Gov’t warned against adoption of national minimum wage

A group of prominent economists and socio-political thinkers cautioned the Department of Labor and Employment (DOLE) against the implementation of a national minimum wage policy, saying this would only deepen poverty and joblessness in the countryside.

The Foundation for Economic Freedom (FEF)—an organization that vows to uphold market-oriented reforms, well-defined and secure property rights, consumer welfare, and good governance—warned that having a nationwide minimum wage policy would be in conflict with the Duterte administration’s growth “rebalancing” policy.

“Seeking to impose high minimum wages in the entire country irrespective of local conditions of unemployment and cost of living will only drive investments and jobs away from the countryside,” the FEF said.

FEF noted that the country already had one of the highest minimum wages in the world relative to average wages, citing World Bank data.

“To encourage investments in labor-intensive industries which will reduce the country’s high unemployment problem, we urge the modernization of the labor code to relax the code’s short and strict labor security provisions and to allow workers and companies to freely negotiate wages,” the group said.

FEF also urged the administration to consider the creation of special economic zones where labor-intensive industries could be set up, exempted from the mandatory implementation of legal minimum wages.  The group noted that at present, labor-intensive industries like garments and light manufacturing were avoiding the Philippines because of the high minimum wages. These prospective investors instead move to Vietnam and Indonesia.

Minimum wages in the country are currently set by Regional Tripartite Wage and Productivity Boards (RTWPBs) across 14 regions, including the Autonomous Region in Muslim Mindanao.

The country adopts a two-tiered wage system, which maintains the mandatory minimum wage setting under the Wage Rationalization Act as the first tier and complemented by a voluntary productivity-based pay scheme as the second tier.

In setting the mandatory minimum wage, the RTWPBs refer to the official data on poverty threshold (National Statistics Coordination Board), prevailing wage rates (labor force survey) as well as socio-economic indicators such as inflation, employment, local gross domestic product, among others.  On the second tier, a voluntary productivity-based pay is implemented through a labor-management mechanism such as the productivity committee or any similar body.

The RTWPBs issue advisories on productivity incentive pay schemes as reference of workers and enterprises in the implementation of productivity improvement and gain-sharing programs. They identify priority or growth industries including their supply chain, as the subject of their advisories.

The two-tiered minimum wage-setting system is intended to make sure that the minimum wage is slightly above the poverty threshold to help workers and their families meet their basic needs but should not exceed average wage, taking into account employers’ capacity to pay.

FEF is chaired by former Finance Secretary Roberto de Ocampo. The vice chair is Romy Bernardo while the president is Calixto Chikiamco. Its senior advisers are former Prime Minister/Finance Minister Cesar Virata and UP economics professor emeritus and former economic planning minister Gerardo Sicat. Members of the board are Anthony Abad, Art Corpuz, Eduardo Gana, Felipe Medalla, Vaugh Montes, Simon Paterno, Perry Pe and Gloria Tan-Climaco.