“Itataas natin ang panawaga, magkita-kita tayo sa SONA dahil alam naman natin ang puno’t dulo nito (mababang pasahod sa mga guro) ang ang patakarang neo-liberal ng gobyernong Duterte.”–Vladimir Quetua, Alliance of Concerned Teachers
Research group IBON said that tax-driven inflation is making the meager wages of poor Filipinos fall even further behind the rising cost of living.
The group said this makes it even more urgent for the government to immediately raise wages even as it revisits the Tax Reform for Acceleration and Inclusion (TRAIN) law behind the increase in consumption taxes.
The Duterte administration would be insensitive if it continues to resist the clamor for a decent national minimum wage, the group added.
IBON said that accelerating inflation has increased the family living wage (FLW) in the National Capital Region (NCR) and elsewhere.
IBON computations show that as of June 2018, a family of six needs Php1,175 to meet their basic needs, while a family of five needs Php979.
The FLW has increased by Php65 for a family of six and by Php54 for a family of five in June 2018 from the same period last year.
As it is, said the group, the NCR nominal minimum wage of Php512 is falling even further behind the rising cost of living.
The NCR nominal wage is only 44 percent of the FLW for a family of six, and 52% of the FLW for a family of five with a wage gap of Php663 (56 percent) and Php467 (48 percent), respectively.
The wage gap will continue to widen as inflation erodes the minimum wage.
Reacting to economic planning secretary Ernesto Pernia who said that a wage hike is not necessary, the group said that an immediate wage hike will help poor Filipinos cope with price spikes.
The Duterte administration can respond to the demand of labor groups for a Php750 national minimum wage.
IBON stressed that there are enough profits in the economy and among corporations to support the substantial increase in the minimum wage needed by workers and their families.
IBON also belied claims by the country’s economic managers in their joint statement on the June 2018 inflation that TRAIN’s reduction of personal income taxes, cash transfers, and allocation for free social and economic services “should help in coping with the rising prices of goods.”
The group said that their assertion that TRAIN “increased the take-home pay of 99 percent of income tax payers” is grossly deceitful because they know that only around 7.5 million or one-third (33 percent) of Filipino families are income tax payers.
Of these, some two million were already exempt from paying income tax even before TRAIN because they were only minimum wage earners.
This means that 17.2 million or over three-fourths (76 percent) of Filipino families suffer inflation but without any increased take-home pay.
IBON also said that the government should stop hyping TRAIN’s cash transfers because when they are ended by 2020 the higher prices of goods and services due to TRAIN will remain.
The group said that the Duterte administration’s unrepentant defense of TRAIN is daily affirmation of its callousness to the plight of tens of millions of poor Filipinos and its refusal to replace TRAIN with a more genuinely progressive tax package that is unafraid to tax the rich. #
Research group IBON said that the government’s insistence on higher taxes especially on the poor is among the factors driving inflation rates to their highest in nearly a decade.
The group said that runaway inflation is due to the peso depreciation and rising global oil prices combined with the Tax Reform for Acceleration and Inclusion (TRAIN) law.
Among these, TRAIN’s higher consumption taxes are directly within the government’s control and it can immediately arrest the tax-driven portion of inflation if it chooses to do so.
The Philippine Statistics Authority (PSA) has reported a 5.2 percent inflation rate for the month of June.
The biggest price increases were in food, especially in corn, vegetables, meat and rice; alcohol and cigarettes; transport; housing, water, electricity, gas, and other fuels; and education.
This 5.2 percent inflation rate is more than double the 2.5 percent in the same period a year ago and four times the 1.3 percent inflation rate in June 2016 at the start of the Duterte administration.
The June inflation rate appears as the fastest in only five years because available estimates using the current base year [2012=100] are only until 2013.
But IBON noted that inflation today would already be the fastest in nearly a decade, or since March 2009, using inflation data according to the previous base year [2006=100] as an approximation.
Sonny Africa, IBON executive director, explained that the TRAIN-triggered increase in consumption taxes, especially on fuel products, is an inflation factor immediately within the government’s control.
“The Duterte administration’s insistence on TRAIN makes it directly accountable for the highest inflation in almost ten years,” said Africa, “and its pushing the higher taxes last year amid already rising global oil prices and a depreciating peso only underscores its insensitivity to the poor.”
