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DISCUSSION PAPER TUCP Petition: P90.00 ATB Daily Wage Increase, NCR II. Two-Tiered Wage System

DISCUSSION PAPER TUCP Petition: P90.00 ATB Daily Wage Increase, NCR II. Two-Tiered Wage System Presented by: Atty. Vicente Leogardo, Jr. Director General, ECOP March 22, 2012. TUCP PETITION FOR WAGE INCREASE IN NCR (March 2012). The P90.00 wage petition was computed as follows:. Comments

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DISCUSSION PAPER TUCP Petition: P90.00 ATB Daily Wage Increase, NCR II. Two-Tiered Wage System

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  1. DISCUSSION PAPER • TUCP Petition: P90.00 ATB Daily Wage Increase, NCR • II. Two-Tiered Wage System • Presented by: • Atty. Vicente Leogardo, Jr. • Director General, ECOP • March 22, 2012

  2. TUCP PETITION FORWAGE INCREASE IN NCR(March 2012)

  3. The P90.00 wage petition was computed as follows:

  4. Comments • In the NCR Wage board meeting on March 20, ECOP • moved to dismiss the TUCP petition on the ff. grounds: • a) It cannot be entertained pursuant to Sec. 3, Rule IV of the NWPC Guidelines No. 01, series of 2007 • b) The RTWPBs have no power to grant ATB wage increases • c) It is contrary to the two-tiered wage system adopted by the NWPC for implementation by the wage boards • d) The increase demanded is excessive and destructive • 2. Both the DTI and NEDA also agreed that no supervening conditions exist citing relevant data and statistics on the CPI as well as official forecast of 2012 inflation rate

  5. 3. The majority of the wage board resolved to declare the non-existence of any supervening condition

  6. ECONOMIC CONTEXT OF WAGE INCREASES

  7. NCR Labor Force: 4,941,000 (2010)

  8. Philippines Labor Force: 38,894,000 (2010)

  9. THE TWO-TIERED WAGE SYSTEM ECOP/VRL

  10. 1. In 2003, the NSCB unveiled a simple methodology correlating the minimum wage rates vis-à-vis the poverty threshold level in each region by deriving per capita poverty threshold on a daily, monthly and annual basis, and multiplying the derived amounts with the census- based size of the household. 2. What is PT?(Glossary of Terms, BLES): The minimum income/expenditure required for a family/ individual to meet the basic food and non-food requirements. a) Basic food requirements are currently based on 100% adequacy for the Recommended Energy and Nutrient Intake for protein and energy equivalent to an average of 2000 kilocalories per capita, and 80% adequacy for other nutrients. ECOP/VRL

  11. b) Basic non-food requirements which are indirectly estimated by obtaining the ratio of food to total basic expenditures from a reference group of families, cover expenditure on: 1) clothing and footwear; 2) housing; 3) fuel, light, water; 4) maintenance and minor repairs; 5) rental of occupied dwelling units; 6) medical care; 7) education; 8) transportation and communication; 9) non-durable furnishings; 10) household operations; and 11) personal care and effects. ECOP/VRL

  12. 3. The PT is derived from the FIESand computed by the NSO/NSCB on a provincial, regional and national level and is updated periodically 4. The FIES is a nationwide survey of households under-taken every 3 years by the NSO to: a) Gather data on family income and family living expenditures and related information affecting income and expenditure levels and patterns in the Philippines. b) Determine the sources of income and income distribution, levels of living and spending patterns, and the degree of inequality among families; c) Provide benchmark information to update weights in the estimation of the consumer price index (CPI); d) Provide inputs in the estimation of the country’s PT ECOP/VRL

  13. IV. Regional Poverty Thresholds vis-à-vis Minimum Wage Say in NCR, the minimum wage of a laborer/employee was pegged at P 250.00 per day in 2000. Normally, a minimum wage earner would work for an average of 26 days monthly giving him P 6,500 in monthly earnings. In the same year, poverty threshold in the region was placed at P 42.95 per day or P1,305.68 monthly for a person to be considered non-poor. Thus a minimum wage earner can have a family of 4.98 (spouse and at most 3 children) for their family not to be poor or for the family to able to meet its minimum basic needs. 23 NATIONAL STATISTICAL COORDINATION BOARD ECOP/VRL

