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Employers can afford Php750 minimum wage—IBON

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Employers can very well afford to raise the minimum wage to Php750 which only entails a small cut in their profits, research group IBON said.

The Rodrigo Duterte administration should support this hike which will help millions of Filipino households dependent on wages and salaries cope with the rising cost of goods and services, said the group.

Current minimum wages are far from IBON’s estimate of the family living wage (FLW) needed by a family of five.

The current minimum wage in the National Capital Region (NCR) of Php537 is already the highest in the country, but it is Php467 short of the Php1,004 FLW as of March 2019.

IBON said that raising the minimum wage to Php750 will significantly raise the incomes of Filipino workers.

The group’s computations also show that employers can afford to increase the minimum wage they pay to Php750.

In the NCR, raising the average daily basic pay (ADBP) of Php562 to Php750 will add Php4,095 to the monthly income and Php53,231 to the annual income (including 13th month pay) of employees.

IBON pointed out that this will only cost Php115 billion out of the Php1.17 trillion in profits of the 14,414 establishments in NCR, which is equivalent to just 9.8% of their profits.

Raising the ADBP of Php401 nationwide to Php750 will in turn add Php7,649 to employees’ monthly income and Php99,432 to their annual income (including 13th month pay).

This will cost the 35,835 establishments nationwide just Php465 billion or only 21.5% out of their Php2.16 trillion in profits, as per IBON computations.

The group stressed that meaningful wage hikes are doable if only companies were willing to accept a small cut in their profits.

IBON also pointed out that raising wages will not be inflationary if companies share a little more of their profits with workers instead of passing the wage hike on to consumers as higher prices.

These were estimated using the latest Annual Survey of Philippine Business and Industry (ASPBI) data of the Philippine Statistics Authority (PSA) for enterprises with 20 or more workers.

IBON however underscored that the government can help micro, small and medium enterprises afford the wage hike by providing them tax breaks and incentives, cheap credit, subsidized utilities, and technology and marketing support.

The growing productivity of Filipino workers is among the main drivers of economic growth and they deserve a significant wage increase, IBON said.

The richest individuals and biggest corporations in particular have more than enough for granting wage increase.

It is the government’s responsibility to ensure that workers get a fairer share of the gains from economic growth rather than have these gains concentrated in the hands of a few, concluded IBON.#

Workers left behind in growing economy under Duterte administration

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Wages of workers in the National Capital Region (NCR) continue to fall even as their growing labor productivity drives economic growth under the Duterte government, research group IBON said.

The mandated minimum wage is not even keeping up with the rising cost of living for ordinary Filipinos, the group revealed, adding that keeping wages low distributes wealth unevenly and worsens inequality.

The Philippine economy is slowing but real gross domestic product (GDP) still grew 6.7% in 2017 and 6.2% in 2018.

The regional GDP of NCR grew 6.2% and 4.8% in that same period, registering a total increase of 11.3% between 2016 and 2018.

In NCR, this economic growth was most of all driven by rising labor productivity. Labor productivity in NCR, measured by regional GDP divided by total employed, increased from Php568,092 per worker in 2016 to Php640,125 in 2018 or a total increase of 12.7% between 2016 and 2018.

These are IBON estimates using the latest available data from the Philippine Statistics Authority (PSA).

Yet despite rising labor productivity, the NCR real minimum wage is actually falling under the Duterte administration.

Measured at constant 2012 prices, this fell from Php467 in July 2016 to just Php457 in March 2019.

The Php46 worth of wage hikes since 2016 have been more than off-set by inflation and the continually rising costs of goods and services especially last year.

IBON also pointed out that the wage gap, or the difference between the minimum wage and the family living wage (FLW), is growing wider under the Duterte administration.

The NCR nominal minimum wage of Php491 in July 2016 was only 54.6% of the Php900 FLW for a family of five at the time.

Today, the NCR minimum wage of Php537 is just 53.5% of the Php1,004 FLW for a family of five.

The wage gap is even wider for a family of six where the NCR minimum wage is just 44.6% of the required Php1,205 FLW.

