Another long discourse and exchanges (13 pages) on legislated hike in minimum wage across the country, made more than 10 years ago in firstname.lastname@example.org.
Related articles, readers may also check:
What determines wage?, May 26, 2006
Liberty and choice vs. Dictation and extortion, May 02, 2008
Econ for statists 8: Minimum wage law is wrong, July 07, 2011
Nanny state 5: Extending min wage law to foreign employers, July 09, 2011.
www.inq7.net/Viewpoints, July 11-15, 2001
ARE LEGISLATED MINIMUM WAGE HIKES JUSTIFIED?
Basically I'm against (1) legislated wage hikes, and (2) "needs of the family of 6" argument. For this purpose, let me focus on no. 2. The "needs of family of 6" argument as basis for high demand for min. wage is wrong because it rests on many wrong assumptions:
(1) It assumes that all workers are married, that there are no single/unmarried workers - which is not true. (2) It assumes that all married workers have 4 children on average, and that they're all dependent and are not working - which is not true always. (3) It assumes that there is only 1 breadwinner in the household, that the wife or one or 2 of the children who are already of working age have no jobs - again, not true always. And (4) It assumes that wage is a function of no. of dependent children, not productivity - again wrong either by common sense or theoretical standards.
Wrong assumptions can lead you to wrong conclusions. And wrong demands. If employers will also jump the gun on this faulty principle, then they will only hire single and unmarried workers, or those with only 1 or 2 children so that the "family of six" argument will not be used against them in the wage hike bargaining.
The minimum wage hike refers to increasing the amount by which the law prescribes to be the least that an employer can pay his employee. Hence, as it is the least, we can safely assume that the beneficiaries of this increase would be the least of our working brethren as well. I totally agree that the basis for the legislated wage increase should be the needs for the family of six. However, in lieu of any other alternative I must tend to agree with the legislated wage hike.
No matter what statistics claim, the consumer price index has indeed risen dramatically for the last twelve years. How much can your peso buy now? Did the government try any anti-inflationary measures, any social programs aimed at increasing savings and decreasing family expenses? If the assumptions used for a legislative increase then I suggest that the basis for the legislative increase be solely the purchasing power of the peso. Simple and neat.
However, in lieu of anything else, a legislated wage increase must be given. The price of living in the Philippines has indeed gone quite unaffordable. There must be a break somewhere. If the government could not think of another relevant bail-out then what else is left. Knowing our government or Filipino administrations in general, well, its better to have a legislated wage hike.
Pareng Mel, the premises & assumptions of "needs of family of six" argument as basis in demanding for a hike in minimum wage are wrong. If you can squarely say that those 4 assumptions are all valid, then we can go to the next debate: whether minimum wage should be increased by legislation or by collective bargaining.
Nevertheless, I will indulge you and disprove your points. You're saying:
1. "the basis for the legislated wage increase should be the needs for the family of six."
2. "the basis for the legislative increase be solely the purchasing power of the peso."
3. "in lieu of anything else, a legislated wage increase must be given."
In short: "raising the minimum wage periodically (via legislation or the regional wage boards) to catch up with inflation rate will improve incomedistribution and welfare of the workers".
This situation will happen if we're in a near full-employment economy (say, 3-4% unemployment rate). Why? Because it will benefit all the employed people; hence, there would be few, if any, losers. But since we're in a low employment situation (unemployment rate of 13.3% as of April 2001), this policy will boomerang through the following:
1. Person A whose wage is near or slightly below the minimum wage might lose his/her job if the employer is also financially struggling, can't afford additional wage hikes, and choose to close shop instead.
2. Assuming the employer can afford additional wage hike, then person A will benefit. But then it's also possible that the next person applying for a job, Person B, might find it harder to be employed since additional resources supposedly to hire new employees have been diverted to those who are already employed.
3. Person C, employed in the same company and is relatively more productive than the rest, will be deprived of possible wage hikes because money has been used to pay for the increased wages of those whose productivity is not justified by the higher wage.