  14. 5. As the poverty threshold appears to be the most reliable indicator to correlate adequacy of family income with economic feasibility, ECOP advocated that the NWPC adopt this methodology and eventually, the NWPC did so in the two-tiered wage system 6. Since then ECOP has continuously advocated for the adoption of this methodology not only because it is empirically and economically sound, but also it would rationalize the politics of wage fixing 7. In 2011 the NWPC introduced the Two-Tiered Wage System wherein it incorporated the NSCB methodology ECOP/VRL

  15. 8. Basically, the two-tiered wage system consists of a mandatory regional floor wage as the first tier, and a productivity based pay for adjusting wages above the floor wage as the second tier. 9. The regional floor wage shall be estimated using the regional poverty threshold estimates as a major reference data, together with the criteria for minimum wage determination. The floor wage shall be: a) The lowest wage level in the region; b) Not be lower than the regional poverty threshold estimated by the NSCB; ECOP/VRL

  16. c) Intended to protect the incomes of the most vulnerable workers such as the unskilled and news entrants who cannot bargain for themselves beyond the floor wage. New entrants shall be defined as first-time entrants to the labor market; d) Not to be equated to the living wage; not given ATB nor shall it adopt a salary ceiling approach. 10. ECOP had long pointed out that the estimates of the FLW which periodically posted in its website until 2008 was conceptually and methodologically flawed. As of last posting on August 2008 the FML was P911.00a day or P27,330.00 a month for NCR;P1,308.00 a day or P39,240.00 a month for ARMM ECOP/VRL

  17. 11. The floor wage rationale is not new as its conceptual and operational framework is embodied in R. A. No. 6727 and existing NWPC policy. The floor wage rationale can be clearly inferred from the standard prescribed by Art. 124 of the Labor Code, as amended by R. A. No. 6727 “The regional minimum wage . . .shall be nearly adequate as is economically feasible to maintain the minimum standards of living necessary for the health, efficiency and general well- being of the employees within the framework of the national economic and social development program” 12. Prior to the introduction of the two-tiered wage system, wage fixing had to address two problems: one was operational in nature and the other, the interplay of populist politics. ECOP/VRL

  18. 13. As far as the operational aspect was concerned, none of the standards/criteria has been integrated into a methodology that would operationalize the prescribed concept and policy of minimum wage fixing. 14. Of the ten standards, the major criterion used by the wage boards is the CPI, the derived inflation rate and its effect on the cost of living 15. As a result, wage increases granted by the wage boards are usually tied to erosion caused by inflation plus an additional amount for political acceptability. 16. Thus, contrary to the intent and policy of the law, wage fixing has deteriorated into a non-productivity based de facto wage indexation. ECOP/VRL

  19. 17. To redress and minimize the interplay of populist politics in wage fixing and its unintended and undesirable consequences, ECOP has for the past decade been advocating: a) The decoupling of wage fixing from the flawed NWPC concept and methodology of determining the living wage prescribed under the Constitution; and b) The correlation of the safety net concept with the poverty threshold level based on NSCB methodology ECOP/VRL

  20. Minimum Wage and Poverty Threshold for a Family (February 2011) *Using December IR_2007-2010 ECOP/VRL

  21. Regional Disparities • As of February 2011, there are 10 regions where the lowest minimum wage rates are below the regional PT levels: • 1) Region I (Ilocos Region) • 2) Region III (Central Luzon) • 3) Region II (Cagayan Valley) • 4) Region IV-A (CLABARZON) • 5) Region IV-B (MIMAROPA) • 6) Region V (Bicol Region) • 7) Region VII (Central Visayas) • 8) Region VIII (Eastern Visayas) • 9) Region XIII (CARAGA) • 10) ARMM • e) Region VIII (Eastern Visayas) • f) Region XIII (CARAGA) and • g) Autonomous Region of Muslim Mindanao (ARMM) ECOP/VRL

  22. THAT'S ALL FOLKS THANK YOU ECOP/VRL

  23. Minimum Wage and Poverty Threshold for a Family (February 2011) *Using December IR_2007-2010 ECOP/VRL

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