The research group said that real wages falling even further behind economic growth is worsening the elitist and exclusionary character of the economy.

Moreover, improving labor productivity is not translating to benefits for the working people but is instead going to bloating corporate profits and oligarch wealth.

The people are left to struggle with the rising costs of their food and non-food needs.

IBON stressed that the Duterte government is very much in a position to change this situation.

Among the most important measures is ensuring sufficient incomes for workers by legislating a national minimum wage of Php750.

IBON’s estimates using the latest available data, for 2016, show that a Php750 minimum wage in NCR will only cost 9.8% of the profits of establishments and still leave them with Php1.17 trillion in profits.

The increase in welfare for millions of workers and their families will however be palpable.#

Lower official poverty estimates don’t mean less poor Filipinos — IBON

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Research group IBON said lower reported official poverty estimates for the first semester of 2018 unfortunately do not necessarily mean that the country’s poverty situation is improving.

The group observed that standard of living allowed by the official poverty line is very low and grossly underestimates the real number of poor Filipinos.

Unless corrected, it gives a misleading picture of the conditions of millions of poor Filipinos and hinders the country’s anti-poverty efforts, IBON said.

The Philippine Statistics Authority (PSA) reported the proportion of supposedly poor Filipinos as falling to 21.0% in the first semester of 2018 or to just 23.1 million poor Filipinos.

This is a seemingly marked improvement from the reported 27.6% poverty incidence and 28.8 million poor Filipinos in the same period in 2015.

The proportion and number of poor families likewise also fell.

IBON observed however that the supposed improvement is based on a daily per capita poverty threshold averaging just some Php69.50 nationwide and a daily per capita subsistence or food threshold of only some Php48.60 in the first semester of 2018.

These are grossly underestimated thresholds that do not meet decent minimum standards for food, shelter, transportation, utilities, health care and education, the research group said.

The research group urged economic planners to review the official methodology in poverty estimation.

The subsistence and poverty thresholds are in dire need of updating and upgrading according to more decent standards, IBON said.

The PSA estimates the poverty threshold by first computing a subsistence or food threshold and then mechanically multiplying this by a factor of around 1.43 to get the poverty threshold.

These are both problematic, IBON added.

The subsistence food basket is estimated using so-called ‘least cost’ and ‘revealed preference’ approaches.

 These result in an extremely cheap food menu, which, while technically meeting bare nutritional requirements, is not just sorely lacking in variety but also only hypothetically available for families, IBON said.

The research group observed furthermore that the crude multiplier applied to calculate non-food items is also unacceptable.

This method does not calculate a budget for meeting families’ other needs for shelter, transportation, utilities, health care and education.

It is then unable to account for rising costs of housing, public transport, water, electricity, medical treatment and medicines, and schooling.

The research group pointed out that IBON estimates on Family Income and Expenditure (FIES) data in 2015 revealed that that the poorest 50% or 11.4 million families had monthly incomes of just Php15,000 or less and the poorest 60% or 13.6 million families just some Php18,000 or less.

These estimates at around those income levels would give a better picture of the real state of deprivation of tens of millions of Filipinos than current official poverty statistics, IBON said.

The choice of official poverty lines is a political one, IBON said.

Setting a high standard indicates the government having a high level of ambition for poverty eradication.

Conversely, setting a low standard indicates low targets for dealing with the poverty situation.

Government, however has chosen the latter, which results in tens of millions of Filipinos not meeting minimum standards of well-being and hidden behind unrealistic official poverty statistics, IBON concluded. #

‘Paano na ang mga magsasaka?’

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President Rodrigo Duterte has recently approved the Rice Tarrication Law, allowing massive rice importation into the country.

Cartoon by Mark Suva/Kodao

Second year of slowing growth a wake-up call – IBON

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Research group IBON said that the second year of slowing growth under the Duterte administration should be enough to jolt it out of its complacency and denial. The downturn in the last two years and the poor prospects in the year to come should be a wake-up call to start to undertake the difficult but necessary reforms for genuinely inclusive growth and national development.

