January 25th, 12:18am January 24th, 11:37pm Ed LacsonEmployer's Corner

The current minimum wage determination, as instituted in Republic Act 6727 or the Wage Rationalization Act, is done on a regional basis through 17 Regional Tripartite Wages and Productivity Boards (RTWPB). A new proposal, through House Bill 8616, will abolish this system and replace it with a national wage fixing scheme to be implemented by the National Wages and Productivity Commission.

The rationale of determining wages on a regional basis is in recognition of the varying socio-economic conditions in each region, such as the levels and pace of economic development and growth, employment and unemployment situation, types of economic activities, whether mainly agricultural, industrial, commercial or services-oriented or a combination of these.

These factors have been considered in the criteria and standards of the current regional wage board for regional minimum wage fixing.

The RTWPB determines the minimum wages per region in accordance with the “standards of living necessary for the health, efficiency and general well-being of the employees,” taking into account the prevailing minimum wages in each region, the most recent available regional poverty threshold estimates and current regional socio-economic indicators, such as consumer price index or cost of living specific to the region and capacity of employers to pay.

These data reflect the wide variance and complexities in socio-economic conditions among the regions following the prescribed criteria of minimum wage fixing.

Wage orders of the current regional wage boards are issued by a composite seven-member regional tripartite wage and productivity boards in 17 regions, represented by two members each from labor and employers and three members from government, namely, from NEDA, DTI and DoLE regional director who acts as chairman.

The RTWPB are mandated by law to conduct public consultations and meetings and to take into account the inputs of stakeholders on the need to increase the prevailing minimum wage rates without impairing the viability of business and industry within the framework of the prescribed standards and criteria for regional minimum wage fixing under Art. 124 of the Labor Code.

RTWPB have the power to adjust wage rates on their own if there are “supervening conditions affecting the capacity of workers to cope with inflation, even if it falls within the 12-month prohibited period from the last wage order issued.”

To change this organized structure and replace it with a national wage fixing system is a step in the wrong direction. About 99 percent of all registered enterprises in the country are made up of MSME (micro, small and medium enterprises). Imagine what would happen to these enterprises, particularly those in the provinces, if wages are legislated on a nationwide basis, a one-wage-fits-all affair, most particularly in light of House Bill 7787, which seeks an excessive increase of P750 daily minimum wage for all workers nationwide versus the recent well-studied P25 per day increase in NCR.

Such a situation would surely hurt our MSME and push many of them to go underground or become informal or unregistered, if not drive them out of business. There is, thus, the potential for job losses from closures, lesser government revenues for firms going informal and ultimately, less protection for the workers.

Additionally, a standard minimum wage nationwide would discourage investors from locating outside urban centers like Metro Manila and set back government’s program for industry dispersal to the countryside.

Even in mixed economies, all factors of production such as materials, labor, logistics and setting of fair return on capital must be autonomously determined and set by employers, including wages for its workers, with the least interference from government. In the end, the ideal situation for wage fixing is for it not to be legislated at all. Rather, it should be left solely to the private sector participants themselves who already have workable mechanisms for wage determination and adjustments, such as their collective bargaining agreements, which can, among other things, also incorporate performance-based incentive schemes.