In short, wage hikes not based on productivity but on how many children/dependents a worker is counter-productive. It benefits currently employed but low productivity workers, and punishes job applicants or the unemployed, and the currently employed but high productivity workers. For the latter, Person C, it would be better to work abroad than be underpaid here.
Pareng Nonoy, the four points you raised on deflating the needs of a family of six could not be contended as being correct. Why?
1. It assumes that all workers are married. Fine point but the basis for the family of six was on the assumption that each worker is representative of a group of people which he supports, may it be a nuclear family formed of siblings or his own children. To point out that some workers are not married would be tantamount to individualizing the basis of a wage increase. That I believe should be proper perspective but in a country like ours?
2. The assumption on the number of children is based on figures which the government had gathered on through its census efforts. The question again is that the basis is representative of the total picture. What else could we use? Again the only point your argument falls on would be to individualize the basis of wage increase.
3. The assumption that there is only one breadwinner. If I may conjecture, perhaps we should look into the employment figures for females, and their classification if available. My big guess is, this sector is either overly under-employed or unemployed.
4. A function of need rather than productivity? Now this perspective is clearly debatable depending on which side of the political spectrum you belong to. As I do not belong to one now and I abandoned one long ago. Well I concede this part.
As of the moment, those living off the minimum wage can hardly survive. With the next round of oil price increases, their quality of life surely falls. So I believe that capitalist must sacrifice as well, are in not all in the same boat. Can businessmen really live without a conscience, is business purely the concern of making a profit. The argument that there will no additional resources to employ new personnel is proof that businessmen who do this kind of thinking are not businessmen at all.
The only reason I am going for a legislated wage increase is the fact that, economic survival nowadays is getting to be pretty tough. My solutions thereto is not for legislated wage increase but for additional social benefits to the people.
With respect to minimum wage: I remember having had to apply for exemption from coverage of a wage order issued sometime in 1993 (I think the Phils. was reeling from the energy crisis then). As far as I can remember, we requested the employees to try to understand the position of our client—and they agreed as they knew that it was either they stand pat on increased wages or the factory closes.
I agree with Nonoy. Sometimes, Labor Law sides too much with the workers without bothering to look at the overall business picture. I remember that our office in the SC issued a decision against a school--re: backwages. The school couldn't negotiate a staggered payment of the liability-the employees were adamant pay up or else. So the school chose the "or else" and closed shop.
That's the problem with our labor laws. Sometimes, it's too damned pro-labor--it fails to take into account the overall picture.
My views on wages are rather distorted from the econometric and political views. During the early 80's I was running sugarcane farms in Negros Occidental. Those were crisis years when the world price of sugar is way below the production cost in the Philippines. Farms were on their third and fourth mortgages, the NPA rebellion was burning, and bishops and priests were rattling the ideology of basic christian communities (BCC), then called "batayang kristyanong katilingban".
And they all wanted minimum wage. So I talked with the farm hands, men, women and children. "We have two choices, one is pay you the minimum wage, in which case we can only employ a third of you. Or divide the labor budget and employ all of you. The choice is actually yours. Beyond that, we would rather not operate this farm." Gloomy? Those of us working in the sugarfarms in Negros had been criticized to no end for anti-labor practices, feudalistic, oppressive. Looking back, my politico-economic views were simplistic, and I suspect they remain till today. My stupid mind tells me that in a situation where the pie to be divided is limited, either you have bigger shares for a few or smaller shares for the many.
If we were in an industry where the more you divide the pie, the bigger it gets, then maybe it makes sense to cut the slices big. But you must assume that the pie slices are highly motivated, productive, labor force full of initiative. Oh yes, the conditions would have to be dot-com like in its early days.
