Set real wage growth targets

I would like the Philippines, someday, to be a place where many people would like to come for work, rather than where many would like to leave for work elsewhere. I think that wages that are high relative to other countries are not a handicap, but an achievement. And that wages that are relatively low are not an advantage, but a sign of failure. Obviously, I am not taking the perspective of a global investor. The bottom line, to me, is the people’s perspective.

Wages are hardly being monitored. What matters are the wages that workers actually receive, rather than the minimum wages they are legally entitled to receive. But data on actual wages over time are extremely scanty. When has there ever been a wage-price-spiral? I don’t know any evidence that backs the dire warnings of the business sector. I have seen a blank questionnaire from the Labor Force Survey (LFS); it contains at least one item about worker compensation. But the LFS findings on this item are unpublished. I suspect it is because their findings are too embarrassing.

An Occupational Wages Survey was apparently done in 2018, 2020, and 2022. (Are there other years? I don’t know this survey’s schedule.) Its recent report (psa.gov.ph, 9/23/2023) shows that:(a) The average monthly wage rate of “selected occupations,” was P18,108 in 2018, P16,486 in 2020, and P18,423 in 2022. So, there was a collapse in 2020. That’s only a 1.7 percent peso-rise from pre-pandemic 2018 to 2022.(b) The average monthly wage rate of “elementary occupations [unskilled workers] across all industries,” was P11,587 in 2020 and P12,276 in 2022. That’s only a 5.9 percent rise from 2020 to 2022. Set against the Philippine Statistics Authority’s average year-on-year inflation rates of 5.2 percent in 2018, 2.4 percent in 2019, 2.4 percent again in 2020, 3.9 percent in 2021, and 5.8 percent in 2022, it is clear that the real wage has been stagnant, at best, since before the pandemic.

Yet the GNP is growing in real terms, faster than the number of employed workers, and hence the average productivity of workers, in real terms, is also growing. There is room for the gain from the increased productivity to be shared across all the factors of production. I think that the growth rate of worker productivity is a reasonable target for the growth of actual wages of workers.

Sectoral wage-targets. Since the government sets growth targets for value-added in industry, agriculture, and services, I think it should likewise set growth targets for wages in the same sectors. It should also set annual growth targets for the wages and salaries of its own employees—all of them, not just those in the uniformed services—consistent with its inflation targets!

Government worker wage targets. The government has workers in the key sectors of health, education, and science. Is it going to allow the compensation of these critical workers to be steadily eroded by inflation? I recommend regular indexation of their salaries to the consumer price index.

Target the children’s nutrition. A wage -target is not achieved by mere legislation. What is needed is to attain the prerequisite conditions of children well-fed throughout at least their first three years of life, and universal completion of at least junior high school (JHS). Good nutrition for very young children is absolutely essential since stunting of their brain capacity is impossible to remedy later on.

Target minimum schooling. Right now, one out of every 10 adults is an elementary school dropout, and three out of every 10 did not complete JHS. These two groups, totaling 40 percent, have very little chance to earn enough wages to escape poverty.

I think the government (national and local agencies combined) should target zero dropouts from elementary and at most 10 percent with incomplete JHS. This would cut the inadequately schooled to only 10 percent. The target date should not be later than 2028.

At present, among adults, there are roughly 30 percent JHS graduates, 20 percent senior high school (SHS) or equivalent graduates, and 10 percent college graduates. I think that the SHS grad and college grad percentages should be targeted to double, to 40 and 20 percent respectively. The JHS grads would stay at 30 percent by absorbing all the erstwhile elementary dropouts and most of the former JHS dropouts.

Target the distribution of income. The government says it wants to achieve a “middle-income” society, but what does that mean in terms of a timetable? The Family Income and Expenditure Survey has just been upgraded from triennial (in 1985-2021) to biennial. The 2023 first half has been completed. The result for the full year 2023 may be out by the middle of this year. Then 2025 and 2027 will follow, with results in 2026 and 2028.

What do government planners hope to see in the forthcoming distributions of income and expenditures? Do they have any scenarios of growth in real wages over time, or will wage stagnation just continue willy-nilly?

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Contact: mahar.mangahas@sws.org.ph.