Wage debate in the Philippines intensifies

Foreign firms have objected to trade union proposals to raise the minimum wage, fearing this will cost the Philippines its competitive edge in what is an increasingly tough global investment climate. However, unions say the changes are crucial as workers need to shoulder increasing utility costs.

Citing inflation-based increases in the cost of essentials such as electricity, water, liquefied petroleum gas and school tuition, in July the Trade Union Congress of the Philippines (TUCP) reiterated a formal request that the Regional Tripartite Wages and Productivity Board (RTWPB) in the National Capital Region (NCR) raise the daily minimum wage in Metro Manila by PHP85 ($1.95).

"The PHP85 daily increase in NCR is essential if workers are to cope with the increasing cost of living, if they are to meet the basic needs of their families, and if the country is to give meaning and substance to the policy of equitable distribution of income and wealth," TUCP president Victorino Balais said in April when making the initial request.

Echoing the demands of the TUCP, in August minimum-wage earners in Southern Tagalog on Monday filed a petition for a PHP79.50 ($1.82) wage increase.

“The sad fact is workers are still in a miserable state, with the current minimum wage pegged at PHP349.50 ($8.02) eroded by 2.7-3% due to inflation and high costs of basic needs,” said Ramon Certeza, the general secretary of the Confederation of Labour and Allied Social Services, an affiliate of the TUCP.

However, the unions’ demands seem ill-timed. On August 6 the central bank revealed that annual inflation unexpectedly slowed in July to its lowest in nearly four years, giving the central bank leeway to cut interest rates further if required.

The consumer price index eased to 2.5% year-on-year, owing to lower utility costs and prices of alcohol and tobacco. It was the lowest rate since September 2009 when the inflation was 2.3%, according to the national statistics agency.

Foreign investors say that the demands are not only uncalled for, but that they will harm the country’s investment levels and cost the jobs of thousands in the small and medium-sized enterprise sector. In July the Employers Confederation of the Philippines president Edgardo Lacson told local media that a rise at this time was “unnecessary and has no factual and legal basis”. He also said the workers’ calculations were “flawed”, according to local media reports.

In a letter sent to Alex Avila, chairman of the RTWPB for the NCR, on August 6, the Joint Foreign Chambers also said a wage increase at this time could result in lay-offs among micro, small and medium-sized enterprises.

“Wages must remain competitive in the sense that wage levels must not result in job loss, as investors avoid the Philippines in favour of other countries with lower labour costs and local markets sell more imported than locally made products.”

Metro Manila’s $10.74 towers over other daily minimum wage in other countries, with Myanmar’ s at $0.52, Cambodia’s $2.03, Vietnam’s $3.15 and Thailand’s $9.75, claimed the JFC.

The planned hike comes amid growing international interest in the Philippines as an outsourcing investment destination, with seven Philippine cities chosen as top locations in a July survey by strategic advisory firm Tholons.

It was estimated in July by the IT & Business Process Association Philippines that business process outsourcing could be a $25bn industry by 2016, accounting for up to 10% of the economy. This year the industry is estimated to make $9bn in annual revenues while employing some 500,000 people.

When rejecting the TUCP’s initial request for the PHP85 rise in May, the Department of Labour and Employment pledged that workers would be receiving non-wage “benefits including contractualisation, tax exemption and social protection”. However, in July, Alan Macaraya, the department’s NCR director, said there would be a salary hike, with a public meeting set for August to determine the exact amount of the raise.

Having held the hearing on the dispute on August 9, the RTWPB-NCR has said it will hear further deliberations before revealing its decision in 30 days.

As the RTWPB-NCR mulls the possible wage increase, it would do well to look at the roots of the disconnect between the trade unions and foreign investors on wage levels. By improving communication between the two and finding the right incentives, it could potentially increase productivity without the need for wage rises.

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