I am tempted to think that the minimum wage law has in fact shackled our industries. I suspect this assertion can be proven by empirical studies. But I believe there is a need to balance the demand between supply-driven policies and those demanded by industries. My main reason is the fact that we do not have fluid information flow/channels in the labor sector. If employment information is visibly available to the workers, then it's good to allow the market mechanism to determine the true price of labor. But in danger of being redundant, I repeat that it is not the case.
In the case of Mondragon in the Basque country of northern Spain, nestled in the Pyrenees, labor and capital is very much intertwined. The workers own the various enterprises. Management is professional. Everybody shares in the ups and downs. Theirs is a model based on the common fate between labor and capital and have proven to me at least that it is not about being pro-labor or pro-industry. It's about pro-enterprise, where both labor and industry benefit.
Por eso, there is a role for the militant labor unions, but I believe they are barking at the wrong tree. Typical of their end-justifies-the-means approach, they are prone to walk-out, strike, and agitate till they kill the business of their employers. Look at Nestle. PAL is not that far with the likes of allegedly corrupt union leaders ringing around the loop of their ranks, the government and the management.
I think our labor unions are good. It's when the union leaders start to come in that they prostitute the whole thing. They wheel and deal. Remember the Teamsters and the mafia?
I think, corporate governance should roll-out faster and broader because the days of abusive employers should have been long gone. Against these, militant labor unions should rally. But then again these are the employers who can corrupt the union leaders with pay-offs. So sabi ka na nga ba, babalik tayo sa corruption.
Like Nonoy and Vicky, I also do not subscribe to the idea of hiking the minimum wage. Economists would normally balk at the idea of putting a regulatory floor on wages for some of the reasons which were already mentioned by our colleagues.
Just to add some more points, actually a summary of various articles which I've read on the issue:
A compulsory minimum wage, set much above the floor that emerges in an unregulated labour market, would reduce employment. Imagine a labour demand-supply equilibrium set at a particular wage (w1). Setting up a minimum, which is higher than the existing equilibrium wage (w1) has an effect of pushing back the demand for labour, resulting in increased unemployment levels. As Vicky mentioned, the risk of having companies lay off workers or cut man-hours becomes evident with the imposition of a mandatory minimum. Firms may also cut other benefits in order to fill in the minimum wage. Corollary, young or unskilled workers would be unable to find work at this higher minimum. To quote, "The higher the minimum wage, once it starts to bind, the bigger the loss of jobs."
Studies also acknowledged the possibility that a minimum wage would not reduce employment, and might even increase it. Yet this was deemed to occur only when a market failure exists, e.g., when employers cut back on demand for labour to bid wages lower. A minimum wage could remedy this particular situation, raising wages and expanding employment at the same time. Under a normal and competitive labour market environment, however, such would not occur.
Simulations done using Input-Output analysis during my stint at the NEDA also produced the same results: the imposition of a minimum wage creates an increase in overall unemployment. Worse, it spikes up inflation, further destroying the peso's purchasing power.
Partly due to these reasons, the minimum wage was deemed to be not a well-targeted instrument for helping the poor. Another important reason why a minimum wage would not help the lowlier levels of the populace is that many of them have no work. "Worse, a minimum wage would destroy jobs-the more jobs the higher it is set-by stopping people willing to work at low wages from doing so."
But I believe we shouldn't stop at just lining up reasons for going against the minimum wage. Perhaps we should now outline the ways (and give recommendations) by which we could "rightfully" target the poor and promote the overall welfare of labourers.
A minimum wage need not push back demand for labor. There are other factors of production that can actually cushion the effect of a rising minimum wage set by law. Firms can cut back on their profit, which may be stratospheric given a very low minimum wage level anyway. But who would want to do that? The essence of business (not necessarily to all though) is to rake in as much profit if you can. Firms threaten to cut down Q of labor so that the government will not touch them with a ten foot pole. The threat, while empty, is rather scary because most of these firms can actually cut down and production and still earn a lot. They are in fact leveraging this to their advantage: use their huge profit margin as tool against pro-labor policy. The are willing to cut down on profit to kill a few laborers of hunger, but they are not willing to cut down on profit to keep a few more employed.
