Labor and Employment Secretary Rosalinda Dimapilis-Baldoz yesterday said one of the biggest accomplishments of the DOLE during the last five years of the Aquino III administration was in the area of wage reform, where it has succeeded in closing the gap between minimum wage rates and the poverty income threshold.
“In July 2010, there were 30 minimum wage rates in nine regions – out of 137 minimum wage rates – lower than the poverty threshold. As of today, only five remain below the poverty threshold, and all these will be closed by 2016. In fact, by the end of 2015, there will be only one minimum wage rate below the poverty threshold. By May 2016, all minimum wage rates will be above the poverty threshold,” she said in a press statement.
The centrepiece of the wage reform is the Two-Tiered Wage System (TTWS) consisting of a first tier, which is the mandated minimum wage, or floor wage, set by RTWPBs. The minimum wage is viewed as a social safety net, as it is, to protect the most vulnerable sectors, the unskilled new entrants to the labor market.
On the second-tier, which is the non-mandatory component, workers’ pay increases and benefits are given based on productivity-based formulas contained in advisories also issued by the RTWPBs.
“The advisories guide industries in developing and implementing productivity improvement programs, productivity-based incentives, and profit- or gain-sharing schemes that workers and employers agree as basis for additional pay or incentives,” said Baldoz.
“The productivity-based pay is regarded as the more appropriate mechanism of rewarding workers’ productivity as their progressive contribution to enterprise growth and competitiveness,” she added.
She said RTWPBs in various regions have issued 16 such advisories, which the RTWPBs also use to raise awareness on the concept and in providing technical assistance so that companies, particularly the small and medium enterprises, can establish productivity improvement programs (PIPs).
Since the two-tier wage system was implemented in 2014, the DOLE, through the NWPC, has provided technical assistance to 17,089 companies in setting up PIPs that have benefited 103,896 workers.
To promote the TTWS, Baldoz said the NWPC and its RTWPBs have collaborated with the Employers Confederation of the Philippines (ECOP), Industry Tripartite Councils, and industry associations in advocating for the TTWS and in identifying beneficiary firms to be provided free technical assistance. The NWPC also has forged strong linkages with the Philippine Statistical Authority and the ITCs in generating industry-specific statistical information.
Baldoz said the fruit of the reform has earned recognition, citing the Global Competitiveness Report of the World Economic Forum in which the Philippines has consistently rose in rank in labor market efficiency indicator of pay and productivity, by 55 notches since 2010; and by 10 notches in the indicator of flexibility in wage determination. “Overall, the Philippines has rose 20 notches in labor market efficiency, which has 10 indicators,” she said.
She also said the Philippines’ ranking has rose 21 notches from 2010 to 2014
in Labor Freedom of the Index of Economic Freedom of the Heritage Foundation where one of the six indicators is the ratio of minimum wage with average value-added per worker.