Why wage boards are the better option

**media[19813]**FINDING ANSWERSAmid the bickering on who’s to blame for the failure to become law of the minimum wage hike bills approved by both chambers of Congress, one thing stands out: economists are adamant that a legislated wage increases can be perilous.“Raising the minimum wage by ₱200 would have ‘dangerous repercussions,’ including hurting the country’s economy, small business owners, and driving a spike in consumer prices, according to the Marcos administration’s economic managers,” read the lead paragraph of the Manila Bulletin’s banner story last June 12.The top headline story came in the wake of intensified calls for the enactment of a wage law shortly after the House of Representatives passed a ₱200 wage hike measure, 15 months after the Senate approved a ₱100 wage increase.A convening of the Bicameral Conference Committee to reconcile the two versions did not materialize as the 19th Congress adjourned sine die. Until the last day of session, both Houses refused to budge and adopt the other’s version, which could have done away with the need for bicameral consensus before being forwarded to Malacanang. The two chambers then blamed each other for the impasse.With the death of the wage measure in the 19th Congress, it is widely expected that similar bills proposing a minimum wage increase would again surface in the upcoming 20th Congress, just as what has been happening in practically every Congress all these years. Such phenomenon raises the question: Is a legislated wage hike the best way to address the need for increase in pay of our workers?There’s no dispute that wages need to be raised occasionally to keep up with rising costs of basic needs due to inflation, and to help the families of wage earners meet basic nutritional requirements derived from food, the most basic of all needs.A 2024 study by Picodi, a Portugal-based ecommerce firm operating an online consumer platform, revealed that the Philippines had a low ranking on the ability of its minimum wage to pay for a “survival basket” consisting of rice, bread, eggs, milk, cheese, meat, fruit, and vegetables.Out of 67 countries studied, ours placed 64th wherein the “survival basket accounts for 66.2 percent of the minimum wage.” The Philippines only ranked better than Armenia (78.7 percent), Uzbekistan (96.1 percent) and Nigeria (116.5 percent), way below the United Kingdom, Ireland and Netherlands which all had 7.2 percent, described as a “most comfortable ratio of the grocery basket to the minimum wage” in their countries.Thus, raising the minimum wage of Filipino wage earners is of paramount importance. But how to do so is also of paramount importance.Economists warn of dire consequences of legislated wage increases such as job loss and unemployment when small and medium enterprises respond by reducing their workforce or cutting back on new hires, and inflationary pressures when businesses facing higher labor costs pass the burden to consumers in price increases for goods and services.A legislated across the board wage hike could also worsen regional inequality. The proposed ₱200 hike, for instance, would raise labor costs by 31 percent in Metro Manila where the current minimum wage is ₱645, while in Bangsamoro Autonomous Region in Muslim Mindanao where ₱336 is the minimum, the rise would be a staggering 60 percent. Such disparity would make job creation even more difficult in poorer regions and could widen the economic gap between regions, instead of narrowing it.Another disadvantage of legislated minimum wage hike is that only around 4.9 million workers who earn minimum wage, or barely 10 percent of the 48.7 million employed stand to benefit. Another reality is that micro, small, and medium enterprises (MSMEs)—which employ the majority of minimum wage earners—cannot afford a 31–60 percent spike in labor costs. They may be forced to pass on the cost to consumers through higher prices, lay off workers, or shut down altogether.While it might be well-intentioned, a Congress-approved blanket national wage hike can be perilous indeed. The better option is using the existing mechanism of regional wage boards, established under RA 6727, which continues to offer a more equitable, flexible, and economically sound approach to addressing minimum wage issues across diverse regions.I was part of the 8th Congress that passed RA 6727, also known as the Wage Rationalization Act of 1989, which created the National Wages and Productivity Council and the Regional Tripartite Wages and Productivity Boards, commonly called regional wage boards.The law we passed was in line with the declared policy of the State “to rationalize the fixing of minimum wages and to promote productivity-improvement and gain-sharing measures to ensure a decent standard of living for the workers and their families; to guarantee the rights of labor to its just share in the fruits of production; to enhance employment generation in the countryside through industry dispersal; and to allow business and industry reasonable returns on investment, expansion and growth.”It was also in line with the State policy to “promote collective bargaining as the primary mode of settling wages and other terms and conditions of employment; and whenever necessary, the minimum wage rates shall be adjusted in a fair and equitable manner, considering existing regional disparities in the cost of living and other socio-economic factors and the national economic and social development plans.”Compared to a legislated wage measure in which “one size fits all,” most economics experts agree that using regional wage boards to come up with pay hikes is the better option. (finding.lina@yahoo.com)