Benefits paid by firms are declared as deductions to taxable income. If they cut on benefits, they will just be bloating their taxable income. Plus of course, if they practice the 6-months "reliebo" technique used by oligopsonist mall operators, they are not paying the benefits of the tempo staffs like the salesladies in the first place. A minimum wage level would at least force these oligopsonists to pay higher salary to these 6-months tempo girls.
I'd like to think that a increase in minimum wage will allow the worker to boost its propensity to consume, since most blue collars are deprived, meaning they want to buy things but are unable to do so. And on the supply side, many producers are not yet at max capacity and will welcome any rise in demand. For quite some time the manufacturing sector had been cutting down production levels to be able to cut down on warehousing costs due to low turnover of inventory. I cannot see inflation here, if we all agree that inflation is a sustained phenomenon and not just a one-shot temporary rise in prices of goods caused by temporary shortfall of supply or temporary rise in demand, e.g. seasonal products.
Ozone, thanks for the clear discussion on the general wage concept. As defined, "a perfectly competitive labour market is one in which there is sufficiently large number of workers and employers so that no individual firm or worker has the power to affect wage rates appreciably. I believe that (overall) the Philippine labour market tends to approach this concept more (although admittedly not a perfect one) than the other end. Therefore, and as you also agreed to, "A compulsory minimum wage, set much above the floor that emerges in an unregulated labour market, would reduce overall employment" and therefore, prove to be more detrimental to the country (for reasons which were already covered by various posts -- both theoretically and in actual experiences).
Tama talaga sila Nonoy dito (pati na rin yung sa issue na "family of six" ang basis ng hike) dahil ang malamang na resulta ng minimum wages e (a) fewer jobs lalo sa low-wage workers (b) disadvantageous to the low-skilled workers na kailangan ng trabaho.
Pero sige patulan natin kunyari sabihin nating fait accompli (at sige full employment din). Bakit ang minimum wage e kailangan maging isang numero lang na standard na sa lahat ng industries? Paano kung yung ibang industries e mas kaya ng mga employers i-absorb yung increase kumpara sa ibang industries? In the same vein, within an industry paano kung yung ibang kompanya e mas kaya nila? Puwede bang iba-ibang minimum wage per industry? Saan pumapasok yung productivity? Puwede bang staggered implementation (time-bound) ang minimum wage hike (kagaya ng pag-re-regulate ayon sa environmental concerns)? Puwede bang iba't ibang assumption per province o region (e.g., "family of four" lang sa Region II)?
Ang sigurado lang dito yung mga maapektuhan na kumpanya ang posibleng gagawin e (a) ipasa yung labor cost sa consumers; (b) magsara; (c) magbawas ng empleyado; (d) magbawas ng cost sa HRD atbp.; o (e) maglaan ng additional "cost of creativity" para paikutan yung patakaran. Sa gobyerno naman posibleng tumaas yung cost of regulation (i.e., monitoring of compliance).
Ang mainam talaga palagay ko e wage increases through collective bargaining agreements (CBA) tapos bukas ang mga libro dahil negotiations siya with full information (at nakakabit yung usapin sa productivity).
Minimum wages are determined by region. If I'm not mistaken, in certain areas, the rates vary according to the industry and the type of workers. Hearings are supposed to be conducted to determine what would be an acceptable minimum wage. But always, both the employers and the employees end up unhappy. Also, there are corporations/industries that are exempt (economic distress is the usual basis for exemption), however, they have to apply for exemption from the application of the wage order so as not to be deemed in violation of labor laws. As for staggered implementation of the minimum wage hike, yes, I think the implementing rules of wage orders do provide for that but on that I'm not too sure.
