Minimum wage is only 13 to 27% of NEDA’s cost of decent living

Under fire for its Php10,000-gaffe, the National Economic and Development Authority (NEDA) is now saying, through Secretary Ernesto Pernia, that the cost of decent living for an ordinary family is Php42,000.

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This admission by the country’s chief economist on the amount required by a Filipino household to afford a decent living has underlined the need and urgency of a substantial wage hike, including the proposed Php750-national minimum wage, which ironically Pernia and other economic managers of the Duterte administration are opposing.

Using data from the National Wages and Productivity Commission (NWPC), it appears that current wages in the country could only meet as low as 13% to just 27% of NEDA’s estimated cost of decent living.

In the National Capital Region (NCR), for instance, the daily minimum wage is just Php475 (for retail/service establishments with 15 or less workers) to Php512 (all other non-agriculture industries). These translate to a monthly income of about Php10,331.25 to Php11,136.00.

(Note: These estimates are based on the assumption that there are 261 work days a year or about 21.75 days a month. It excludes Saturdays and Sundays plus an extra day to account for a leap year. See here.)

This means that the minimum wage in NCR is equivalent to only 25% to 27% of NEDA’s estimated cost of decent living. Put another way, an ordinary household in NCR needs four minimum wage earners to afford a decent living.

The situation is much worse in regions outside NCR where the minimum wage is way lower. In the Autonomous Region in Muslim Mindanao (ARMM), for example, the minimum wage is a paltry Php270 (agriculture) to Php280 (non-agriculture) per day. Per month, the minimum wage in the region is about Php5,872.50 to Php6,090.00, which meets a meager 14% to 15% of the cost of decent living.

And worse, amid ever increasing prices and rising inflation and additional tax burden such as those under the TRAIN (Tax Reform for Acceleration and Inclusion) Law, the already meager wages of Filipino workers are further being eroded.

Meanwhile, the proposed Php750-national minimum wage is even less than 40% of NEDA’s cost of decent living. The workers are asking much less of what their families need to live decently and they are still being deprived.

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The curious case of NEDA’s Php10,000

NEDA (National Economic and Development Authority) did not say that a family of five could live decently with Php10,000 a month, according to Rappler’s “Fact-Check”. End of debate?

Actually no. While NEDA may not have directly referred to the Php10,000 as enough for decent living, the whole issue is what the amount of Php10,000 represents.

That “hypothetical” amount – the budget of an average Filipino family, said NEDA – was in fact based on the official poverty threshold fora family of five (i.e., Php9,140 as of first semester 2015, latest official data).

The PSA (Philippine Statistics Authority) defines poverty threshold this way:

“Food threshold is the minimum income required to meet basic food needs and satisfy the nutritional requirements set by the Food and Nutrition Research Institute (FNRI) to ensure that one remains economically and socially productive. Poverty threshold is a similar concept, expanded to include basic non-food needs such as clothing, housing, transportation, health, and education expenses).”

For the government, that is around Php10,000.

And there lies the problem. Using the ridiculously low poverty threshold as reference to show that the impact of high inflation and the TRAIN law on ordinary households is tolerable highlights the basic flaw of government’s appreciation of the true extent of poverty in general and of the impact soaring prices and regressive taxes in particular. #