Minimum wage, as defined by the International Labour Organization, is the bare minimum of payment that an employer must pay to wage workers for work done during a certain period, which cannot be decreased by a collective agreement or an individual contract. The implementation of minimum wage laws and policies is to provide protection to desperate workers against exploitation. In the Philippines, requests and petitions by workers for the increase of minimum wage are evident. It is a controversy between the government employment agencies and labor unions. Raising the minimum wage has its significant effects on a country’s employment, businesses, and economy; therefore must be given priority. As stated by the International Labour Organization, a significant proportion of minimum wage workers live in poor or low-income households. To counter the deprivation of access to necessities or poverty, the government must consider raising the minimum wage of the Filipino workers.
Admittedly, some would contradict the requests of increase in the minimum wage for the following reasons: Raising the minimum wage would probably cause an increase in inflation since business will proportionally increase prices of goods and services. Also, setting a higher minimum wage will affect most families’ income in many ways, and that might lead some families to extreme poverty since entry-level jobs will be reduced. The current situation of the Philippine economy could not adjust easily; many businesses closed and stopped operating, and with the increase of low minimum wage, the country might be drowned from greater debt.
“Raising the minimum wage can cause inflation”
Raising the minimum wage will have a proportional effect on the inflation rate of the country. When businesses increase the minimum wage of their workers, this will fall back to the prices of their goods and services, thus fueling inflation. Besides increasing the prices of goods and services, businesses will also experience a great increase in cost production that would somehow hinder the business in producing more goods in the market. The ensuing revenue increase partially compensates the underlying cost increase for businesses; for employees, the increase in their earnings is partially countered by increases in the prices they confront as consumers (Clemens & Strain, 2017). However, inflation caused by the increase of minimum wage may contribute to the improvement of the economy. High prices and high income is better than high prices and low income. Inflation occurs when the prices of goods and services rise. It is often viewed as bad, however its impact differs on what extent the rate of inflation is. Inflation at a reasonable level is often regarded as a sign of a thriving economy, since as the economy rises, so does demand for goods (Warr, 2019). The impact of inflation on consumers may be determined as good or bad depending on how it affects their purchasing power or bargaining power. An article from the International Monetary Fund Organization, written by Öner (n.d), mentioned that when households’ nominal income does not increase as much as prices, it is difficult for them as they can only purchase less. Inflation is not bad if the increase in income compensates for the high prices.
“Raising the minimum wage will reduce entry level jobs and cause greater debt to the country.”
Besides the aforementioned, raising the minimum wage will reduce entry-level jobs in the country. Most families and bread winners are entry-level job workers and with the increase in minimum wage, the chances of getting unemployed will increase. With the pandemic still happening, businesses are not yet in full operation. Raising the minimum wage could greatly affect the businesses who are not earning enough than before the pandemic started. With the decline in business profits, the country’s economy consequently declined as well. With the the only resort of families and businesses is to go bankrupt or be in debt. The minimum wage was designed to ensure that anyone working full-time could not only live, but also support a family on a modest but secure income. People in entry-level jobs work a complete shift of varied types of labor, and they are entitled to a dignified living when they return home. It should be a fundamental right of the employees to be treated with basic human dignity and fair compensation for their economic contributions. The minimum wage does not offer enough income to survive on since it does not increase in line with inflation; the minimum wage can only be increased through action by the government (Kagan, 2021). Also, the minimum wage was created so businesses couldn’t pay a person less than a living wage, as no company should be able to exist if it can’t pay its workers a living wage. By raising the minimum wage, the increase in employee morale could easily translate into more tangible benefits, such as increased employee retention and reduced hiring and training costs. Employees who are more inclined to stay with a company longer could benefit from greater advancement and from an overall reduction in job-related relocation expenses (Maverick, 2021). The increasing debt of the country due to businesses going bankrupt is only a logical fallacy which is used to derail the conversation and ignore the problem. With bankruptcy as an option, people or businesses may work with a bankruptcy lawyer to find a solution that allows them to continue working, paying taxes, and spending, all of which helps boost the economy (George, 2017). Katz, L. F., & Krueger, A. B. (1992) found in their results in their study that employment increased at firms most affected by the minimum wage increase, and price changes appear to be unrelated to changes in wages resulting from the minimum wage increase. Though a large increase in minimum wages might result in employment decrease and price increase, Castillo-Freeman and Freeman (1992) found that the relatively high minimum wage in Puerto Rico has resulted in substantial employment losses. Under certain conditions, monopsony models predict that a small increase in the minimum wage leads to an increase in employment, whereas a large increase in the minimum wage leads to a decrease in employment.