I think somebody has also mentioned that the salaries of the employees in the higher levels will also be adjusted to "correct" the distortion that will occur if a new minimum wage is approved. Some friends in other companies revealed to me that they have consulted DOLE in regard to the legality of a company's action to propose lower pay to employees in exchange for less workhours. These companies do not want to retrench, but the situation forces them to take a less painful way. There are other means for the company and its employees to wait out this economic storm. Legislating a wage hike seems like traipsing the green mile.
Just a comment on Mylene's statement that firms may cut benefits in order to fill in the minimum wage. I don't think this can be done without the consent of the workers. There's a rule on the non-diminution of benefits. Any reduction in benefits (which cannot fall below the minimum legislated by law) would have to apply to employees still to be hired by the company/firm.
Mel V. mentioned earlier the possibility of increasing non-wage benefits instead of the minimum wage. Could these come in terms of increased tax exemptions (for individuals); tax shelters for individuals by way of retirement benefits/pension plans; increased medical/health insurance benefits? Would these kinds of benefits be more costly to employers (if they have to contribute)? What about lower income tax rates for employees? Malaki rin ang cut ng gobyerno sa suweldo ng empleyado. But will tax cuts affect minimum wage workers?
First, isn't the price of labor, especially unskilled labor determined by the forces of supply and demand just like any other commodity? Does not the fact that the government have to go through the motions of imposing a minimum wage in the first place indicate that the real market value of labor is below this figure? Logically, if the market value was higher then we would not have to go through this exercise in the first place.
Now, if the market value of labor were less then the minimum wage does that not make give an incentive for employers to reduce the labor content because the more the use it, the greater their losses? Basically, he is paying more then he should be. The more he reduces it, the greater the unemployment, right? I understand we now have the highest unemployment in the region.
Ultimately, we have a situation were some people get this new higher wage but some others have to get laid of for this? In the balance then, will not the wages received by labor as a whole be about the same? So in the end, we did not increase wages as a whole. We caused many to lose their jobs. We increased the incentive for employers to break the law (by rewarding those that did) and caused many businesses to close.
We raise wages, does output rise with that? If output does not rise does that not mean productivity will go down? Don't investors favor countries with high productivity versus low productivity? Will not an increase in investors, increase the demand for labor thus assuming the supply remains constant increase wages without naturally?
-Victor Limlingan, Jr.
This call for a wage increase is not productivity-driven; it's being pushed because of a depreciation of the peso. Peso-dollar fluctuations have caused the prices of imports to rise, among them chiefly petroleum. I guess it's a worker's prerogative to argue for a wage increase, but he's got to show that it's being matched by a sustained increased in output. Employers don't normally employ people for charity.
Legislated wage-fixing is an abomination -- for what should obviously be a purely market-driven activity (only between employer and employee). If workers feel that an employer may be pulling a fast one, industry-based wages and benefits should be formulated, with a "haggling" band within which the individual employer can decide to hire an employee based on qualifications and previous experience. The point is to ensure that companies' pay schemes are competitive vis-a-vis others in the industry. That way, workers can be sure that they are well within the industry's standards.
I welcome the idea of a wage hike because to me it means that the minimum earners bring home a little more to their loved ones. It helps to ensure food in the belly and a roof over one's head. Its not easy earning a mere pittance, with everything else going up. At some point, some things will give way, and I'm not even talking about luxuries.
At the same time, I will admit that it is not a practical move for all companies. I talk to family and friends, and they talk of belt-tightening and downsizing in their respective companies. I switch on the TV and listen to small businesses say that their workers have had to go on rotation as it was the only way they could continue to employ all of them.
Closer to home, I have had to make do with one less person in my department since January because we are trying to keep costs down. Of course, that person's responsibilities needed to be redistributed among the other staff. At the same time, I have requested that any overtime be kept to a minimum and that they be "more productive" instead. This year, no one even had to ask if we were going to have any mid-year increases.
As a company, we will survive. Other companies will survive too. At what cost, I do not know. I dread to think of the day when I will be asked to assess the staff's individual performance and to identify if there is any one person I can do without.
