Widening gap between rural, urban wages explained

MANILA, Philippines - Experts on political economy have warned that the wide disparity in rural and urban wages remained a roadblock to achieving inclusive, broad-based development, despite the country’s 7.8 percent growth in first quarter.

This is the essence of the first in a series of roundtable discussions organized by the Angara Centre for Law and Economics, dubbed Taking the Philippine Economy to the Next Level: Promoting Inclusive Regional Development, which was held yesterday at Malcolm Hall, College of Law, University of the Philippines, Diliman, Quezon City.

The event was topbilled by internationally-recognized political economist, Dr John C Nye, Frederic Bastiat chairman in Political Economy at the Mercatus Center, George Mason University, and research director at the Higher School of Economics in Moscow.

Dr Nye observed that the Philippines’ overall ratio of rural-urban wage gap at 67 percent remained constant over the last decade. There are higher ratios when skilled and unskilled workers are considered separately. Areas with a high share of agriculture have the lowest relative wages, the study revealed.

There is a pressing need to even out the rural-urban wage gap, which calls on the Aquino administration to take a hard look at differences in labor policies between commercial industries and rural labor.

The paper pointed out that urban workers actually earn slightly less in real terms than rural workers when relative prices are considered. Despite the higher cost of living in urban centers, there are compensating factors that can explain why people flock to already-congested cities. These are unmeasured intangibles like better public services, improved networks, more educational opportunities, better urban amenities, and an expectation of social mobility.

Nye coauthored the study with respected political economists Jeffrey Williamson, Laird Bell professor emeritus of Economics, Harvard University; Karl Chua, country economist for PH, World Bank (WB); and Louie Limkin, research analyst, Poverty Reduction and Economic Management (PREM) unit, WB. National Economic and Development Authority (NEDA) Director General Arsenio Balisacan and Dr Rogier van den Brink, lead economist of PREM at World Bank in the Philippines served as panel discussants. The roundtable also featured a discussion on welfare disparities in the country, presented by Sharon Faye Piza, senior research associate at the Asia Pacific Policy Center.

This lecture kicked off the Angara Centre’s Andrew Tan Lecture Series, named after the real estate tycoon and Megaworld founder who is the Centre’s first patron. The Andrew Tan Lecture Series focuses on topics related to ASEAN integration. Its aim is to promote a deeper understanding of issues that affect the PH as member of the ASEAN Economic Community.

The next roundtable discussion on Promoting Cooperation and Resolving Crises in Southeast Asian Territorial Disputes, is slated for December 2013.