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Managing
a wage hike clamor Malacanang’s announcement that a wage hike is not likely to be announced on the first of May, thanks to an election ban that prohibits vote buying, was received with both relief and frustration. It was relieving for economic managers as a hike in the daily minimum wage – whether P125 or P65 – would have dramatic repercussions on the economy. At the same time, I can feel the frustration of millions of wage earners, no doubt because the labor sector is in dire need of improving its take-home pay. The cost of almost everything basic – food, gasoline, transportation – has gone up. Sweldo na lang ang hindi! But whether jacking up salaries is the right response to this unfortunate situation is debatable, especially now that China continues to lure more and more investors due to its cheap labor. Labor groups of course argue that the Chinese yuan has not devalued as much as the peso. To date, the Philippine currency’s purchasing power has deteriorated to half of what it used to be in 1994. Looking For A Quality Package So this May 1, workers were instead treated to a package of freebies, from no-pay train rides, complimentary tickets to basketball games and concerts, and discounts at business establishments. Plus the announcement of a thousand new jobs available in Metro Manila, Labor Day festivities may have taken the bitter edge of a worker’s daily struggle to make ends meet. Well, at least for the day. Last year, sans the election ban, all the government could offer was the reduction in the purchase power adjustment (PPA) on Meralco billings. And as we all know, it later turned out that the gift was only for a short while. After a few months, Meralco billings were reformatted to include the new "unbundled" configuration. As of now our workers can only hope that the next administration will facilitate the granting of a new cost of living allowance (COLA) to help stretch whatever remains in the pay envelopes. The COLA scheme gained popularity starting the late 2001 to early 2002. Workers in Metro Manila were supposed to have received an increase of P30 in their daily take-home pay. In Region 4, workers should have been given between P8 to P20 daily, while those in Regions 3, 6 and 8 should have received an extra P20, P8 and P20, respectively, in their daily pay. The additional living allowance should have been truly beneficial if only the government did not exempt too many employers. In the end, labor groups claim that the COLA filtered down to less than 10 percent of nationwide workers. With the basic survival of many families seemingly on the line with the way prices of basic commodities have soared, some real and substantial form of additional compensation needs to be given to wage workers in the very immediate future. Balancing Act The government’s inflation numbers may not reflect it, but households all over the country are feeling the pinch of high prices of pork, cooking oil, milk and even coffee. Pump prices of gasoline is still on the rise. Fare for the first five kilometers have already increased by 75 centavos, and much more for air-conditioned buses. However, the government would have to do a tough balancing act and consider also the impact from a macroeconomic point of view before messing up with the basic wage structure and allowing an increase. It could prove to be a costly and futile exercise as other economic factors come to play and dilute whatever initial benefits can be gained by a wage hike. Economists will say that first to be affected of course is inflation as a wage hike will further push up prices of basic goods. As previously mentioned in earlier columns, inflation is estimated to go up by 50 basis points for every P12 increase in wages. So if the wage hike is approved, inflation could go up between three and six percentage points. Every time inflation goes up, the peso buys a lesser amount of goods. In short, no one gains. Second is interest rates. A surge in inflation would elicit a knee jerk response from the central bank to increase its overnight rates. And when this happens, the benchmark Treasury bill rate would follow. And so would bank lending rates. When the cost of borrowing increases, expansion plans are shelved and the economy stutters badly. Higher interest rates would also swell the budget deficit even more because everybody knows that the government is the biggest borrower in town. And the fiscal deficit, being one of the most-watched indicators, contributes also to the instability of the foreign exchange. While the peso had gone back to the P55 level two weeks ago, this breached the P56 mark again as political opponents grabbed the headlines again. Frankly, the peso movement is quite frustrating when compared to Thailand’s. After the Asian crisis, the peso and the baht moved almost in tandem. Now, the peso is almost 50 percent weaker. Creative Solutions The tricky part now is giving our workers the purchasing power they need without jeopardizing the sensitive relationship of other economic factors. Perhaps, now is the time for our bureaucratic advisers to come up with some creative solutions. For starters, why not provide entrepreneurship training for wageworkers or their designated family members? This entrepreneurship drive has to be supported by sustainable micro-financed livelihood programs. After all, what has kept most Filipino families surviving these last few years are the odd jobs solicited on a need basis or the backyard micro enterprise ventures. It may not be as easy as simply allowing a wage hike, but can be truly rewarding. Perhaps, the government should now really look into seriously supporting a truly grassroots economic renewal.
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