For me, the real issue in minimum wage is upgrading the living condition of our workers. It is not just about pesos and centavos -whether it should beP125, P60 or some other number. Limiting the discussion to these numbers would only lead to zero-sum game - one party (either the workers or the employers) will "win" and the other "loses" depending on final outcome of government policy on the wages issue. The bargaining aspect can be emotional and can also give wrong impression about economists being insensitive to the plight of the poor workers.
The bigger issue is generating more employment opportunities for our workers - that is, expanding the "pie" as Citizen Kori points out. The sad reality is that our economy, particularly our domestic industries, has not been able to provide enough jobs for our people and this is clearly reflected in our very high unemployment and underemployment rates. Many of our people have decided to migrate/work overseas.
I think if we define the problem as one of upgrading the living conditions for our workers, we can explore more options other than raising the minimum wage, such as enhancing productivity (for instance, via the German "Dual-tech" model, farm schools, etc), promoting entrepreneurship and small-scale/cottage businesses (Kalakalan 20), expanding assistance to exporters, etc. It is not really an issue of funding because government financial institutions such as Land Bank and DBP have billions of funds that can be tapped for these job-generation activities.
Our "labor agenda" would not be complete if we do not mention about foreign investments. It is critical that we open up our economy aggressively to foreign direct investments so that our workers need not have to go overseas to get jobs from these foreign companies. Our workers would also be protected by our own labor laws rather than be subject to abuse and discrimination overseas. Our workers are not only suppliers of labor, they are also consumers of products and services.
Human work dignifies man and makes him more human. It facilitates his interaction with the community, providing both opportunities for personal growth for him as an individual and healthy social relationships from his collaboration with other men. Man's labor cannot be reduced to mere pesos and centavos. We should explore all possibilities for enhancing the worker's living condition in a context that is consistent/synergistic with the rest of the economy.
I read your points Nonoy and they are all theoretically sound but I guess most of these arguments are not borne by data. I have seen corporate data and labor cost is miniscule compared to other variable cost. I have done I-O exercise before on effect of wage hike on sectoral prices and it's not much. So I would go for morality of it all because I guess years and years of lame excuse have desensitized us to the fact that profit grows because share of labor have been kept to the minimum. I would be happy to revisit the issue if it would be useful.
I'm not an economist, but shouldn't government just work on bringing the prices of basic goods down? I understand that about 45% of household income is spent on food, whereas the comparable number in Thailand is 20-30%. If we are able to bring it down the Philippine number to 25%, let's say, then households will have an "extra" 20%. Just a thought from a non-economist.
From most of the postings, it seems that on economic grounds at least, a minimum wage cannot be justified. However, most of them seem to imply, that the price of labor without this minimum wage, would otherwise be determined by free market forces? What if the reality was not so?
In the labor market, what if the price of labor is then artificially low due to oligopolistic consumption of producers? Then, can we not justify government intervention in the form of minimum wage? Instead of pegging the wage at the value needed for consumption, how about on the production instead? Maybe we could say that these measures are necessary as a temporary solution till the government is able to break up these oligopolistic practices. I do not think that there is an actual conspiracy by producers but maybe there are certain rules and regulations that prevent the Filipino worker from getting the true value of his labor.
-Vic Limlingan, Jr.
Like many of you I am of the opinion that the Minimum wage issue is more an emotional, even political, one rather than one truly rooted in economicrealities. Like Ronald I agree that focusing on pesos and centavos will over simplify the problem, thus resulting in the wrong impression that one side of the employer employee relationship simply put one over the other.
In truth, what is happening is that the negotiation for fair wages is being done in isolation of the reality that is happening around us. Labor sees rising oil prices, "taas and sweldo". They don't even consider that employers are also affected by the increase in prices thus making the cost of running a business or factory more costly. In good times, labor clamors for increases but some employers refuse since it would increase their overhead and reduce their profits, even if their workers are demotivated and the risk for the slippage in production is becoming imminent. The over-riding sentiment is "basta kumita ako, wala akong pakialam sa boss / trabahador ko." Not a very healthy way of looking at things right?
