Less than half of Pinoy workers earn living wage–ADB experts

poor family

Manila, Philippines – Less than half of Filipino workers earn a living wage, which prevents families from falling into poverty, according to experts from the Asian Development Bank (ADB).

This was according to an Asian Development Blog authored by Economic Research and Regional Cooperation Department Statistician Arturo Martinez, as well as Research Assistants Rhea Molato Gayares and Mia Kim Maceda Veloso.

The living wage is the “benchmark wage level” that allows a worker to support his or her family’s basic needs, such as shelter, food and other necessities.

The authors computed that the living monthly wage using 2011 purchasing power parity (PPP) is $254.28 which is enough for a worker to support a family of four.

“Our estimates show that 87 percent of workers in Thailand are earning at least the living wage rate. In Vietnam and Sri Lanka, it is 71 percent and 56 percent, respectively,” the authors said.

“However, less than half of workers in India, Nepal, Pakistan and the Philippines reach the living wage rate,” they added.

The authors explained that in order to obtain the living wage, they inflated the poverty line figure for a family of four which is at $7.6 per day by 10 percent to make room for discretionary spending. They also assumed that the maximum number of work days per month and work hours per week are 21.5 days and 48 hours, respectively.

They compared this living wage against the actual earnings of workers in India, Nepal, Pakistan, the Philippines, Sri Lanka, Thailand and Vietnam, taking into account spatial price differences across regions, states and provinces.

The authors said following the experience of “Tiger Economies,” wages increased when agriculture workers move to nonagricultural employment.

As such, the authors found the shares of living wage earners among nonagricultural workers in India and Nepal were 20 percentage points higher than the national average.

“Not surprisingly, the manufacturing sector does well in terms of ensuring that its workers are earning living wages. Agriculture, on the other hand, does not, except in Thailand and Vietnam, where agriculture workers are earning more, on average, than the other countries we studied here,” the authors said.

“What is most interesting to note—and seems to be underappreciated—is that the trade services sector does nearly as well as manufacturing in paying workers a living wage rate or higher,” they added.

To this end, the authors recommended that since the manufacturing and trade services sectors can employ even low-skilled workers, farm workers who are looking for better pay can shift to getting employed in these sectors.

However, not all countries in the region have a robust manufacturing sector such as the Philippines. The authors said Filipino workers can turn to trade services or jobs/services that help facilitate trade to gain decent wages.

In the Philippines, the authors said, manufacturing employment accounts for only around 8 percent of the work force. This is significantly lower than China, where 16 percent of employment is in manufacturing.

“Thus, while helping the region’s lower-skilled workers transition to manufacturing, trade services and other nonagricultural sectors must be an important component of poverty reduction strategies, equally important is increasing the productivity of workers who remain in it,” the authors said.

“Doing so will be crucial for enabling developing Asia’s poorest break out of poverty and foster more inclusive and sustainable growth,” they added.

Based on the authors’ estimates, there are around 1.2 billion people living on less than $1.90 per day, using 2011 purchasing power parity terms, which is the international poverty line.

In many low- and middle-income countries, around 30 percent of the jobs are in the agriculture sector, where wages are insufficient in keeping millions out of poverty.

Better wages come from manufacturing and trade services. The authors, however, said employment shares by country range between only 8 percent to 18 percent for manufacturing and 11 percent to 22 percent for trade services.

“How can these people break the cycle of poverty and improve their standard of living? A significant part of the answer is contingent on the wages that workers—especially the less educated—are able to make in sectors that employ large numbers of people,” the authors said.

Recently, the Associated Labor Unions-Trade Union Congress of the Philippines is pushing for a standard national minimum wage of P800.

Also, lawmakers belonging to the Makabayan bloc in the House of Representatives filed a measure that will peg the wages across regions at P750.

Labor groups earlier called on President Duterte to certify as urgent House Bill (HB) 7787, which mandates a national minimum wage of P750.

Once enacted, HB 7787, or the proposed national minimum wage law, will institute a national minimum wage of P750 and lead to the abolition of the National Wages and Productivity Commission (NWPC) and the Regional Tripartite Wages and Productivity Boards (RTWPB).

The bill will then transfer the minimum wage-setting function of the NWPC and RTWPBs to the Office of the President.

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