Competition and compensation: The wage debate intensifies

Foreign firms have objected to trade union proposals to raise the minimum wage, fearing this will cost the Philippines its competitive edge in a tough global investment climate. But unions say the changes are crucial as workers shoulder increasing utility costs. Citing inflation-based rises in the cost of essentials like electricity, water, liquefied petroleum gas and school tuition, in July 2013 the Trade Union Congress of the Philippines (TUCP) reiterated a formal request that the Regional Tripartite Wages and Productivity Board (RTWPB) in the National Capital Region (NCR) raise the daily minimum wage in Metro Manila by P85 ($2.05). “The ... increase in NCR is essential if workers are to cope with higher costs of living, meet the basic needs of their families, and if the country is to give meaning and substance to the policy of equitable distribution of income and wealth,” TUCP’s president, Victorino Balais, said in April 2013 when making the initial request.

RISING COSTS, GREATER NEED: Echoing the demands of the TUCP, in August 2013 minimum-wage earners in Southern Tagalog filed a petition for a P79.50 ($1.92) wage increase. “Workers are still in a miserable state, with the current minimum wage at P349.50 ($8.42) eroded by 2.7-3% due to inflation and high costs of basic needs,” said Ramon Certeza, general secretary of the Confederation of Labour and Allied Social Services, an affiliate of the TUCP. But the unions’ demands seem ill-timed. In August 2013 the central bank said that annual inflation unexpectedly slowed in July to its lowest in four years, giving the central bank leeway to cut interest rates further if required. The consumer price index eased to 2.5% year-on-year, the lowest rate since September 2009, when inflation was 2.3%, according to the national statistics agency.

Foreign investors say that the demands are not only uncalled for, but that they will harm the country’s investment levels and cost thousands of jobs. In July 2013 the president of the Employers Confederation of the Philippines, Edgardo Lacson, told local media that a rise at this time was “unnecessary and has no factual and legal basis”. He also said the workers’ calculations were “flawed”, according to local media reports.

STAYING COMPETITIVE: In an August 2013 letter to Alex Avila, chairman of the RTWPB for the NCR, the Joint Foreign Chambers said a wage increase could result in lay-offs among micro, small and medium-sized enterprises. “Wages must remain competitive in the sense that wage levels must not result in job loss, as investors avoid the Philippines in favour of other countries with lower labour costs and local markets sell more imported than locally made products.” Metro Manila’s $10.74 daily rate exceeds daily minimum wages in other countries, with Myanmar’ s at $0.52, Cambodia’s $2.03, Vietnam’s $3.15 and Thailand’s $9.75, claimed the JFC.

The planned hike comes amid growing international interest in the Philippines as an outsourcing investment destination, with seven Philippine cities chosen as top locations in a July 2013 survey by strategic advisory firm Tholons. That same month the IT & Business Process Association Philippines estimated that business process outsourcing could be a $25bn industry by 2016, accounting for up to 10% of the economy. In 2013 the industry is estimated to have $9bn in annual revenues while employing some 500,000 people.

SMALL STEP: When rejecting the TUCP’s initial request for a wage rise in May 2013, the Department of Labour and Employment said that workers would receive non-wage “benefits, including contractualisation, tax exemption and social protection”. But the following July Alan Macaraya, the department’s NCR director, said there would be a salary hike, with a public meetings to determine the exact amount of the raise. Within 30 days of its August 9, 2013 deliberation meeting, the RTWPBNCR announced that it would increase minimum wage in Metro Manila by P10 ($0.24), far below the TUCP’s initial demands, bringing the new minimum daily rate to P466 ($11.23). Nevertheless, the move proves the willingness of regulators to deliberate and effect change, highlighting the opportunities for effective communication between the foreign firms and their employees.