Again I agree with Ronald that rather than over emphasize the minimum wage issue, there must rather be a promotion of the idea of entrepreneurship or business. It's about time we stopped producing wage earners in school and start producing businessmen. Siempre long term ito and the effects won't be felt for another quarter century. But if people would concentrate more in putting up their own businesses, the issue of minimum wage will become less prominent. This issue would be a non-issue if we instead focus on creating businesses rather than condemning ourselves to a life of forever being a simple wage earner.
In a "free" (unregulated) economy, wage, the price of labor, like of any other resource, would be determined by supply and demand. Victor is quite right that establishing or increasing a minimum wage means that the cost of labor is being raised above it's real market value.
Social considerations have led in most countries to the implementation of minimum wages, limits on working hours, benefits, paid vacation etc, to fight exploitation of the work force. All of this raises the cost of labor. However, I doubt that the employers are considering what the "real" value of labor in a unregulated economy would be. How is that relevant to them?
What is relevant is the cost of labor compared to the available alternatives. Modernization, outsourcing, moving operations to a different country etc are options available to the employer. As labor becomes more expensive, these options become more attractive, albeit still difficult, time consuming and costly to implement.
A quicker way to neutralize the additional costs in the short term is more likely:
- Cost on unskilled labor rises by 10%,
- Implement mandatory unpaid overtime of 10% of working hours,
- Lay off employees who do not want to work the overtime, plus additional workers totaling 10% of the work force.
In the above scenario, would at least 90% of the workers rather work 1 hour overtime per day at the higher salary than getting fired? Probably yes.
It's a balancing act trying to preserve or even create new jobs, while "motivating" employers to pay decent salaries. Increasing the minimum wage alone will inevitably result in the loss of jobs. Limiting, controlling and enforcing(!) maximum working hours at the same time is required to avoid easy circumvention, and negation of the benefits to the overall economy and workforce.
I feel the minimum wage has to be increased, but not without keeping the working hours in balance, and not measured on ability to provide for a family of 6. Why do unskilled workers working minimum wage jobs have to have 4 kids??
Fellow citizens, correct me, but increasing the minimum wage will have two opposite effects:
1. Employment of workers (i.e., teenagers, out-of-school youths)with few skills will decline as companies will retain the productive or skilled workers.
2. Since we are in the Republic of P, companies can go around the Labor Code, employ casuals, and not subject them to the minimum wage. The skilled ones will be without work opportunity that pays the minimum. I hate to suggest it, but in this scenario, our factories and offices might resemble a department store or a fastfood. A nation of scabs? These workers, however, would spend tremendous amount of time learning rather than producing. Avoiding the prescribed minimum will still ruin the day for these companies.
What am I saying? Companies will resort to tempo workers because they are easy to dismiss. The lack of skills training that these tempo workers will get will not prepare them for a better long-term employment. If I am a politician, I will go for hiking wage. Then, I should expect the underground economy to rumble and stay that way even if conditions get better. Need I still mention that government will get less taxes?
-Jerome del Pilar
Is it not that the discussion on wages have somehow shifted to one on economic development model/program. Except that the perspective is that of wages. If so then another way of expanding discussion is to ask, what is the development approach where the optimum fruits accrue to most number of people, or specifically to laborers? But if we say laborers, the assumption again is that we want to employ them (of course stupid!). That to me seems to point to a development approach based on the comparative advantage of Philippine labor.
My fear is that the margins being generated by most Filipino firms/enterprises is from inefficiencies of the system and not from productivity. If I were to remove the non-production marginal advantage (i.e. tax, tariff, incentive, difference between mandated and market-based labor rate, etc.) and put producers side by side, and if I were to compare the Thai slippers maker with one from here, I suspect talo tayo.