Africa stressed that the runaway inflation hits poor Filipinos the hardest because their incomes are so low already that any price increase means they will be consuming less.
Moreover, food spending accounts for over half the expenses especially of the poorest households so that food prices are rising even faster than other commodities is particularly alarming.
The poorest are hit worst, Africa said, adding, “The cumulative impact of high inflation is that the poor will eat less, walk more, forego spending on medicines and treatment, scrimp on their utilities, and have nothing for emergencies.”
In the short-term, government can suspend TRAIN to moderate inflation and provide relief to millions of poor Filipinos. Even better, it can work towards eventually reforming the tax reform package to become genuinely progressive rather than regressive and anti-poor, said Africa.
Africa added that the government can also take measures to moderate inflation over the longer term. It can manage the impact of rising global oil prices through responsible regulation of the oil industry.
Arresting the peso’s steady decline will, he said, require a more comprehensive approach.
This includes identifying and overcoming: the long-standing agricultural and industrial backwardness at the root of the country’s chronic trade deficit; the over-reliance on overseas remittances for foreign exchange; and the over-reliance on foreign debt and investment. #
“There is no such thing as a tambay culture. That practice is a result of workers’ ways of dealing with precarious work, it’s how the jobless deal with joblessness, and joblessness as we all know is a result of a backward non-industrial economy based on export orientation and import-dependence.” —Prof. Sarah Raymundo, sociologist
A meme by the Alliance of Concerned Teachers on the issue of President Duterte’s order to the Philippine National Police to arrest loiterers in communities.
Ordinary citizens speak on the Rodrigo Duterte’s Tax Reform for Acceleration and Inclusion Law, explaining the poor are affected the most by the inflation caused by the measure.
TRAIN was among the issues condemned by activists as they commemorated Philippine Independence Day with a protest action last June 12.
The Rodrigo Duterte government should not depend on foreign investments for economic progress and job generation soon after the enactment of the Ease of Doing Business and Efficient Government Service Delivery Act, research group IBON said.
The Ease of Doing Business Act or Republic Act (RA) 11032, signed into law last May 28, aims to simplify the application process for the establishment of businesses in the country.
Proponents say that RA 11032 aims to attract more foreign investments.
IBON said however that even after several decades of rising foreign investments, domestic industries and agriculture remain lagging while the Filipino people continue to be mired in a poor jobs situation.
Foreign direct investments (FDI) have grown by 391 percent from US$664 million in 2013 to US$3.3 billion in 2017.
But most of these investments have gone to foreign export enclave manufacturing, business process outsourcing, commercial and residential real estate, and transport infrastructure.
These areas are profitable for foreign and local big business, but not necessarily beneficial to the country’s economic development, said the group.
IBON explained that investments have remained scarce in domestic industries and agriculture sectors that are much-needed for sustainable and genuine growth and job generation.
For instance, agriculture only received 0.6 percent (US$19.6 million) of total FDI in 2017.
Meanwhile, the gross domestic product (GDP) share of agriculture declined from 10.5 percent in 2013 to 8.5 percent in 2017.
Manufacturing remains stagnant with minimal change from its 22.8 percent GDP share in 2013 to 23.6 percent in 2017.
Rising FDI has not translated into improved job generation.
IBON noted that the number of employed Filipinos fell by 663,000 from 40.3 million in 2017 from the previous year, which is the biggest contraction in employment in 20 years.
The labor force participation rate (LFPR) also dropped to 63.7 percent, the lowest in 20 years when it was 63.1 percent in 1985 during the severe economic crisis.
More recent official labor data for the first quarter of 2018 shows that there are over one million underemployed despite higher employment and lower unemployment.
Before RA 11032 was signed, the World Competitiveness Report showed that the Philippines’ attractiveness to corporations wanting to do business here was diminishing.
The country’s ranking plunged by nine slots, reportedly the biggest drop in Asia, due to employment concerns and poor social infrastructure.
IBON however said that instead of focusing on attracting foreign investments, the Philippine government should first ensure its control over key local industries, utilities and services, as well as place national interest and public welfare above local and foreign big business interests.
For the country to truly benefit from foreign investments, these should be planned in accordance with genuine domestic development, with close government monitoring and regulation, said the group. #
Contrary to government and big employers’ claims, research group IBON said that raising minimum wages nationwide to Php750 is doable, need not spike prices further, and will benefit millions of Filipino workers and the economy.
