How the fluctuation of wage affects Philippine Economy
By: Jun M. Yun
Philippine
economy is directly affected by employment and worker’s wage according to a new study conducted by the director of the Ateneo Center for Economic Research
and Development.
In a
study made by Leonardo Lanzona Jr. titled: Effects of Minimum Wage on the Philippine
Economy, we can see how the fluctuation of Filipino Workers’ wage could affect
our economy both negatively and positively, the current Labor Code of the
Philippines may pose a bias towards the workers by giving them higher wages and
some benefits such as prohibition of a worker’s termination without proper
causes, recognition of the right of workers to form a trade union and the right
of workers to start strikes as long as they adhere to the requirements imposed
by the Labor Code.
But according to Lanzona’s study, there is a negative effect
caused by the increase of wages, one is that lower-skilled workers are now more
expensive to hire for employers so in turn employers now choose the
higher-skilled and higher-paid workers just because they could get their money’s
worth from employing the proven workers compared to the lower-skilled ones
which now require higher pays. This could cause more unemployment went it comes
to hiring the lower tier workers.
Some of the features of the Labor Code could also affect the
relationship between workers and their employers, according to Lanzona’s study,
the Labor Code protects workers by giving them security when it comes to their
work, ensuring a worker’s job can create a positive outcome by giving workers a
sense of security thus creating a more productive work force that has the
potential to improve their skills. But there is also a negative effect, the
Labor Code transferred the responsibility of giving social protection of
workers to their employers, this responsibility should be handled by the public
sector and not the firms.
Another, is that other factors outside of the Labor Code’s
grasp could affect it was not taken in account during its development, Lanzona pointed
out how policies not part of the Labor Code and other external factors could
affect the Labor Code itself. Also, during the development of the Labor Code
the bigger firms enjoyed protection from the government, this caused monopsony
when it comes to labor market, according to Lanzona’s study.
Small firms are also negatively affected by the increase in
wage, smaller firms who could not handle higher wages have to let go of some of
their employees while the bigger firms are not directly affected because they
could compensate for the increase in wage. This translates that small firms
will have a hard time growing and transferring into a larger-scale operation
while the bigger firms will be able to hire more workers that came from the
smaller firms where they got laid off, they can employ those kinds of workers
for less because those workers need to find an immediate source of salary and
only the big firms could offer them that.
Employers will also tend to hire the more experienced
workers that have been in the industry for some time compared to fresh grads,
female workers and the less educated
which requires more training which translates to firms spending more for
training them compared to hiring the experienced workers.
Lanzona concluded in his study that the Labor Code has
serious consequences that can affect production efficiency and social
protection and that there is a need to review the policies inside the Labor
Code on how it affects workers and firms.