippines’ top 5000 corporations, for example, have risen ten-fold  between 1997 and 1999.  Clearly MNCs and the local business elite can afford to pay their workers much more than what they are currently paying.  After all, they seem to be the only ones benefiting from neoliberal globalization while workers are forced to choose between hellish jobs or hellish unemployment. 

That’s why big business is forced to dissemble by claiming to have the interests of small businesses and their workers at heart when they rail against wage hikes.  But in truth, majority of wage and salaried workers are employed in establishments employing 10 or more employees.  Only 37 percent of workers are employed in firms with less than 10 employees (even if such micro-enterprises comprise majority of establishments).  More importantly, labor productivity or the value-added created by each worker in establishments with 10 or more employees clearly indicate that their capitalist owners can afford to raise the wages of their workers by a substantial margin - and still profit.

Table 2.  Distribution of Firms and Employment, Productivity

Sources: Data on distribution of establishments and employment from NSO; Data on productivity of formal sector from 1998 DOLE-BLES Yearbook of Industry Statistics CD-ROM ; Data on productivity of all RP from http://www.nwpc.dole.gov.ph/

Note that government functionaries and neoliberal economists are predisposed to citing productivity statistics based on gross valued added  (GDP) and total employment of the entire economy  -- including the low-productivity household (informal) sector which is not covered by minimum wage and labor standards law in the first place.  This understates the productivity of workers and the capacity-to-pay of capitalist-employers in the establishment (formal) sector -- where wage and salaried workers are to be found -- by more than three times (taking 1995 as an example). 

Filipino entrepreneurs are overcome primarily by the high interest rates of the local banking cartel, high power rates and poor infrastructure, unfair competition from foreign monopolies, their local agents and Malacañang-favored businessmen who corner concessional loans from government financial institutions. Foreign competition in the form of cheap imports and foreign investors encouraged by the government's own neo-liberal policies is pushing domestic industry to the brink of bankruptcy. 

In this light, workers and small Filipino entrepreneurs have a common interest in opposing neo-liberal globalization which merely favor transnational corporations, the cartel operations and rent-seeking of local big business and their brokers in government. 

Support from non-wage and informal sector workers

Nearly 14 million wage and salaried workers and their families stand to benefit directly from a legislated wage increase, or two-thirds of the country’s non-agricultural workforce.  Other measures must be pursued to provide relief and address the basic concerns of the remainder of the labor force.  But surely only the most narrow-minded and anti-worker cynic would oppose a wage increase simply because it will not directly benefit all workers. 

In fact, the unemployed, unpaid family workers, the self-employed and irregular workers in urban poor communities, for example, also support the campaign for a wage increase because their parents, siblings, relatives or even neighbors stand to benefit.  In short they stand to benefit indirectly.  This is not surprising since the only meaningful safety net and social security system available to the Filipino poor is provided by the extended family and the community.

Moreover, unlivable wages actually magnify the unemployment problem and swell the informal sector because it forces more members of the household to seek employment in order to earn more for the family.  Millions of children or youth are forced to leave school in order to augment the family income or at least cut down on family spending.  Some 3.7 million Filipino children are forced to eke out a living on their own. 

Unemployment crisis not a valid pretext for opposing wage hike

Neither should the poor investment climate and chronic unemployment be blamed on "uncompetitive wages" prevailing in the country.

In the Philippines, the flood of imports due to import liberalization, a constricted market due to mass poverty, systemic corruption, cronyism and state abandonment of its rightful duties including the provision of adequate public infrastructure and utilities have rendered domestic production more costly and less rewarding compared with mere trading, finance and TV game shows.  This has been confirmed by numerous surveys of business executives in the country as well as the Department of Labor and Employment (DOLE).

According to DOLE figures, nearly one-fourth of all establishments resorting to closures and retrenchments in the first quarter of this year cited "lack of market/slump in demand" as the principal reason for the decision while only 1.3 percent cited wage rates as a problem.  Weak demand was the second most frequently cited reason while the top excuse is "reorganization".   This is often a euphemism for laying off regular workers to be replaced by contractuals, agency-hired workers or subcontractors. 

The proximate cause of increasing distress in the domestic economy and the real threat to jobs is the wanton liberalization of the economy according to the dictates of US-dominated international financial institutions, namely the IMF-WB-WTO.

Even before the Asian financial crisis, many local industries were already stagnant or in decline in the face of competition from foreign imports.  This was made worse by the country’s accession to GATT-WTO in 1994 – championed by then Senator Macapagal-Arroyo.  Barely a year after, our trade deficit in agricultural products quadrupled and has widened each year since.  The Kilusang Magbubukid ng Pilipinas (KMP – Peasant Movement in the Philippines) estimates that around 400,000 rice farmers, 66,000 corn farmers, 200,000 fisherfolk and nearly 500,000 sugar workers and farmers have been displaced by the flood of imports under the WTO regime.  By the turn of the millennium, our unemployment rate is at its worst level in 10 years while the underemployment rate was the highest ever recorded. 

The severe and chronic unemployment crisis in the Philippines should not be used as a pretext for depressing workers’ wages and trampling on workers rights.  Rather, it should compel the Arroyo government to rethink its basic development strategy and abandon its fanatical devotion to neoliberal globalization.

 “Global competitiveness” should not be based on providing cheap and oppressed labor.

First off, lower wages do not necessarily attract more investments. Around 80 percent of the global flows of foreign direct investments in the last decade have been concentrated in the US, Japan and the other rich countries of Western Europe.  Even in Asia, countries with higher wage levels compared with the Philippines such as Hong Kong, Singapore, Taiwan and South Korea, attract greater foreign direct investments.  Indeed, “market size” is an important consideration for investors - reckoned not only in terms of the population’s size but also its purchasing capacity. Clearly encouraging productive investments should not preclude raising people’s incomes. 

The current downturn in the global economy must be seen in its proper light.  In the wake of massive mergers among international monopolies and the depressed incomes of the broad masses, the global crisis of overproduction now affecting all types of goods - from raw materials to light consumer goods to high value-added manufactures - is forcing MNCs to shut down plants or downsize operations.  Neo-liberal globalization is prompting MNCs to “rationalize” their operations by closing down plants in many countries while expanding their production in other plants in a few countries according to the global profit calculus of international monopolies. 

The economic crisis is not a valid pretext for cornering workers in a “jobs versus wages and rights” equation as it is being used by big business and their client technocrats. Competing for foreign investments against 120 or so countries that make up the rest of the Third World by offering ever cheaper labor, more tightly fettered unions and workers deprived of security and democratic rights will only condemn workers to suffer an unending downward spiral of wretchedness and indignity. 

Genuine development should not just trickle down but should be directed towards uplifting the broad masses from poverty and penury.  It cannot be dictated by market forces which reward owners of property and capital while immiserizing the majority with no means to live except backbreaking toil. Bulatlat.com

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