More demand for jobs = higher pays

Last week, the militant labor group, Partido Manggagawa (PM), called on President Rodrigo Duterte “to certify as urgent House Bill 7787 pushed by the members of the Makabayan bloc seeking to abolish the regional wage boards and fix the national minimum wage at ?750 for all workers.”

It also called on “all labor groups to close ranks and form a stronger alliance to push for the demand to raise wages and to abolish the regional wage boards by amending RA 6727 known as the Wage Rationalization Act of 1989.”

Demand for exorbitant wage increase may sound absurd but it sells well to the labor unions’ members. Coupled with the proposal to set a national minimum wage, the workers in the countryside will even be more gratified. This is so as the minimum wage in Metro Manila shall be the same as that in the Province of Sulu. Simply put, should we consider the proposed ?750 national minimum wage the PM pushed, then, a worker in Sulu stands to receive an increase in daily pay amounting to over ?500. Such move though encourages the “probinsyanos” in Metro Manila to go back to the rural areas.

However, before we buy the idea of wage increases and uniformity nationwide, let us look into some facts. Historically, negotiations for minimum wage increases have always been so intense. Since demands by labor groups have been so unrealistic, their petitioned amounts, as always, were not granted. Thus, as has always been the finale in each negotiation, labor unions call for the abolition of the country’s Regional Tripartite Wages and Productivity Boards (RTWPBs).

Most of us, however, are in agreement that their demands have always been clothed with so much hyperboles. They usually do these to stay relevant to their union dues-paying members.  Unfortunately, these swaggers brought about negative consequences to the new entrants in the labor market and the unskilled ones.

Factually, when non-productivity related increases are imposed, the unskilled and inexperienced workers or new graduates will suffer the major blow. With the same amount of pay, companies will definitely go for skilled and experienced ones. Therefore, as the unskilled and inexperienced workers will turn out to be expensive, the possibility that they won’t get employed is imminent. Unfortunately, they will miss the opportunity to earn while learning skills and gaining experiences.

By the same token, if the proposal for equal minimum wage nationwide pushes through, there shall be wild non-productivity related increases of wages in the countryside. Some small and medium enterprises might even close. Thus, we can surely expect spikes in unemployment rate in the rural areas.

Additionally, this move (equal minimum wage nationwide at ?750) is a disincentive to prospective investors in the countryside. Why will they pour their money in the rural areas if labor cost is just the same as in Metro Manila? Remember, for manufacturers, the closer they are to a huge market the better for them. Why? It is because if they put their plants in the rural areas and have exactly the same manufacturing cost, their products will come out to be more expensive when delivered to Metro Manila due to freight and handling expenses. Therefore, they’ll just put up their plants in Metro Manila. That’s a no brainer.

Moreover, this move discourages up-and-coming entrepreneurs and kills struggling business start-ups in the countryside. The minimum wage in Metro Manila is just too much to bear for these small businessmen. If they close their shops what is there for the “probinsyanos” in Metro Manila to go back for? Nothing.

The truth is, we’ve not been doing the right approaches and, now, the labor groups are also trying to come up with a wrong one. Agreeably, the most tenable approach should have been through productive employment in the countryside. This can be addressed by encouraging new investments there, both foreign and domestic (including SMEs). Or, should the government must directly intervene, through productive-oriented supports to the most vulnerable sector, the agriculture sector.

Indeed, except for the more professionally managed and growth and people oriented companies, wages always boil down to supply and demand. It simply means, when labor is scarce, the wages are high. When there is oversupply (of labor), wages are low.

Therefore, the most appropriate approach is to encourage more new investments. Let the demand for labor rise beyond the supply. Then, when it happens, salaries will obviously increase.