Minimum wage: Justice, not charity

In the past encyclicals of Pope Francis, he wrote that every family is entitled to a living wage. Here in the Philippines, researchers at IBON calculate that a family living wage covering food, housing, health care, education and other essentials for a family of five is roughly P14,885 a month. This is approximately P1,205 to P1,221 per day.

While this is an ideal aspiration, the business community has said that this level of wages would be too high a target for the Philippine economy.

The current daily minimum wage in the Metro Manila region is P645 a day. Outside Metro Manila, the minimum wage ranges from P336 to P560 per day.

Even the highest metropolitan wage rate of P645 daily is below poverty threshold. A family of four or five trying to live on the minimum wage today faces impossible choices of which bills to pay or what to eat. For a minimum wage earner, the thought of even a decent home and minimum health care is out of reach. Certainly, no society can claim moral high ground while knowingly enforcing a wage that is less than a household’s poverty threshold.

Congress is presently debating a legislated increase in the daily minimum wage. The House of Representatives has already approved a minimum wage increase of P200 a day. The Senate was unable to pass the minimum wage bill when it adjourned this month. Hopefully, in the coming session this July, the Congress will be able to agree on, at the very least, a P200 minimum wage increase.

The proposal for the minimum wage increase has significant potential benefits for workers, families and society. The first is that while families would still remain below the poverty line, there would be improvements in their living standards. Workers and their dependents would have more income for food, health care, education, shelter. This would directly contribute to better nutrition and health outcomes.

Second, it would be a boost to consumer spending and economic growth. Low-income households will spend any additional income on local goods and services. Thus, any wage hike will stimulate consumer demand for food, consumer products, transportation, etc. The increased spending by millions of workers will act as an economic stimulus at the grassroots level, driving higher sales for even small- and medium-size businesses. This bottom-up growth can offset part of the higher wage costs. Businesses will see greater demand for their products as workers will have more money to spend. In the medium term, this will support GDP growth through increased consumption.

Third is that paying workers more can lead to higher job satisfaction, increase morale and higher potential productivity. When employees feel they are earning a fair wage, they are often more motivated in their jobs. Better paid workers may also be healthier and less stressed, which can improve their focus and productivity at work. This will lessen the need to have multiple jobs in order to survive. The wage hike could incentivize firms to invest in efficiency and skill upgrades, moving towards higher productivity per worker which will be a gain in long term competitiveness.

Fourth, boosting the earnings of the lowest paid workers will allow minimum wage workers to catch up with lost purchasing power. In recent years, wage increases have lagged behind inflation, which has effectively led to a shrinking of real incomes for the poor. Additionally, higher household incomes for the poor can have positive social effects. For example, this will allow parents to invest more in their children’s education, which is an investment in the country’s human capital.

Fifth, many minimum wage earners are women and young workers. A minimum wage increase could narrow gender pay gaps and improve the lives of vulnerable groups. Furthermore, sectors like agriculture and service, which often see underemployment, might experience a shift because higher wages could attract workers to more formal jobs or encourage employers to increase work hours, potentially reducing underemployment.

This debate on increasing the minimum wage must also be conducted within the framework of our Constitution, which mandates that every Filipino is entitled to a “living wage.” This is therefore not just a slogan, but a mandate. Data from the Philippine Statistics Authority and other research groups show that we are still far below that standard of a living wage. Acting on this mandate therefore should not be considered as charity but social justice.

We need to remember that it has been proven time and again that merely increasing economic growth will not benefit the people, as even Pope Francis said that the idea of trickle-down economics has never worked.

It is time for Congress to honor the promise of social justice and give workers a wage that can provide, at the very least, some semblance of human dignity. Congress can at least begin by approving the P200 a day minimum wage increase. The goal should at least be to restore the workers’ purchasing power and a minimal life of decency.

By increasing the minimum wage, it is an affirmation that in the Philippines, no work is too small for respect and no family should live in hunger. The government must act on increasing the minimum wage now.

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