Minimum wages are supposed to protect workers from being paid unfairly. According to Pia Charmane de Jesus, deputy executive director of the National Wages and Productivity Commission (NWPC), these wages are specifically intended for “vulnerable workers” who usually lack the educational attainment, skill sets, or capacity to organize themselves into a labor union.

But for labor groups and some lawmakers, our current system of minimum wage determination has done the opposite of what it was intended to do.

For them, it has unfairly widened the wage gap between workers inside and outside Metro Manila who do the exact same job. They also claim that the Regional Tripartite Wages and Productivity Boards (RTWPBs) have been slow to react to socioeconomic developments, resulting in dismal wages that have not kept pace with rising costs.

“Filipino workers have weighed in on the regionalized wage regime through [its] thirty-six-year history and found it a big failure. They are now demanding that it be scrapped and for the Philippines to return to the regime of uniform national minimum wage that is based on the family living wage,” read part of one House bill pushing for a national minimum wage.

When you look at the numbers, these demands make sense. The gap between the daily minimum wages in Metro Manila and the rest of the region has only continued to grow since the RTWPBs were first created in 1989.

The P1,200 national minimum wage some groups are asking for is also based on the prevailing family living wage, or the wage one family with five members needs for their food, necessities, and allocations for savings or investments for social security, according to the NWPC’s definition. 

The IBON Foundation’s computation of family living wages shows minimum wages, even within specific regional contexts.

For the NWPC, the issue is more nuanced than that. According to De Jesus, minimum wages are the result of careful study that balances the following factors, which differ from region to region:

• needs of workers and their families, which include the family living wage
• capacity of employers to pay
• requirements for the economic and social development of the region at large.

Tipping over this balance could result in “unintended consequences,” according to the NWPC, such as job losses, business closures, fewer job opportunities, and inflation. But even economists have differing perspectives on the disemployment effects of minimum wage hikes, with modern academics like JC Punongbayan saying, “the jury is still out” on the issue.

In the meantime, arguments for and against across-the-board wage hikes and a broader national minimum wage have continued to divide Filipinos. But to understand those arguments thoroughly, it is important to know how the current minimum wage determination system works.

Here’s what you need to know.

How our minimum wage system came to be

Minimum wages were first established in 1951, through Republic Act No. 602 or the Minimum Wages Law. From that time up to 1989, minimum wages were largely uniform across the country, with Metro Manila and the rest of the country either having the same minimum wages or with differences going only as high as P1.

In this period, wage-setting functions were mostly with Congress, though the President also took over that duty for a few years.

But even then, there were problems with the legislative mill being generally slow, with laws taking years to be enacted, according to De Jesus. Because of that, there were attempts to create wage commissions that could take over this wage-setting function, according to De Jesus. Commissions like these were often short-lived — until 1989, when the Wage Rationalization Act was signed into law.

This act created the NWPC and RTWPBs that assumed the duty of determining minimum wages across the Philippines. The wage boards, specifically, were established for three main reasons, according to De Jesus:

• To depoliticize and speed up the minimum wage hike process
• To acknowledge the differences in the socio-economic development of the regions
• To devolve the wage setting process to the local level and involve the people who will be directly affected

How minimum wages are set

De Jesus said the Philippines’ current minimum wage determination process is based on two main sources: data and the expertise of the RTWPBs.

There are 10 criteria used to come up with the minimum wage.

These criteria are assessed using data, which the NWPC calls “proxy indicators.”

These proxy indicators are used to come up with base amounts that are then subject to simulations, but De Jesus clarified that there is no specific weight nor a rigid formula to come up with the minimum wage.

She explained that this is because they want room for the wage boards’ expertise to come in. The composition of the tripartite board with three sectors — government, businesses, and workers —  was intended for fair representation and on-the-ground experience to be considered in the wage-setting process.

This system is supposed to result in a “holistic” minimum wage determination cycle, De Jesus told Rappler. Otherwise, she said that a recklessly calculated minimum wage could lead to even worse outcomes for workers, businesses, and the region at large.

The minimum wage determination cycle

In most cases, the minimum wage determination cycle happens annually. Either the board or regular citizens who file a petition can initiate the process for reviewing the existing minimum wage.

This process is allowed to start 60 days before the anniversary of the existing minimum wage order. She explained that this required one-year period is supposed to ensure “regularity” in two ways: to provide businesses with a clear planning horizon and to give regular workers time to adjust price shifts. 

But there are cases in which that process can be started earlier, as long as there are “urgent and reasonable grounds” to start the review process earlier, according to De Jesus.

“The process is that they should be able to write a letter to the commission (NWPC) [saying there are] urgent and reasonable grounds for us to start the review process,” she said. 

If the request is supported by data and the NWPC agrees with their findings, then the regional wage board will be given the go-signal to start the minimum wage determination cycle early.

Growing divide

Because of these policies, minimum wages across the Philippines have grown at varying rates. Though the NWPC says this is intentional to account for regional differences, the data also show that the gaps have only been growing year after year.

Metro Manila has consistently had the highest minimum wages in the country, while BARMM, Region I, and Region IVA have lingered at the bottom ranks.

And even within some regions, there are further distinctions based on industry, business size, and classes of towns that have widened the wage gaps even more.

As the years passed, these stark differences have led to disgruntled workers and concerned lawmakers becoming more and more insistent with their demands for a system that ensures just wages.

For its part, the NWPC has been actively working to improve the wage-setting process, according to De Jesus. It is working on a new definition for the highly contested family living wage, while there have long been efforts to further simplify wage classifications within each region.

But as it stands, the NWPC has repeatedly stated that it is only an implementing body. While it presents its data and findings to Congress, legislation will decide whether or not the Philippines will keep its regional wage boards.

Up to now, wage hike bills with even smaller amounts have failed again and again. But can anger at the current wage-setting system finally translate to a P1,200 national minimum wage? – Rappler.com