Living wage

We have been accustomed to incremental wage hikes implemented by the Regional Tripartite Wages and Productivity Boards (RTWPBs) in the country for many years. These adjustments are usually the result of a tug-of-war between labor groups and business groups represented in the RTWPB. The outcome often leads to wage increases that are unsatisfactory to the labor sector and grudgingly accepted by the business sector, with the government tending to lean in favor of capital or business interests.

Thus, it is quite a pleasant surprise that a bill proposing a ?200 across-the-board daily wage increase for private sector workers has passed the first stage and is now set for a second reading in the House of Representatives. Reports state that the House Committee on Labor and Employment approved on Thursday the substitute bill consolidating House Bills 514, 7568, 7871, and 10139, all of which push for across-the-board wage hikes.

But some lawmakers, particularly from the Makabayan bloc, are pushing for a much larger wage hike --a ?750 daily increase. Rep. Arlene Brosas of the Gabriela Women’s Party-list, citing data from IBON Foundation, said that a family of five would need at least ?1,200 per day to cover essential food and non-food expenses while also allowing for savings. With the average nominal wage at ?465 per day, an increase of ?759 is needed, according to a report by PhilSTAR.com, which cites IBON Foundation data.

If we examine the graphic published by BusinessWorld Online in December 2024, titled "How Minimum Wages Compared Across Regions in November (After Accounting for Inflation)", it clearly illustrates how inflation has significantly reduced the real value of wages, making it harder for workers to afford basic necessities despite nominal wage increases.

The data shows that inflation has eroded the purchasing power of workers' wages by 17.6% to 25% compared to the officially-mandated daily minimum wages set by the RTWPB. In peso terms, this means that real wages were lower by approximately ?74.48 to ?125.15 per day, effectively rendering nominal wage hikes by the RTWPB meaningless or even unjust.

NCR or Metro Manila workers have the highest nominal daily minimum wage at ?645.00, but after accounting for inflation, its real wage is only ?521.61, resulting in a difference of ?123.39. Central Visayas, on the other hand, has a nominal wage of ?501.00, which translates to only ?413.03 in real terms, a difference of ?87.97. Across the country, wages remain inadequate for workers to keep up with rising costs.

The data raise concerns about wage policies and whether they effectively protect workers from economic instability, as inflation continues to erode the real value of any nominal wage increase. So why is this happening? Why have we allowed it to happen?

As they say, it’s complicated. But nothing is too complicated when it comes to people’s right to a living wage. So let me break down the arguments on this issue into two schools of thought. One advocates for market efficiency and rational incentives and, therefore, sees the living wage as diametrically opposed to this idea. The other side, which supports a living wage, calls for revisiting older economic theories that view wages as more than just market transactions but as the foundation for social well-being and economic stability --often referred to as the social justice principle.

There are also valid concerns from small businesses who might not be able to afford to pay a living wage. However, this concern has been addressed in our Labor Code, which grants certain establishments the option to apply for an exemption from compliance with the minimum wage order.

Historically, many economists, including John Stuart Mill, Alfred Marshall, and Adam Smith, supported the idea of a living wage, seeing it as beneficial to productivity and stability in society. I believe in striking a balance between workers’ dignity and the need to sustain a competitive labor market.

That is where the government can intervene --to thoroughly study the objective conditions on the ground, examine empirical data, and balance moral imperatives with practical considerations. Chances are, it will find that our workers have long been underpaid, not because the economy lacks the capacity to sustain fair wages and redistribute wealth, but due to the myopic business lobby that prioritizes short-term profits over long-term economic stability and social equity. (CEBU NEWS)