Wage increase justifiable, possible

The total cost of the proposed wage hike will only be Php135.6 billion which, subtracted from total profits, will still leave establishments with Php759.6 billion in profits.

If small and large employers in the Philippines accept a cut in their already-substantial profits, they can afford to grant a sufficient wage increase, according to research group IBON. The benefits for workers and their families is unambiguous and a wage hike will provide immediate relief, even if not yet necessarily bringing all of them up to a decent standard of living.

IBON noted that the economy actually has more than enough profits to support workers’ call for a Php125 wage increase. Government data show that establishments in the country with total employment of 20 and over had combined profits of Php895.2 billion and 2.74 million employees, according to the preliminary results of the 2008 Annual Survey of Philippine Business and Industry (ASPBI) of the National Statistics Office (NSO).

Granting an across the board wage hike of Php125 means workers will receive an additional PhP3,802 per month, and that employers will spend an additional Php49,427 per employee per year (assuming 13 months of pay). The total cost of the proposed wage hike will only be Php135.6 billion which, subtracted from total profits, will still leave establishments with Php759.6 billion in profits. This is only a 15.1% cut in their profits.

Giving a Php125 wage hike in NCR will cost employers Php61.0 billion and reduce their profits by only 17.3%, from Php352.1 billion to Php291.1 billion. Average profit per establishment in the NCR will only fall by Php6.8 million and still leave them with an average of Php32.2 million in profits each.

According to IBON, the situation is even more straightforward for the country’s largest corporations. The Top 1,000 corporations in the country combined annual net income increased from Php116.4 billion in 2001 to Php756.0 billion just in 2009, with a cumulative Php3,788.9 billion over the period 2001-2009.

These enterprise and big corporate profits starkly contrast with the conditions of workers. The average daily basic pay that wage and salary workers in the country actually received – as opposed to merely mandated minimum wages that are not necessarily actually paid – increased from Php222 in 2001 to Php301 in 2010 (preliminary estimate). The additional Php79 amounts to a 36% increase but was not even enough to make up for the continuous increase in prices which soared some 56% over the same period – with inflation at an annual average of 5.2% over the 10-year period including a peak of 9.3% in 2008. The net effect is that the wage increase was more than offset and workers instead saw a Php28 drop in the real value of their wages.

A large wage hike will be beneficial not just for workers and their families but also the economy, IBON added. The transfer of money from rich to poor households will increase aggregate demand and stimulate the economy. High-income households have a higher propensity to save and low-income households, so deprived even of basic necessities, a higher propensity to consume, the group said.

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