IBON: Economy Has Enough Profits To Support Wage Hike

MANILA — The economy has more than enough profits to support a substantial wage hike. According to research group IBON, the benefits of a wage hike for workers and their families are clear and will substantially improve their welfare.

IBON made the statement after Malacanang announced yesterday that it does not support the proposed Php 125 wage hike bill pending in Congress as the economy cannot accommodate the wage increase.

The group said that employers in the Philippines can afford a substantial wage hike if only they accept a cut in their already considerable profits. In 2009, all the establishments in the country of all employment sizes had combined profits of Php1,629.5 billion and 3.94 million employees, according to the 2009 Annual Survey of Philippine Business and Industry (ASPBI) of the National Statistics Office (NSO).

Granting an across the board wage hike of Php125 means workers will receive an additional Php3,802 per month, and that employers will spend an additional Php49,427 per employee per year (assuming 13 months of pay). The total cost of the proposed wage hike will only be Php194.9 billion. When subtracted from total profits, this will still leave establishments with Php1,434.6 billion in profits. This is only a 12% cut in their profits, said IBON.

The situation is even more straightforward for the country’s largest corporations. The Top 1,000 corporations in the country combined annual net income increased from Php116.4 billion in 2001 to Php804.1 billion just in 2010, with a cumulative Php4,593 billion over the decade 2001-2010. Combined net income in 2010 was nearly double the Php416 billion in 2008 despite the onset of the global crisis – affirming their ability to absorb a significant wage hike.

These enterprise and big corporate profits starkly contrast with the conditions of workers. The average daily basic pay that wage and salary workers in the country actually received – as opposed to merely mandated minimum wages that are not necessarily actually paid – increased from Php222 in 2001 to Php321 in 2011 (July estimate). The additional Php99 amounts to a 45% increase in wages but was not even enough to make up for the continuous increase in prices which increased by over 62% over the same period. Inflation over this 11-year period averaged 5.2% including a peak of 9.3% in 2008 upon the steep increase in oil prices then. The wage increase was more than offset by inflation and workers instead saw the real value of their wages drop Php24 or a nearly 11 percent decline.

A large wage hike will be beneficial not just for workers and their families but also the economy. The transfer of money from rich to poor households will increase aggregate demand and stimulate the economy. High-income households have a higher propensity to save and low-income households, so deprived even of basic necessities, a higher propensity to consume.

Opposition to a wage increase and alarmist scenarios of runaway inflation and massive job losses are unwarranted, and may just be justifications to preserve high profits at the expense of workers and other low-paid employees. According to IBON, raising wages is one of the most concrete ways for growth in the country to become more inclusive rather than benefiting just a handful of elite families and big corporations.(IBON)

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