The Philippine Statistics Authority (PSA) reported a 6.2 percent annual growth in the country’s gross domestic product (GDP) for 2018, lower than government’s revised growth target of 6.5-6.9 percent for the year.

Government cited slowing agriculture and high inflation as among the main factors pulling back growth, while the main drivers were growth in construction, and trade and repair of motor vehicles, motorcycles, personal and household goods.

“Growth is slowing most of all because of the economy’s unsound fundamentals in backward agriculture and shallow industry,” said Sonny Africa, IBON executive director.

The agriculture sector registered just 0.8 percent growth in 2018 from 4 percent in 2017.

This is the sector’s worst performance since its contraction in 2016.

Yet, Africa said, the administration seems to have little interest in reversing this trend.

For example, the Php49.3 billion agriculture department budget for 2019 proposed by Congress is Php1.4 billion less than the Php50.7 billion in 2018 (in equivalent cash-based terms).

Africa also noted that manufacturing growth slowed to 4.9 percent in 2018 from 8.4 percent the year before, which is the slowest since the 4.7 percent growth in 2011.

He said that this is due to weaker demand in domestic consumption and weaker exports amid the global economic slowdown. Manufacturing also remains shallow in being low value-added, foreign-dominated, and dependent on foreign capital and technology.

Africa pointed out that recent rapid growth has instead relied on external short-term factors that are fading. Yet remittances are slowing, exports are falling, and interest rates are rising. The real estate and consumer spending booms are also petering out.

Growth in overseas remittances slowed from 5.0 percent in 2016 to 4.3 percent in 2017 to just 3.1 percent in the first 10 months of 2018, said Africa.

Exports growth increased from 11.6 percent in 2016 to 19.5 percent in 2017, but then fell to 11.5 percent in 2018.

Meanwhile, the benchmark overnight reverse repurchase (RRP) rate rose steeply from 3.0 percent in 2017 to 4.8 percent by end-2018, reversing the decade-long general decline in interest rates.

Africa also said that household consumption spending markedly slowed from 7.1 percent growth in 2016 and 5.9 percent in 2017 to just 5.6 percent in 2018.

The real estate boom is also tapering with 2016 growth of 8.9 percent in real estate, renting and business activities declining to 7.4 perent in 2017 and falling further to just 4.8 percent in 2018.

“Rising government spending and its infrastructure offensive haven’t been enough to offset the reliance on waning external factors,” said Africa. “The administration’s efforts to stimulate growth to its 7-8 percent target with even more spending, are not going to be enough amid high disguised unemployment, low incomes, and the global slowdown this year.”

Global GDP growth is estimated to slow from 3.1 percent in 2018 to 3.0 percent this year.

“The Duterte administration needs to stop downplaying slowing growth and hyping that this as still among the fastest in the region and the world because the growth is becoming more jobless than ever,” Africa said.”

The number of employed only increased by 162,000 from 41 million in 2016 to 41.2 million in 2018, according to data from the Philippine Statistics Authority (PSA).

Average annual job creation was then only 81,000 in the period 2017-2018, which is the lowest level of job creation among post-Marcos administrations.

Africa said that government continues to ignore telltale signs of an economic downturn and deceive Filipinos with its rosy picture of the economy.

He said that the sooner the administration admits the failure of its neoliberal policies, the sooner measures that will spur domestic industries and benefit the Filipino people can be implemented. #

2018 inflation highest in 10 years amid slowing growth — IBON

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Inflation for 2018 is more than double the Duterte administration’s original inflation target for the year and the highest in a decade, research group IBON said.

Along with slowing economic growth, this further points to the failure of government’s economic managers to rein in consumer prices and of its neoliberal policies, such as the Tax Reform for Acceleration and Inclusion (TRAIN), which continue to burden the poorest Filipino families, said the group.

The reported annual average inflation rate rose to 5.2 percent in 2018 from 2.9 percent in 2017 and 1.6 percent in 2016.

IBON noted that this is much higher than the government’s original annual inflation projection of two to four percent for 2018 and the highest since the 8.2 percent rate in 2008.

Aside from missing its inflation target, the government is also facing an economic slowdown.

