Foreign business groups back two-tiered minimum wage scheme

MANILA, Philippines – Amid the debate over increasing minimum wages in the country — it will allow workers to cope with rising prices, but raise the costs of small businesses, forcing them to cut jobs — foreign business groups want a compromise.

The Joint Foreign Chambers of the Philippines (JFC) is backing a two-tiered minimum wage system, which it believes will benefit Filipinos in both the formal and informal sectors, while maintaining labor costs in the Philippines competitive.

“We support fair and competitive wages for the Philippine workforce. Fair in the sense that as many Filipinos as possible are rewarded for their work and competitive that wage levels do not result in job losses,” it said in a statement.

Under the system, minimum wage is set above the regional poverty threshold or the level of compensation that will allow a worker to afford basic goods and services (first tier), and additional compensation is given based on the worker’s productivity (second tier).

The Labor Department approved a wage order in southern Luzon provinces using this scheme last week. If generally adopted, the two-tiered system will replace the current setup in the Philippines where wages are adjusted once every 12 months or more when supervening conditions exist.

The JFC said the yearly minimum wage adjustment directly benefits 2.2 to 2.3 million workers in the formal sector, but leaves the balance of 38 million more in the informal sector unprotected from inflation after the adjustment. Moreover, it said 62% of workers in the formal sector are in micro, small and medium enterprises (MSMEs). Any wage adjustment pushes these MSMes to close shop or hire the informal or untaxed sector.

The group also said that the relentless upward adjustment in minimum wages in the Philippines has made them among the highest in Southeast Asia.

“The Philippines is slowly catching the attention of foreign investors who can bring investment and jobs to the country. We are already at a disadvantage with higher wages.”

Labor groups in the country have proposed as much as P90 across-the-board increase in the minimum daily pay of workers in the private sector. Last week, the regional wage board has approved a P30 additional allowance for workers in Metro Manila and ordered the allowance awarded last year be computed in the minimum wage.

While the groups welcomed the increase, they said it was not enough to cover the rise in the prices of basic commodities.

Transition to two-tiered

In the Calabarzon (Cavite, Laguna, Batangas and Quezon) region, the Labor Department has approved a P2 to P90 basic pay increase for minimum wage workers, hiking the wages there above the P255 floor set by the wage board under Wage Order No. IV-15

In addition to the wage increase, a P12.50 per day “productivity incentive” was ordered for workers who are performing well. Companies are required to set up a committee with equal representation from both workers and employers that will implement the productivity-based pay.

Labor Secretary Rosalinda Baldoz said the wage order follows for the first time the two-tiered wage system.

“The Philippines is definitely in transition to a two-tiered wage system, which offers better protection to minimum wage earners, ensures better viability of enterprises, recognizes and rewards productivity and performance, and strengthens collective bargaining,” she said. – Rappler.com