New Central Visayas minimum wage rate unfair to labor

The regional tripartite productivity and wage board (RTPWB) just announced an increase in the minimum wage rate of P20.00 pesos per day for Class A areas and P15.00 for Class B, C, and D areas. Class A covers all the Metro Cebu cities and municipalities, Class B for the rest of Cebu except Camotes and Bantayan Islands, Class C for Negros and Bohol, and Class D for Siquijor together with Camotes and Bantayan Islands.

Speaking of Metro Cebu (Class A), the minimum wage rate will now be P386 daily. This corresponds to a 5.5 percent increase in the minimum wage set last year at P366 daily. This looks good as it appears higher than the 4.6 inflation rate announced by the government for the whole country from May last year to May this year. It turned out that the region’s inflation rate is 6.0 percent. It is clear then the workers are going to fall in their standard of living.

This year, the government set 2012 as the new base year in deriving the Consumer Price Index or CPI from where the inflation rate is also computed. With the value of the CPI set at 100.0 in 2012, we find that the CPI for the region has increased to 121.6 in May this year. Again, this corresponds to an overall 21.6 percent inflation rate in six years. Six years ago the minimum wage for Metro Cebu was also set only at P327 daily. The new minimum wage, therefore, is only 18 percent higher than this. If only to maintain their 2012 standard of living, the daily minimum wage should have been raised to P398 per day.

Even that, however, is still unfair to labor. Why?

Net of inflation, the Central Visayas gross regional domestic product, more than 60 percent of which comes from Cebu, had increased by 38.5 percent in the last six years from 2012 to 2017, plus another 6 to 8 percent real growth that I estimate this year. The question then is who are benefiting from the increase in our output? Should not the lowly wage earners partake also of this? To be fair, they should or we will be seeing only more new cars on the road but with the wage earners having trouble buying a used pair of shoes and pants in Carbon.

In fact, we also profess to have an inclusive society. A truly inclusive society will do more than just giving labor what is enough to meet inflation plus a little share of the growth in output per worker. When there is too much inequity, like in our country, a truly inclusive society will endeavor to increase the income of the lower rung faster than those in the upper rung. Only through this way that our inequity will be lessened a bit.

Therefore, to have more equity, the minimum wage should be allowed to grow at rates faster than the sum of the inflation rate and increase in output per worker. How high depends on how inclusive and equitable we want to be as a democratic society.