The economic growth target for 2018 has already been adjusted downwards from 7-8 percent to 6.5-6.9 percent.

The gross domestic product growth rate already slowed to 6.3 percent in the first three quarters of 2018 from 6.7 percent in 2017 and 6.9 percent in 2016.

Inflation eased last December to 5.1 percent but the poorest half of the population still saw their real income erode by anywhere from Php3,300 to Php7,300 from the high inflation throughout 2018.

Rising prices always spell more difficulty for the poor especially amid low or even stagnant incomes, IBON said.

The Duterte administration should also not be too quick to take credit for the lower year-end inflation, IBON added.

The biggest factor easing inflation is not anything the government has done but rather falling global oil prices from increased supply amid a global economic downturn.

On the contrary, the Duterte administration’s insistence on TRAIN’s second tranche of fuel excise taxes adds inflationary pressure, the group said.

The economic managers will fallaciously claim that relatively slower inflation in the first few months of 2019 proves that TRAIN and the additional fuel excise taxes are not inflationary, IBON said.

Such dismissiveness of how TRAIN makes consumer goods and services more expensive however only affirms the government’s insensitivity to the plight of the Filipino people, especially the poor.

IBON said that poor Filipino families worst affected by last year’s high prices will continue to carry the burden of these into the new year if government does not take genuine measures to curb inflation and arrest a faltering economy.

The government can start with repealing TRAIN and implementing a progressive tax system. #

2018 Yearender: Are You High? The Economy Isn’t

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by Sonny Africa

Executive Director, IBON Foundation

The Duterte administration’s economic managers made some odd statements as the year wound up. Economic planning secretary Ernesto Pernia said “the Philippine economy became stronger and even more resilient than ever”. Finance secretary Carlos Dominguez III insisted on “the soundness of the Duterte administration’s economic development strategy”. Bangko Sentral ng Pilipinas (BSP) governor Nestor Espenilla meanwhile said that they “expect growth to remain solid in the years ahead”.

These are odd because the economy clearly showed signs of increasing stress in 2018. If anything, the year just passed confirmed the end of the long period of relatively rapid growth for the Philippines.

In denial

Growth has been slowing since the start of the Duterte administration. It is already its slowest in three years. Inflation reached a nine year-high and was even worse for the poorest Filipinos. The current account deficit is at its worst in 18 years. The peso is at its weakest in 13 years. International reserves are in their lowest in 10 years. The jobs crisis is disguised but really at a historic high. Overseas remittances are also slowing — this further dampens household consumption and welfare.

The government seems to think that it can just spend its way out of this. It holds its ‘Build Build Build’ infrastructure offensive as some kind of magic bullet. This will be difficult with the end of the decade of low global and local interest rates and rising borrowing costs. Accelerating government debt will also only become more unmanageable as growth continues to slow. As it is, the budget deficit is already at its worst in seven years.

All these the government’s chief economic propagandists will euphemistically call ‘headwinds’ or ‘challenges’. Yet barring a real change of economic course, there is little reason to expect that the economy will get better anytime soon. Elite business profits will likely continue to grow, but it may just be a matter of time before even these suffer.

As if being near the top of a sinking ship is a good thing, the administration will keep on claiming that the Philippines is among the fastest growing economies in the region and in the world that is caught in a protracted crisis, Still, the 6.3% growth in the first three quarters of 2018 is markedly slower than the 6.7% growth on 2017 and 6.9% in 2016.

Deteriorating

Agriculture is doing particularly badly: its 0.4% growth in the first three quarters of 2018 is approaching its worst performance since 2016. But even the hyped manufacturing resurgence is hitting a wall – the 5.7% growth in the first three quarters is much slower its 8.4% clip in 2017, and the full year results may be the slowest since 2015.

Filipino industry and domestic agriculture would have been solid foundations of domestic demand and production, if only these had really been developed these past years. This is impossible though under the government’s obsolete globalization and free trade mantra. Agriculture is still left to the vagaries of the weather and small peasant labor. Manufacturing remains shallow and foreign-dominated.

