The Philippines has a “comparatively long history of the application of minimum wages,” beginning 1951 when the Minimum Wage Law (Republic Act 602) mandated a national minimum wage of P4.00 for non-agriculture workers and P2.50 for agriculture worker.
According to the Philippine Institute of Development Studies, the 1951 wage law did not take into account differences in the cost structures of the various industries, or differences in the cost of living across regions.
In 1965, 1966 and 1970, amendments were made to RA 602 and when the Labor Code of the Philippines was enacted way back in 1974, the Regional Tripartite Wages and Productivity Boards, or simply, the regional wage boards were created.
All 17 regions encompassing Luzon, Visayas and Mindanao have their own regional wage boards for the purpose of studying all pertinent facts and determining based on prescribed standards and criteria whether or not a situation warrants an adjustment in the salary of the minimum wage earners.
When war went off sometime in February between two oil-exporting countries which used to form the powerful Union of Soviet Socialist Republics (USSR), the tension triggered a shortage in oil supply which is considered a globally essential commodity.
Shortage in oil’s derivative products triggers adverse effects as industries halt operations, transportation stops rolling and a total darkness starts past six in the afternoon. Top on the list of its adverse effects is the soaring price of basic commodities and even essential services like transportation, electricity, water and communication, to name a few.
Presidential decree No. 928 was issued on June 1, 1976 providing for a new statutory minimum wage where the minimum wage rate for non-agricultural workers in the Metropolitan Manila area was placed at P10 per day. Presidential decrees were issued from 1978 to 1981 which raised the minimum wage to P18.
From 1983 to 1984, wage orders were issued steadily increasing the minimum wage from P19 to P37 until Executive Order No. 178 was issued in 1987 which raised the minimum wage to P46.
In 1989, Congress enacted a minimum wage reform law (Republic Act No. 6727 or the Wage Rationalization Act) that placed wage-setting with the Regional Tripartite Wages and Productivity Boards (RTWPBs) under the supervision of the National Wages and Productivity Commission (NWPC), an attached agency of the Department of Labor and Employment (DOLE).
The regional board is composed of the DOLE regional director as chairperson and the regional directors of the Department of Trade and Industry and the National Economic and Development Authority as vice-chairpersons. Two members each from the workers’ and employers’ sectors serve five-year term.
• Region – Of course, region is the category in which everything will differ depending on what the changes are for that specific area.
• Wage Order (WO) No. or Date of Issuance – This is the part where we get to know when the changes were officially made.
• Date of Effectivity – The exact point in time when the changes were observed or when it will be observed in the future.
• Non-Agriculture – Jobs or professions that DO NOT tackle agricultural actions
• Agriculture (Plantation and Non-plantation) – The jobs or professions, which are for agriculture. It’s separated by two sub-categories that are actually easy-to-understand.
According to PIDS, RTWPBs follow 10 criteria in fixing wages, categorized into four groups. The first set of criteria pertains to workers and their families’ needs: the demand for a living wage, wage adjustment vis-à-vis inflation, cost of living and changes therein, needs of workers and their families, and improvements in standards of living.
The second set of criteria takes into account the capacity to pay of employers or the industry, which means a fair return on capital invested as well as productivity.
The third set of criteria takes into account prevailing wage levels while the fourth set of criteria takes into account the “requirements for national development”: the “need to induce industries to invest in the countryside, effects on employment generation and family income, and equitable distribution of income and wealth along the imperatives of economic social development.”
DOLE’s Two-Tier System
In 2012, the Department of Labor and Employment (DOLE), through the National Wages and Productivity Commission (NWPC), implemented the two-tiered wage system (2TWS) as a policy reform measure primarily designed to strike a balance between the need for a wage hike and the capacity of the employers to provide – or at least on how much the employers can afford without necessarily putting the business on the losing end.
The mandated minimum wage rate varies. So as the unintended outcomes of mandated minimum wage, improving the coverage of the vulnerable sectors, and promoting productivity improvement and gain-sharing.
The two-tiered wage system maintains the mandatory minimum wage (under the Wage Rationalization Act) as the first tier; complemented by a voluntary productivity-based pay scheme as the second tier.
Under Tier 1, minimum wage rates are determined by factors such as poverty threshold, prevailing wage rates as determined by the Labor Force Survey, and socio-economic indicators like the inflation, employment figures, Gross Regional Domestic Product, among other measures promoting protection of the Filipino workers.
Under Tier 2, over and above minimum wage is the voluntary productivity-based pay compelling workers and enterprises to become more competitive and productive through a reward system embarking on supplementary pay based on the quality of their performance.
Determining the Minimum Wage
Under existing laws, regional wage boards (composed of regional directors representing DOLE, the National Economic and Development Authority, Department of Trade and Industry and representatives from both the workers and employers’ group, are mandated to determine the minimum wage at least once a year.
However, determining minimum wage is easier said than done as regional wage boards are required to take a closer look and make a meticulous study based on prevailing predicaments crucial in setting the minimum wage for one particular area of concern – clustered provinces, cities and municipalities comprising a region.
From the vantage point of the workers, factors being considered include the demand for living wage, wage adjustment vis-à-vis Consumer Price Index (CPI), cost of living and changes therein, needs of workers and their families and the improvement in the standard of living.
On the side of the employer, the regional wage boards should be able to determine the company’s productivity, fair return on capital invested and employer’s capacity to pay. Another factor on the regional wage boards’ radar is the prevailing wage levels in adjacent regions.
Only after complying with the required data would the regional wage board be able to call for public hearings and consultations among the employees’ and employers’ groups, provincial, city and municipal officials and other stakeholders.
20 Petitions So Far
Based on DOLE data, there are 20 wage hike petitions filed in 10 regions of the country — the National Capital Region (NCR) and Regions 3 (Central Luzon), 4-A (Calabarzon), 5 (Bicol Region), 6 (Western Visayas), 7 (Central Visayas), 8 (Eastern Visayas), 9 (Zamboanga Peninsula), 10 (Northern Mindanao), and 11 (Davao Region).
Aside from the petitions filed before the NCR-Regional Wages and Productivity Board (NCR- RTWPB), groups have also asked nine other RTWPBs for an increase in the salaries of employees.
Relatedly, the NCR-RTWPB hinted on a fresh petition seeking P470 wage hike filed by the Trade Union Congress of the Philippines (TUCP), immediately after its first petition seeking the same amount was junked over a clause which reads “across-the-board,” – meaning all workers.
Other petitions filed before the NCR wage boards are pushing for minimum daily wage adjustments ranging from P213 to P250 for the Metro Manila workers.
Consultations have already started as early as April 8, but still no time table as to how soon a minimum wage hike for Metro Manila would take effect – if ever there would be one, as records showed that the last minimum wage adjustment took effect way back in 2019.
However, DOLE has assured its regional wage boards will expedite the deliberation of petitions for wage adjustment to help workers cope with the rising cost of basic goods triggered by the high prices of fuel products.
DOLE said the determination of wage adjustment has to undergo a process. Upon receipt of wage hike petitions, the wage board secretariat has five days to study the veracity of the petition in form and content before its actual submission to the board.
The board will then deliberate the petitions and decide whether to conduct a public hearing or not. RTWPBs are mandated to publish a notice of public hearing within 15 days to give stakeholders the chance to participate in deliberations.
When there is no filed petition for wage increase, a regional wage board may motu proprio, or on its own initiative, review existing wage structure and conduct public hearings.
The boards will also consider the unintended effect of the wage order in the economy such as on unemployment, in the Gross Domestic Product (GDP) growth, in the prices of basic commodities, and on inflation.