Minimum wage hike: Pricing unskilled & new entrants out of the market

In a month from now, May 1, the entire country shall again observe our fellow workers’ day. Therefore, expect that demands from different labor unions and coalitions for another round of increase in the country’s minimum wage to be more intense. 

For one, just yesterday, the Kilusang Mayo Uno (KMU) sought the abolition of the country’s wage boards, saying “they do not cater to the needs of workers”. The labor group made the call after Labor Secretary Rosalinda Baldoz reiterated the Department of Labor and Employment’s (DOLE) position that the proposed P125 across-the-board daily wage hike “is not feasible.” 

In a statement, KMU secretary general Roger Soluta said that “there exist enough grounds to adjust the salaries of workers but the Regional Tripartite Wages and Productivity Boards (RTWPBs) continue to be blind to them.”

He further accused the regional wage boards of again “proving to be instruments of capitalists and the government for pressing down wages.”   Soluta said the “KMU’s call for wage increase nationwide should be discussed in Congress where it has a chance of being approved” 

In a way, he is trying to suggest that minimum wages must be legislated.  Therefore, selfishly, expect too that politicians will give in to their clamor, not for an honest-to-goodness concern, but to maintain visibility and quick recognition for election purposes.  

Sadly, however, businesses are still trying to psyche themselves up to try to establish a stronger hold on whatever assets left from the menacing downturns they were in. Whether labor unions considered these businesses’ predicaments in demanding for these increases, we do not know. Certainly though, these demands are totally devoid of sympathy.

In trying to understand the present situation, we must take a look at wages in an all-encompassing perspective. In more professionally managed companies, it is viewed positively as investment not cost. To some cash-strapped institutions, it is something that they would like to control to survive. To some miserly affluent companies or businessmen, however, it is something they’ve made their hapless employees continued to starve. Clearly, in these three scenarios, employers differ in the ways they treat their employees and in their approaches in compensating them. Some are too generous, a few are reasonable and others are just too stingy.  

On the other hand, laborers and employees differ in many ways too. Overly protected by our labor laws, even those with salaries three times higher than the established minimum wage are filing notices of strikes. However, it is a fact too that despite receiving wages way below established floors from unreasonable employers, some laborers just grumble in the corner by their lonesome. Obviously, they prefer to have little something than have nothing at all. Indeed, there are varying approaches among employers and employees. These varied approaches are either necessitated by business and economic conditions or just mere attitude. 

Despite these recognized diversities, however, labor unions and lawmakers (despite having hundreds of them) can only figure out one common solution. As usual, legislated wage increase.   Well studied or not, only the future can tell. 

In the meantime, however, let us revisit a bit of history on legislated minimum wages. Lacking in originality, as it has always been, we look into other countries’ practices and take them as our own solution as well. As usual, we are precariously taking them as our own despite the assortments of conditions that are just so different.

History will tell us that legislating minimum wages was started in Australia and New Zealand with a noble purpose of ensuring decent standard of living for unskilled workers. It was perceived as both the wall shielding the workers from exploitation by unjust employers and as a primary weapon in the war on poverty. 

Australia, one of the first advocates of the minimum wage law, showed us one of its damaging effects when, in 1921, the federal court established a minimum wage for unskilled workers. Ignoring the employers’ right to value the workers’ worth vis-à-vis their skills, the workers (through the minimum wage law) priced themselves out of the market. Consequently, unemployment increased and those who insisted to work found some solace from employers who can ill-afford but are willing to break the law.

The same situation prevailed in the United States of America when a hospital terminated a group of women after the District of Columbia’s Minimum Wage Board ordered them to raise their wages to the legal minimum. Sarcastically, the women filed a case to halt the enforcement of the minimum wage law. Acknowledging the merits of their case, the U.S. Supreme Court, in 1923, ruled that “the minimum wage law was simple price-fixing and an unreasonable infringement on individuals’ freedom to determine the price at which they would sell their services.” Consequently, they stayed and enjoyed the usual benefits they had.

Another conflict happened in 1990 when the U.S. Department of Labor ordered the Salvation Army to pay the minimum wage to their volunteers in its work therapy programs. The programs provided participants (mostly, homeless and drug and alcohol dependents) a meager weekly stipend, three-month food and shelter subsistence as well as counseling, in exchange for processing donated goods. The Salvation Army appropriately reasoned out that compliance of such an order would force them to close the program. 

Just considering these unfortunate events in these countries’ wage legislation makes us shiver. Added to that fact could be a very tricky scheme that maybe employed by our employers that is very legal and yet disadvantageous to our workers. This precarious option could be the changing of the workers’ compensation package. It is a known fact that some of our workers have tax-free fringe benefits. Granting that the demands for wage increases will be approved, most employers will be forced to redesign their compensation packages to the detriment of the employees. Once approved, it is almost certain that some employers will simply reclassify or transfer some of their employees’ tax-free benefits to their basic pay. It simply means that tax-free medical benefits, rice and laundry allowances and the like will be transferred to their basic pays. Certainly, transferring these tax-free benefits to their basic compensation is substantial compliance of the wage order (if something shall be passed) as far as employers are concerned. 

Moreover, the unskilled and inexperienced workers or new graduates will suffer the major blow. With the same amount of pay, companies will definitely go for skilled and experienced ones. Therefore, as the unskilled and inexperienced workers will turn out to be expensive, the possibility they’ll loss their jobs is imminent. 

Furthermore, some unskilled or new entrants in the labor market may not be given the opportunity to work and gain experience. These are valuable experiences that are really necessary for them to use as bargaining chips for higher pay demands in the future. Unfortunately too, they will miss the opportunity to earn while learning skills and gaining experience.

Despite all these facts and possible courses of adverse actions employers may take, we can expect skirmishes here and there. The left-leaning organizations will certainly take advantage of the situation to advance their causes. On the other hand, as election nears, lawmakers will certainly join in the fracas to seemingly portray their concerns over their constituents despite their ulterior motive of just protecting their political turf.

Whatever selfish motives some may have, however, there is no shade of a doubt that the demand for a wage increase is noble intention and will have wide political support. Lest we forget, history has taught us that noble intention and wide political support are not enough to ensure such approach brings about good results. 

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