The services sector never should have been the driver of economic growth. But even this is failing. The real estate boom appears to be ending with 5.9% growth of finance and real estate in the first three quarters of 2018 continuing the trend of slowing growth from 7.5% in 2017 and 8.5% in 2016. Reflecting weakening household consumption, even trade is down – at just 6.0% in the first three quarters compared to 7.3% in 2017 and 7.6% in 2018.

The main drivers of growth in 2018 have been the intrinsically short-term boost from government spending – this increased to 13.1% growth in the first three quarters from just 7.0% in 2017. , Construction also increased to 13.3% growth in the first three quarters from just 5.3% in 2017.

Real score on jobs twisted

The worst effect of a backward economy is not creating enough decent work for the growing population.

The economic managers hailed 825,000 new jobs created in 2018 and unemployment falling by 140,000 bringing the unemployment rate down to 5.3 percent. Unfortunately, these do not tell the whole story.

The Duterte administration has actually created just an average of 81,000 jobs annually with 43.5 million jobs in 2018 compared to 43.4 million in 2016. This is because the economy lost a huge 663,000 jobs in 2017, which was the biggest contraction in employment in 20 years or since 1997.

So the largest part of the supposed job creation, or some four out of five ‘new’ jobs, was really just restoring jobs lost in 2017.

But how to explain the falling unemployment? This is a statistical quirk. According to the official methodology, jobless Filipinos have to be counted as in the labor force to be counted as unemployed.

It seems that huge numbers of Filipinos are no longer seeking work and dropping out of the labor force. This is reflected in how the labor force participation rate dropped to 60.9% in 2018 which is the lowest in 38 years or since 1980.

While employment grew by just 162,000 between 2016 and 2018, the number of workers not in the labor force grew by a huge 2.9 million over that same period. It is likely that the reported 62,000 fall in the number of unemployed between 2016 and 2018 reflects workers dropping out of the labor force because of tight labor markets rather than their finding new work (because of weak job creation).

This scenario is supported by IBON’s estimates of the real state of unemployment in the country. The government started underestimating unemployment in 2005 when it adopted a stricter definition that made subsequent estimates incomparable with previous figures.

Reverting to the previous definition to give a better idea if the employment situation really is improving or not, IBON estimates that the real unemployment rate in the decade 2008-2017 is some 10.2 percent. This maintains high unemployment in the economy since the onset of globalization policies in the 1980s. IBON does not yet have estimates for 2018, but the real number of unemployed in 2017 was 4.6 million or almost double the officially underreported estimate of just 2.4 million.

Job generation trends in 2018 are in any case worrisome as it is. The quarterly labor force survey showed drastically worsening job generation since the start of the year. Measured year-on-year, some 2.4 million jobs were reported created in January 2018 but this fell to 625,000 in April then 488,000 in July and then 218,000 jobs actually lost, rather than created, in October.

Economy needing rehab

Perhaps high on their own propaganda, the country’s neoliberal economic managers continue to confuse abstract growth figures, business profits and foreign investment with development and the conditions of the people. The reality however is of chronically backward Filipino industry and agriculture and an economy that went sideways in 2018. The real challenge is to discard failed neoliberalism and to replace this with an economics truly serving the people.#

High prices still burden poor despite inflation slowdown

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On the release of the November 2018 inflation rate, research group IBON said that prices are still high and rising even with the reported slowdown.

This remains a burden on poor families trying to live off low and precarious incomes. Substantial and longer-term solutions are still needed, said the group.

Headline inflation slowed to 6.0 percent in November from 6.7 percent last month.

Inflation slowed in food and non-alcoholic beverages; housing, water, electricity, gas, and other fuels; and communication.

Inflation however worsened in the rest of the commodity groups. Additionally, year-on-year inflation is still double the 3.0 percent rate in November 2017.

IBON stressed that prices are still higher than before due to the inflationary impact of the Tax Reform for Acceleration and Inclusion’s (TRAIN) consumption taxes, rising global oil prices and the peso depreciation.

Rice, fish, meats, fruits, vegetables and other basic commodities are still more expensive now than a year ago.

