MANILA – Contrary to what President Benigno “Noynoy” came up with in his computation presented to the media yesterday, the Philippine economy actually has more than enough profit to support a P125 ($2.91) nationwide across-the-board wage hike. Analyzing the data released by the government itself based on the declared financial reports of corporations and establishments, the independent thinktank IBON found out that employers would actually still retain a huge amount of profits even if they implement a P125 across-the-board wage hike today.
IBON countered also that the benefits of a wage hike for workers and their families are “clear and will substantially improve their welfare.”
IBON issued this statement after Malacañang announced that it does not support the proposed P125 ($2.91) wage hike bill pending in Congress, with Malacañang reasoning that the economy cannot accommodate the said wage increase.
Profits grow in leaps, wages stagnate
Employers in the Philippines can afford a substantial wage hike if only they would accept a cut in their already considerable profits, said IBON in a statement. Using 2009 figures, they estimate the cut in profits after deducting a P125 ($2.91) wage hike as just 12-percent of firms’ profits.
In 2009, all establishments in the Philippines had combined profits of Php1.63billion ($38m) and 3.94 million employees, said the 2009 Annual Survey of Philippine Business and Industry (ASPBI) of the National Statistics Office (NSO).
Granting an across-the board-wage hike of P125 ($2.91) means workers will receive an additional P3,802 ($88.55) per month, and employers will spend an additional P49,427 ($1,151) per employee per year (assuming they give 13 month’s pay). The total cost of the proposed wage hike will only be P194.9 billion ($4.54b), said IBON.
Subtracting this from total profits, establishments will still retain P1,435-billion ($33.429b) in profits. The proposed P125 ($2.91) increase will cut profits by a mere 12-percent, said IBON.
For the country’s largest corporations the situation is even more straightforward, Ibon said. The combined annual net income of the top 1,000 corporations operating in the Philippines increased from P116.4 billion ($2.71b) in 2001 to Php804.1 billion ($18.73b) in 2010, or a cumulative P4,593 billion ($106.97b) over the decade 2001-2010.
The global financial crisis did not cause a dent in the profits of corporations operating in the Philippines. Far from it, actually, based on IBON’s analysis. The combined net income in 2010 of corporations was nearly double the P416 billion ($9.69b) it reaped in 2008, despite the onset of the global crisis. This, noted IBON, further affirms the corporations’ ability to absorb a significant wage hike.
These huge profits of enterprises and corporations contrast starkly with the condition of workers. The average daily basic pay of wage and salary workers in the country– as opposed to mandated minimum wages that are not necessarily actually paid – increased from P222 ($5.17) in 2001 to P321 ($7.48) in 2011 (using July estimate), IBON reported.
The additional Php99 ($2.31) represents a 45-percent increase in wages, but not only was it left behind numerous times by the leap in profits, it was also left behind by the continuous rise in prices. From 2001 to 2011, IBON said prices rose more than 62-percent.
Inflation over this 11-year period averaged 5.2-percent, including a peak of 9.3-percent in 2008 given the steep increase in oil prices at the time. The wage increase was thus more than offset by inflation and the real value of workers’ wages has actually shrunk by P24 ($0.56) or it became 11-percent smaller.
“A large wage hike will be beneficial not just for workers and their families but also for the economy,” IBON reiterated. The independent thinktank reasoned that the transfer of money from rich to poor households will increase aggregate demand and stimulate the economy. High-income households, they said, have a higher propensity to save while low-income households, so deprived even of basic necessities, have a higher propensity to consume. Their increased consumption is expected to stimulate the economy.
If that is how the data speak, the opposition to a wage increase and alarmist scenarios of runaway inflation and massive job losses are evidently baseless, according to IBON. The group agreed with the labor groups that these scenarios “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.