(Mis)understanding Phl minimum wage

(Mis)understanding Phl minimum wage | Daily Tribune

A master’s degree holder in Philippine Studies focusing on sociocultural and development wrote a column in another newspaper on 26 September entitled, “Understanding Minimum Wage in the Philippines.” He began his article by quoting and supporting his paper’s July editorial about the “inadequate and insulting wage hike.” He immediately revealed his misunderstanding of his subject and his contempt for the mandated minimum wage.

He alleged that the poverty in the country was due to the non-payment of a living wage to workers by the “unconscionable and heartless 40 rich businessmen.” He cited the incredible sale of a single slice of a high profit-margin chocolate cake which he averred gave the business owner a huge profit but he refused to pay his workers the living wage they deserve.

He made several wrong assumptions but the most egregious was his childish use of that example of the one slice of cake that led him to his hasty conclusion. He must know that in a free enterprise economy no business is assured of daily robust sales only of a high-margin product or service.

He failed to consider many other uncontrollable variables such as greater sales of low-margin items; high operating cost due to inflation; spoilage and obsolescence; business slowdown due to disruptive and excessive legal and special holidays, natural and man-made disasters, supply chain disruptions; the health problems of workers; fickle-minded customers; a pandemic outbreak; a transportation shortage, traffic issues; rising rent; the weakening peso vis-a-vis the US dollar that increases import costs; power and water supply interruptions; and the impact of stiff competition, to mention a few.

Obviously, the columnist was not an economist nor an accountant but he was clearly anti-business.

He and other like-minded groups misunderstand or take out of context the 1906 homily of a certain Father John Ryan who coined the term “living wage,” a hypothetical and unquantifiable term, that cannot be found in the Bible or any church teaching. But labor groups found it a fitting slogan for their movement as a moral imperative to demand a living wage as the minimum wage for all workers.

Many books and essays, including my column of 12 July 2024, explained the difference between a living wage and the minimum wage.

For two generations, the militant labor groups persistently petitioned Congress to mandate the hypothetical living wage as the lawful minimum wage across all regions and industries nationwide. Such demand is delusional and a pipe dream that aims to grant lifetime happiness to salaried workers.

It is not unexpected for militant labor leaders to use the living wage issue as a war cry to give hope to their members and retain their loyalty. But it is surprising for a master’s degree holder to chime in on this flawed slogan verging either on hypocrisy or ignorance or both. At the risk of being redundant, let me repeat my previous column’s definition of a living wage and a minimum wage:

A LIVING WAGE is an aspirational, hypothetical and unquantifiable income for workers depending on each family’s lifestyle in an ideal economy. In contrast, a MINIMUM wage is the mandated income per industry and per region computed by wage boards to prevent the exploitation of labor and ensure the viability of businesses for economic growth.

Additionally, I solicited a more professional definition from a former DoLE undersecretary and he offered this distinction: a LIVING WAGE is an economic concept established by the ILO to represent the HYPOTHETICAL amount that a family of four needs to be able to live a decent life. Thus, this amount is variable depending on the area’s cost of living, threshold family income, inflation rate, and the purchasing power of the working class.

A MINIMUM WAGE is a legal concept established by the government, in consultation with both the labor sector and the employers’ group. This is really a balanced amount considering not just the needs of the working class but also the employers’ capacity to pay it. The amount of a minimum wage also considers the effect of wage levels on employment, and the impact of wages on the economic development of the entire country.

Those who advocate for a living wage oversimplify the complex realities of the broader economic landscape businesses operate in and the very nature of markets, competition, and business sustainability. Promoting a living wage without regard for its practical limitations ignores the diversity of industries and local conditions.

Real progress is not achieved through idealistic rhetoric but through practical and balanced policies that ensure that both workers and businesses can thrive.