The majority of Filipino families who have low incomes are burdened the most. Inflation has eroded the incomes of the poorest 60 percent households by a total of Php2,650 to as much as Php7,000 from January to November of this year.

The Php537 minimum wage in the National Capital Region is the highest nationwide but even this falls far short of the estimated family living wage of Php1,002 for a family of five.

Meanwhile, some 2.5 million of the target 10 million beneficiaries of TRAIN’s unconditional cash transfers (UCT) have still not received anything almost a year into TRAIN.

The Duterte administration’s economic managers said that slowing inflation “suggests” the effectiveness of government’s anti-inflationary measures such as Administrative Order No. 13 removing barriers to agricultural imports.

IBON executive director Sonny Africa disputes this: “The government is too quick to take credit and too dishonest to accept blame.”

“The inflation slowdown may even be due more to falling global oil prices since October than the Duterte administration’s half-hearted anti-inflation measures,” he said. “On the other hand, government refuses to accept how the higher taxes from TRAIN have driven prices up and will do so again in less than a month.”

Africa said that government’s decision to push through with the next tranche of fuel excise taxes next month in January 2019 shows its insensitivity to the plight of millions of poor Filipinos.

He said that real steps to curb inflation begin with stopping TRAIN, and giving meaningful support to domestic agriculture and Filipino industry. #

 

TRAIN Package 1A: From the poor to the rich

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Government’s continued implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) means that TRAIN’s taxes will keep raising prices next year and make inflation higher than it should be.

Read: TRAIN still inflationary with lifting of fuel excise suspension

TRAIN still inflationary with lifting of fuel excise suspension

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Research group IBON said that government’s continued implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) means that TRAIN’s taxes will keep raising prices next year and make inflation higher than it should be.

The group said that lifting the fuel excise tax suspension shows the Duterte administration’s insincerity and insensitivity in addressing the inflationary impact of the tax reform program, particularly on poor Filipino households.

The administration’s interagency Development Budget Coordination Committee (DBCC) recently announced its plan to recommend that the second tranche of fuel excise tax be implemented, backpedaling on its previous suspension proposal.

The DBCC cited the lowering of Dubai crude oil prices and consideration of possible foregone revenues as reasons for its latest recommendation.

IBON however said that not going through with the suspension means new inflationary pressure next year from the second round of oil excise taxes in January 2019 on top of the now built-in additional prices from the first round in January 2018.

The liquid petroleum gas (LPG) excise tax of Php1.00 per kilogram (kg) in 2018 increases to Php2.00/kg in 2019, and Php3.00/kg in 2020. Diesel excise tax of Php2.50/liter in 2018 increases to Php4.50/liter in 2019, and Php6.00/liter in 2020.

Kerosene excise tax of Php3.00/liter in 2018 increases to Php4.00/liter in 2019 and Php5.00/liter in 2020.

The gasoline excise tax meanwhile is set to increase from Php7.00/liter in 2018 to Php9.00/liter in 2019 and Php10.00/liter in 2020.

IBON said that another fuel excise tax hike further increases costs of production. This will create a domino effect that will sustain the high prices of goods and services that many Filipinos, especially the poor, suffered this past year.

IBON estimates that the poorest 60 million Filipinos have already endured real income losses of anywhere between Php2,500 to Php6,800 due to worsening inflation since the onset of 2018.

The group added that it is premature to think that oil prices are going to stay low or that the peso will not continue to depreciate.

Oil prices remain volatile and could still increase next year with US sanctions on Iran gaining traction, possible Organization of Petroleum Exporting Countries (OPEC) production cuts, and untoward geopolitical events.

IBON insisted that the administration can do much to moderate inflation by suspending the inflationary taxes of TRAIN package 1.

IBON said that government should stop imposing higher consumption taxes such as the fuel excise which burdens the majority of poor Filipinos who can ill afford this amid low wages and growing joblessness. 

 

Instead, the government should improve revenue collection by cracking down on tax evaders and corruption in the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC). 

 

It should also build a tax system that raises revenues more from higher income, wealth and property taxes on the rich.#