Having the circumstances of the issue established, the organization’s first proposition is that minimum wage earners in the Philippines have weak bargaining power and financial insecurity. The money that households spend on living expenses basically comes from the income obtained through employers’ salaries and wages. Housing, food, clothes, transportation, healthcare, and other pertinent incidental charges are all examples of daily living expenses. Having adequate money to fund an individual’s lifestyle is referred to as financial security (Cautero, 2019). When it comes to assessing financial security in the household, income is usually given priority, but little consideration is given to whether the household’s resources are sufficient to support expenditures (Households Expenditures and Income, 2016). According to Philippine Statistics Authority (2021), a minimum wage earner in the Philippines receives a monthly pay ranging from US$169.99 (Php 8,458.53) to US$287.24 (Php 14,292.78). However, this depends on the area or region on which the worker is employed. In a report by Cigaral (2020), it is mentioned that high food prices are consuming a large percentage of the pay that minimum wage earners in the Philippines receive, taking up to 75.1% of their wage. After food expenses, few of the wage is left for other necessary expenses like housing or rent, clothing, transportation, and healthcare leading to financial insecurity. As reported by Numbeo.com, the estimated monthly costs in the Philippines are Php 26, 301.73 without rent. According to iPrice, a research data aggregator, Manila is one of the most expensive cities to live in despite having the lowest average salary for the working class in Southeast Asia. (Abadilla, para. 1). It’s also stated that Manila’s cost of living is 33% higher than most leading economic countries in Southeast Asia. The average cost of living in Manila is 168% higher than its average salary, so we can depict that Manila Residents are financially experiencing difficulties in bearing the given high costs and low wages. Based on the estimated cost of living in the Philippines, it is discernible that minimum wage earners have to increase their working hours and productivity in order to overcome the lack of financial resources.
Second, despite labor unions and employees’ effort to seek minimum wage increase, nothing has been done to address it. As the country continues to suffer from the effects of the COVID-19 pandemic, many workers, especially those working in the health sector, suffer from low wages or no compensation. It is undeniable that these people exert the greatest efforts in the country’s fight against the COVID-19. Despite the numerous calls of these people, the government and private sectors gave little to no consideration to their requests. The rate of unemployment in the country during the pandemic has risen to a drastic level. Because of this, many Filipino families suffer from hunger, diseases, and worse, death. With that being said, the call for raising the minimum wage, especially to blue collar jobs is highly relevant and must be taken seriously by the government. With the continuous increase in the cost of our basic necessities, it is high time for the government and private sector to increase the minimum wages of their employees so as to assure that their efforts and hard work is validated. According to the Philippine Statistics Authority, the Philippines’ latest unemployment rate as of August 2021 has an increase of 1.2% with about 3.88 Million having an estimate of 8.1%. This shows how extreme the depletion of the country’s employment rate has been since the start of the pandemic. Moreover, in an article released by CNN Philippines (2021), Philippine inflation rate has further caused a major decrease in unemployment with 3.5% in December 2020. The unemployment rate in the Philippines is evidently seen in many urban and urban poor areas as these people usually work contractual or temporary jobs. With this, not only increase of wage do they protest but also a fair and reasonable compensation for their work. As a result, more labor unions filed petitions to increase minimum wage in all regions of the Philippines (Torres, 2021). A petition was filed in February of this year with the National Wages and Productivity Commission (NWPC) to increase the minimum wage in all regions with the same amount – P100.00, however the petition was left in question as prescribed by the charter of the NWPC, petitions must be filed with the regional wage and productivity board, thus the NWPC did not entertain the said petition for its lack of jurisdiction. With the given case, it can be asserted that labor unions across the country have continuously sought consideration for their wages and compensation, however, the achievement of such is still challenging for the laws and processes still needs reform or modification to instill inclusivity and equity. Since the 1970s, there has been a worldwide sharp decline in labor productivity. Workers in the Philippines demanded greater salaries while the economy was in crisis and productivity and production were declining. The amount of the money pay adjustment and the rate of inflation influenced real wages up and down. Real wages declined over the decades 1971-1975, 1981-1985, and 1998-1999 because commodity prices climbed significantly faster than money pay rates (Bucog, 2008).