The group cited the following reasons:
Raising minimum wages nationwide to Php750 is doable if owners of establishments allow a small portion of their profits to go to their workers instead.
Firms and the economy as a whole have more than enough profits to support this.
Data from the 2015 Annual Survey of Philippine Business and Industry (ASPBI) of the Philippine Statistics Authority (PSA) shows that the 34,740 establishments employing 20 or more have Php1.7 trillion in total profits and 4.5 million employees.
Raising the average daily basic pay of wage and salary workers from the nationwide average of Php378.71 to Php750 transfers just Php473.2 billion to workers’ pockets, which is only a 28.3 percent decrease in profits.
Workers will meanwhile get to take home an additional Php8,076 per month on average.
This still falls short of the family living wage and does not necessarily bring everyone up to a decent standard of living but such an increase will provide immediate relief to millions of Filipino workers and their families.
Raising minimum wages nationwide to Php750 will not necessarily hike inflation. Prices need not go up and workers need not be laid off if employers accept the slight cut in profits.
As it is, wages are not even keeping up with the rising productivity of workers so their ever-growing contribution to the economy increases employer profits more than improves workers’ welfare. For instance, according to the Labor Productivity Statistics of the PSA, the contribution of each worker to total gross domestic product (GDP) increased from Php196,179 in 2015 to Php198,215 in 2016 (up by 2.2 percent). This means that the average daily contribution of each worker to the economy amounts to some Php759.44 per day, which is more than double the average daily basic pay and more than the proposed national minimum wage.
The economy will also benefit by increasing workers’ purchasing power and aggregate demand which stimulates higher production and increases economic activity. Raising minimum wages nationwide also reduces inequality by transferring wealth overly concentrated in a few to millions of workers and their families.
According to IBON, the country’s largest corporations and the wealthiest families owning these can easily absorb the substantial wage hike.
Smaller producers in micro, small and medium enterprises (MSMEs) will also be able to afford the wage hike with government support such as immediately providing cheap and easy credit, giving marketing support, nurturing locally-integrated supply chains, and improving their scientific and technological capabilities.
MSMEs will also benefit from increased worker demand for their goods and services in the domestic market, said the group. #
Research group IBON said that the government’s recently announced plan to respond to labor’s clamor for an increase in the minimum wage is welcome but underscored that this move is urgent amid rising prices.
The group said that the hike should be meaningful enough to keep up with accelerating inflation and worsening poverty.
Amid the three-year-high first quarter inflation, widely perceived to be caused by the government’s Tax Reform for Acceleration and Inclusion (TRAIN) among other factors, and labor’s demand for a wage hike, the Department of Labor and Employment (DOLE) said that a wage increase is coming up within the month.
According to IBON, it is urgent for government to ensure the legislation of a minimum wage hike that is sufficient for the working people to cope with the rising cost of goods and services.
Recent price spikes have been brought about by government’s own market-oriented policies such as the oil deregulation and tax reform laws that press prices up while wages remain low.
The group however stressed that the wage increase should be substantial, as the recent inflation rate will only continue to erode a paltry increase.
IBON explained that despite the last increase of Php21 in October 2017, which raised the National Capital Region (NCR) minimum wage to Php512 from Php491 per day, the real value has eroded by Php16.25 from Php464.19 in October 2017 to Php447.94 as of April 2018.
IBON also noted that the TRAIN has inflicted a heavy blow on the workers’ purchasing power as the real value of the NCR minimum wage lost a significant Php18.79 since the Duterte administration took office in July 2016.
According to IBON, initially increasing the minimum wage nationwide to at least Php750 as recently proposed by progressive lawmakers is the more practical measure.
This will allow wage earners to cope with inflation and increase their purchasing capacity.
It will also help bridge the gap between the nominal minimum wage and the family living wage (FLW) of Php1,173.14 in the NCR, for instance, as of April 2018 computed by IBON.
While the amount still falls short of the FLW, a Php750 minimum wage can be an initial important step towards increased economic activity and more vibrant economic growth that shall ensure a more stable price situation, said the group. #
Despite being relatively high compared to other Asian countries, Philippine economic growth is lopsided in the interest of a few at the expense of the majority of poor Filipinos. High levels of wealth are concentrated in the hands of a few, while family incomes have stagnated in real terms, especially amid rising prices.
