Think tank urges gov't to relax wage rules

BAGUIO CITY—A government think tank on Tuesday urged policymakers to relax wage regulations and allow small and medium businesses to pay salaries below the minimum wage when they hire unskilled workers.

The Philippine Institute for Development Studies (PIDS) said the imposition of a minimum wage had worsened unemployment, a conclusion reached by its labor policy analysis of Philippine job expansion and development.





The unemployment rate in the country stands at 7 percent.

Dr. Aniceto Orbeta Jr., PIDS senior research fellow who participated in the study, said the agency was tasked to examine labor policies, which he described as “tools [that] are not working.”

The policy changes that PIDS is recommending should help reduce poverty, he said, by increasing the chances of poor unskilled workers to land jobs.

“For them, this is a matter of survival,” Orbeta said.

He said, however, that PIDS has yet to study the impact of a flexible or diminished wage regulation on the country’s commitment to international labor standards.

Asean integration

PIDS also needs to see whether its proposals and presumptions about the labor market will remain applicable when the 10 members of the Association of Southeast Asian Nations (Asean) become an integrated market next year, he said.

Integration may allow more Filipinos to leave for jobs in Southeast Asian countries once border regulations are lifted and uniform Asean work and skills standards are applied, said Myrna Pablo, Cordillera regional director of the Department of Trade and Industry.

The minimum wage and other labor regulations are designed to protect workers from abusive employers and to give them bargaining power when seeking better wages, Orbeta said.

But citing the 2007 minimum wage increase as an example, he said the PIDS labor policy analysis found that the rise reduced the probability of an employee retaining his job or an applicant landing a job by 8 percent to 22 percent that year.

Employers end up hiring veteran workers instead of fresh graduates, who now compose the bulk of the unemployed work force, Orbeta said.

Consequently, he said, a typical household income is also reduced when at least one member of the family, who is eligible for employment, ends up jobless due to the restricted hiring opportunities.

The wage increase has little impact on big businesses, but has been detrimental to smaller businesses with 10 employees or fewer, Orbeta said.

A mandated minimum wage “hurts the employment probability of the young, female and inexperienced workers most,” he said, so employers must be allowed “to hire low-skilled and poor workers who want to voluntarily opt out of the mandatory minimum wage norm.”

He said these workers could be supported by special measures to improve the value of their smaller income, including adjustments in tax rates or other ways that would increase their pay.

Lack of investments

But for the Trade Union Congress of the Philippines (TUCP), the real problem is the lack of investments, both public and private.

“Many of our microindustries are exempted from paying the minimum wage. It could not be true that that is the reason for the very low employment rate,” Ernesto Herrera, TUCP president said.

Pointing out that employment rate is related to investments that generate employment opportunities, Herrera said the government should invest in infrastructure, including in education, energy and agriculture.

“We need competitive costs of electricity, irrigation, farm-to-market roads, training,” Herrera said.

“The private sector will not invest if there is no sufficient justification, meaning they are not convinced that they can make money, because their motivation is profit,” he said.

PIDS’ finding that 60 percent of the unemployed are literate only shows that the economy is not producing enough employment opportunities, he added.

Workers’ protection

Alan Tanjusay, a spokesman for the TUCP, said the minimum wage was the minimum standard to protect workers’ interests and improve the quality of labor.

“If there is no minimum wage, workers will be very vulnerable to abuse and oppression,” Tanjusay said. “There has to be a standard such as the minimum wage. Otherwise, we will revert to the age of slavery.”

Another labor group criticized the PIDS study as an “alibi for the government and employers to reduce wages further” and as a “guise for contractualization.”

“The present minimum wage levels are already below living standards, according to the [National Economic and Development Authority] and yet they want to suppress it further,” said Gie Relova of Bukluran ng Manggagawang Pilipino.

“Our experience shows that during wage increase deliberations, government and employer representatives gang up on the labor representative. Never has the government representative sided with the labor sector,” Relova said.

That, Herrera said, is “normally the case, because democracy works through pressure and the greater pressure is exerted by business.”

PIDS’ views not new

Julius Cainglet, assistant vice president for research, communication, networking and project development of the Federation of Free Workers (FFW), said PIDS’ views were not new.

“The World Bank and the Asian Development Bank have been saying that for years. The think tank’s research seems wanting as it failed to consider the real state of workers,” Cainglet said in a text message.

“The minimum wage is but a meager social protection for workers. Present minimum wage rates in Metro Manila could not even cover half the required income needed to afford your family a decent life. Besides, the minimum wage is much smaller in the provinces where a lot of investors set up manufacturing plants,” he said.

“Abolishing the minimum wage would work only if workers have a voice, that is if the majority of them are unionized. We know how employers do everything to bust unions. Without a minimum wage to bank on and a union to fight for their rights to just wages, benefits and better working conditions, the government is opening the floodgates for even more exploitation of workers. We will end up with workers receiving alms and getting employed for no more than five months,” he said.

High cost of doing business

“What is pushing down employment is the high cost of doing business. For one, the country’s power rates are the highest in Asia. Add the fact that there are mounting fees, permits and impossible requirements when applying for a new business or renewing permits for the same. It is a nightmare, in fact,” Cainglet said.

“The FFW believes that this is what curtails employment more and not the minimum wage. We would want to abolish the wage boards for the right reasons like for being insensitive to the needs of workers. But removing the minimum wage right now will only deprive workers even more of their just share in the country’s economic growth,” he said.

Roger Soluta, secretary general of Kilusang Mayo Uno, said PIDS economists were serving the interests of foreign capitalists in blaming the minimum wage for the low employment rate.

“It’s irritating that to justify doing away with the minimum wage, they would use that argument,” Soluta said.–With reports from Erika Sauler and Tina G. Santos in Manila


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