Lastly, raising the minimum wage settles income inequality. The society would often make remarks that raising the minimum wage is a basic issue of fairness in a society where income inequality is rising. They think putting more money in the pockets of low wage workers is an effective way to reduce property. A study showcased that if you raise the minimum wage to plus 750 pesos an hour, it would boost the pay of 27 Million workers, and would lift 1.3 million people above the poverty line (Alsalam, 2019). Proponents of raising the minimum wage argue that doing so will lower the number of people living in poverty in the United States, boost the economy, and reduce income inequality. According to a recent analysis from the Congressional Budget Office (2019), raising the minimum wage would lower the number of people living in poverty by 900,000. Furthermore, raising the minimum wage may boost productivity, resulting in a rise in GDP. Increases in the minimum wage could help close the income gap by raising the income of millions of Americans who presently earn less than the minimum wage as well as those who earn more. A study discovered that when the minimum wage is raised, the lowest earnings benefit the most; middle earners benefit little, and top earners benefit little or nothing. As a result, Engbom and Moser argue in Earnings Disparity and the Minimum Wage: Evidence from Brazil that the policy shift produced a considerable drop in earnings inequality “at the same time, as workers move to more productive enterprises, employment and output reduce only slightly ” (Engbom & Moser. 2018, p.5).
In conclusion, the minimum wage in the Philippines should be raised as it would combat the deprivation of access to necessities, especially of the unprivileged. The organization recognized that the current real minimum wage in the country is not sufficient for the living expenses of households, making the minimum wage earners with dependent household members at disadvantage. In addition to this, inflation elevates due to the resurgence of Covid-19 resulting in the low bargaining power of consumers. With the current situation of the state, requests and petitions were made by labor unions to raise the minimum wage in order to cope with the rising prices, however the minimum wage remains the same as the last adjustment. Raising the minimum wage will also assist in settling the income inequality in the country.
Conversely, government leaders are firm on giving no adjustments to the minimum wage as it would impact the country’s economic growth and employment; however, they give less consideration to households that suffer from poverty and financial insecurity. The significant percentage of the population who are below the national poverty line are at disadvantage as they are not able to subsist. With this, the call for an increase in minimum wage suffices the amount of basic necessities of every Filipino family as prices or goods and services continue to rise. Filipinos living below the poverty line couldn’t even eat at least three times a day, and increasing their minimum wage is enough to afford their basic needs. Moreover, the organization suppose that Filipino families would afford the cost of living while raising the minimum wage with a proper consideration of inflation rate.
Author/s:
Salary Increase For Better Opportunity and Living
University of Santo Tomas Senior High School
| Jhun Cedrix Bautista SIBOL member | Hannah Britaney Lamorena SIBOL member |
| Jeanine Cheska Merino SIBOL member | Paolene Faye Ocampo SIBOL member |
| Lloyd Andrew Sinoy SIBOL member | Lanz Leo Suarez SIBOL member |
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