Is there any progress in real wages?

The title of this piece has a question mark due to the near-absence of data by which to determine how real wages—i.e., adjusted for inflation—are changing, if at all, over time. The scarcity of data on real wages contrasts with the abundance of data on the real Gross Domestic/National Product per person over time. There is no substitute for time-series as a means of measuring the extent of progress.

There is so much trumpeting about the high rate of economic growth. If such economic growth is inclusive, then the average real income of workers, especially low-skilled workers, should be rising commensurately. At any time, 92-95 percent of the labor force are already employed. The way for the employed to share in economic growth is for their real wages to rise.

So the issue raised here is not the adequacy of current wages—Labor Secretary Rosalinda Baldoz admits that wages are very low (“Wages in 7 regions below poverty threshold,” https://abs-cbnnews.com, 2/28/2015)—but whether real wages are rising in line with economic growth.

The concern of this piece is the actual real wage received by the average worker, rather than the legal minimum wage. Some workers receive less, though hopefully most workers make more, than the legal minimum. But what happens to the average real wage, when the legal minimum is adjusted?

Last Wednesday, the regional wage board for Metro Manila approved a hike of P15 per day in the minimum wage. Department of Labor and Employment regional director Alex Avila said: “The take-home pay of our minimum wage earners will increase to P492.57 per day, or by 3.2%, because of the wage hike, compared to the current P477.03 per day.” (It’s not clear how the DOLE derives the minimum take-home from the reported new legal minimum of P481 per day for nonagricultural workers.)

Using the monthly Consumer Price Index (CPI; base 2006) for Metro Manila, one can compute the rate of inflation in each month of 2014 from the same month in 2013. The simple average of the 12 rates of inflation in 2014 happens to be 3.2 percent. Thus, if Mr. Avila’s 3.2 percent is a one-year change, then it happens to be no more than the rate of inflation, or not enough to be called a real increase. Is there no intention to improve the legal minimum wage?

The limited data on actual wages. After I wrote about the lack of time-series on wages (“Lack of pay, not lack of work,” Opinion, 2/7/2015), executive director Criselda Sy of the National Wages and Productivity Commission (NWPC) requested a meeting to discuss NWPC initiatives on the matter. The meeting was held last Feb. 18 at SWS. It was attended by Labor Undersecretaries Reydeluz Conferido and Ciriaco Lagunzad III, director Sy, her deputy Patricia Hornilla and two other NWPC staffers, and myself and two SWS staffers.

At the meeting, we were shown the average monthly wage rates of time-rate workers on full-time basis in 443 occupations, for the Philippines as a whole, for July 2012. But these are not collected regularly, not even annually.

On our specific interest in wage data over time, we were shown unpublished figures, based on the Labor Force Surveys (LFS), on the average daily basic pay of wage and salary workers, for the country and the 17 regions, for seven points in time: 2012 as a whole; January, April, July and October of 2013; and January and April of 2014. The DOLE does not deflate its wage series for inflation. Usec Lagunzad opined that the real wage trend is probably flat.

The DOLE’s means of promoting higher pay for workers is the so-called “two-tier wage system.” The first tier is the legally mandatory minimum wage. The second tier is a voluntary, productivity-based, compensation scheme, wherein certain participating enterprises receive recommendations from the Regional Tripartite Wages and Productivity Board on certain incentives, including nonmonetary benefits, to provide their workers.

The effectivity of the scheme should be determined empirically. How many companies participate in the two-tier system? Are their numbers growing? What is the track record of total compensation received by workers in these companies?

SWS computations. This week, we at SWS deflated the NWPC figures for the Philippines and for the National Capital Region by their respective CPIs. At the national level, the latest available average daily pay is P365.89, for April 2014, which is worth P264.56, in terms of 2006 prices. In April 2013, the daily pay was P346.27, which was worth P260.75 when deflated.

Thus we estimate the real national increase in pay from April 2013 to April 2014 at 1.46 percent. This cannot be satisfactory, since it is only half of the GNP growth per worker, of around 3 percent per year. (Note also that: (1) the CPI probably understates the inflation that affects families of wage earners; and (2) the April 2014 figure excludes Leyte—see my 3/14/2015 piece about how Typhoon “Yolanda” disrupted the LFS.)

For the NCR, the April 2014 average daily pay is P525.59, or P404.92 when deflated. In April 2013, the average daily pay was P489.83, or P389.99 when deflated. Thus we estimate the real NCR increase in pay from April 2013 to April 2014 at 3.82 percent. This needs to be compared to the growth of Gross NCR Product per worker—which is probably much higher than the national growth rate—to see if the sharing of economic growth with the labor sector was commensurate.

* * *

Contact [email protected]