Fighting Off an Unreasonable Minimum Wage Increase Petition

In our previous newsletter issue, I discussed the “Anatomy of a Minimum Wage Increase.” That was brought about by the P75.00 daily minimum wage increase petitioned to the Regional Tripartite Wages and Productivity Board (RTWPB) by the Mitsumi Philippines Workers Union (MPWU).

Well, the fight for the magic number is now on! The result of the first public hearing in San Fernando, Pampanga last 20 September 2010, however, did not bode well for the employers sector. The petitioner came well prepared.

It is time for the big guns to come on board. On September 25, the presidents of all the Chambers in Region III, each bringing position papers against the proposed increase, met and consulted with the Philippine Chamber of Commerce & Industry (PCCI) and the Employer Confederation of the Philippines (ECOP).

It was agreed to adapt the position paper from the Subic Bay Freeport Chamber of Commerce as official position of the Region III employers sector with just very minor changes. Below are the salient points mentioned in our position paper (the full position paper and MPWU petition can both be viewed in our Online Forum).

---------- xxx ----------

The SBFCC and its members recognize our obligation to our workers and understand that everyone should have the opportunity to earn a decent wage. We also believe that the minimum wage is not just about helping the less fortunate but is also about fairness, the value of work, and the opportunities that such work provides.

The SBFCC likewise believe, however, that admirable the intentions are of the petitioner in increasing the daily minimum wage may be, it should not work to the detriment of employers or companies who are providing the work in the first place.

Accordingly, we strongly believe that a P75.00 increase in daily minimum wage, as proposed by MPWU, cannot be financially supported by our members; that many of us will be forced to close down or move to other countries where we will at least have a reasonable return on our investments; and that instead of helping the less fortunate, jobs will actually become less available. We also believe that the data used by MPWU as basis for the petition was erroneous.

In the light of the foregoing, we present our opposition to the bases of MPWU’s petition as follows:

1. Item 6 of MPWU’s petition states that “Between June 2008 and May 2010, the consumer Price Index or CPI in the region rose from 149.1 to 163.0 or the equivalent of 9%...” Further, item 10 of their petition states that this increase in CPI is equivalent to a P27.00 increase in minimum wage.
   
   The petition did not indicate from where the above CPI data came from. The SBFCC, therefore, thinks that it is without solid basis and could actually be erroneous. In fact, a quick research shows that data from the National Statistics Office (NSO), publicly posted on their website, clearly indicates that for areas outside NCR, Region III included, the CPI in June 2008 was 157.5 and in May 2010 was 166.7. The increase in CPI is actually 5.84% [calculated as (166.7/157.5)-1], way below the 9% erroneously indicated in the petition.
   
   
2. Item 7 of MPWU’s petition states that “Due to the continuing increases in deregulated oil prices, automatic adjustments in rates of utilities (electricity, water), and the resulting general increases in prices, among others, consumer prices between January and December 2010 are expected to rise further by another nine percent (9%).” Further, item 10 also estimates future increases in CPI for the next few months up to December as equivalent to another P27.00 daily minimum wage increase.
   
   Again, no basis from where the data came from was included in the petition. In any case, the SBFCC finds that introducing baseless data is pointless. The employers sector can also speculatively argue of an impending double-dip recession in the United States that will once again create havoc on the global financial system—but we will not. Besides, the effect of inflation is not only limited to the labor workforce but to companies more so.
   
   The SBFCC believes, therefore, that further adding P27.00 to the daily minimum wage cannot be justified by mere speculation.
   
   
3. Item 9 of MPWU’s petition states that “The Central Luzon Region’s Gross Regional Domestic Product (GRDP) in constant Prices increased from P64,168 million in 1989 to P117,724 million in 2008, averaging a yearly 4.4% growth.” Further, that this growth rate should be equivalent to a P21.00 increase in the daily minimum wage.
   
   Once again, no reference was made where the petitioner’s data came from. Be that as it may, the SBFCC finds that introducing data from 1989 to 2008, for the purpose of substantiating a minimum wage increase in 2010 is not only anachronistic but is also unfair, given that there were already many wage increases since 1989, the latest being in 16 June 2008.
   
   Besides, because of the global financial crisis, the growth rate has actually decreased from 12.73% in 2008 to a very low 3.25% in 20092, according to data from the National Statistics office.
   
   In fact, just last year, the Trade Union Congress of the Philippines (TUCP), the mother group of MPWU, even identified 65 big companies as extremely vulnerable to worker lay-offs3 exactly because of the crisis.
   
   Further, there is currently an 8% unemployment rate4 in Region III which would be more than half million people who are looking for work but cannot find one.
   
   The SBFCC believes that whatever calculations the tripartite board will eventually come up with should be based from a time period since the latest minimum wage increase and not from some 22 years ago.
   
   We therefore find the petitioner’s proposal of yet another addition to the minimum wage as arbitrary, without merit, and unfair. Further, that since companies are still reeling from the effects of the global financial crisis, the P21.00 additional increase cannot be justified by most businesses to survive.

Aside from what was already expressed earlier, the SBFCC would like to further include the following reasons why a huge increase in minimum wage will destroy rather than increase or retain jobs:

1. We would like to emphasize that the daily minimum wage in the Philippines is much higher than other countries in Asia5 including Cambodia, Vietnam, Indonesia, Thailand, and especially China, who we are competing with for foreign investments.
   For the same reason, manufacturing companies are starting to transfer to low labor rate countries, a recent example is the layoff of 700 employees of the manufacturing company Wistron (a subsidiary of Acer) in the Subic Freeport.
2. There is no question that the labor force is affected by inflation; however, it would be wise to consider that inflation also affects companies and not just in terms of salary increases but from many other factors as well, like the increased cost of raw materials, appreciation of the peso, and increase in costs of utilities, among others.
3. The majority of new investments to the Philippines, Region III included, are now more service-oriented than manufacturing such as Business Process Outsourcing (BPO) companies. These companies are already paying their employees much higher than minimum wage, therefore, will not be terribly affected by a huge increase in minimum wage. The manufacturing and other companies that are already struggling are, unfortunately, the same companies that normally hire minimum wage workers. Their closure or transfer to low-wage countries will mean loss of jobs primarily to minimum wage earners.
4. The vast majority of textbooks on economics mention that increasing the minimum wage decreases the employment of minimum-wage workers6. This is because a greater number of workers are willing to work at the higher wage level. Companies, therefore, can be more selective in whom they employ, thus, the least skilled and least experienced will typically be excluded and will be pushed into the ranks of the unemployed.
5. Minimum wage earners are usually inexperienced workers who are just entering the workforce. Through entry-level jobs that do not require prior experience, they are able to learn, train, and hone skills that are later used as credentials for higher-level or overseas work. Without this training ground, we might have fewer workers who will qualify for overseas work.

It is clear from the foregoing, therefore, that the petition not only lacks solid basis, but that the petition will likely hurt not only companies, but even also the minimum wage workers we are all trying to protect with more secure jobs.

While the SBFCC feels that there should be a freeze in minimum wage increase to give struggling companies some breathing room to get back on track, we are also aware that our workers, especially the minimum wage earners, are far more exposed to the difficulties of survival.

We therefore propose that we use as basis the 5.84% CPI increase. Further, that since companies and the labor workforce are similarly affected by inflation, that a compromised amount where employers will bear the bigger burden of the inflation rate be used. We feel that employers will be able to cope, difficult as it may be, with 70% of the inflationary rate. This would correspond to 4.10% or equivalent to an overall P12.00 increase to the existing daily minimum wage.

---------- xxx ----------