10 Standards For Minimum Wage Fixing In The Philippines

Article 124 of PD 442, As Amended, provides that- The regional minimum wages to be established by the Regional Board shall be as 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. In the determination of such regional minimum wages, the Regional Board shall, among other relevant factors, consider the following:

1. The demand for living wages;

A wage is more than just compensation for labor. It is a means of securing a living and it leads to public policies that addresses both the level of the wage and its decency. A living wage is the minimum income necessary for a worker to meet their basic needs. This standard generally means that a person working forty hours a week, with no additional income, should be able to afford the basics for quality of life, such as food, shelter, utilities, transport, health care, minimal recreation, one course a year to upgrade their education and childcare. Oftentimes, living wage differs from the minimum wage set by law.

2. Wage adjustment vis-a-vis the consumer price index;

The Consumer Price Index (CPI) measures how much average prices are moving by surveying households to find their average expenses on specific goods and services during a given time period and then comparing that total cost to previous time periods. The group of goods measured by the CPI is called the market basket of goods and services. Generally speaking, the goods and services baskets includes the most commonly purchased items for household across the country, such as housing expenses, groceries, transportation expenses, clothes, education expenses, health care and more. CPI serves as a good economic indicator showing where the prices are going. It can measure how much a peso of income will purchase to show if there is an increase or decrease in the purchasing power of the same amount of money. It is a common way to measure inflation since it objectively measures increases in the cost of consumer gods and services. CPI is an acceptable proxy for cost-of-living changes in many applications, such as wage increase.

3. The cost of living and changes or increases therein;

Cost of living is the expenses of, maintaining a certain standard of living. Changes in the cost of living over time are often operationalized in a cost of living index. Cost of living calculations are also used to compare the cost of maintaining a certain standard of living in different geographic areas. Differences in cost of living between locations can also be measured in terms of purchasing power parity rates.

4. The needs of workers and their families;

The protection of workers and their families represents the main objective of minimum wage fixing, anchored on a policy that labor should received its rightful share of the wealth it has help produce.

5. The need to induce industries to invest in the countryside;

The concept of minimum wage means more than setting a floor wage to upgrade existing wages, it also underlies the effort of the State to promote productivity-improvement and gain-sharing measures to ensure a decent standard of living for the workers and their families; to guarantee the right of labor to its just share in the fruits of production; to enhance employment generation in the countryside through industrial dispersal; and to allow business and industry reasonable returns on investment, expansion and growth.

6. Improvements in standards of living;

Standard of living refers to the level of wealth and necessities available to a certain socioeconomic class in a certain geographic area. It is closely related to quality of life and includes such factors as: income, quality and availability of employment, class disparity, poverty rate, quality and affordability of housing, hours of work requires to purchase necessities, gross domestic product, inflation rate, amount of leisure time every year, affordable or free access to quality healthcare, quality and availability of education, life expectancy, incidence of disease, cost of goods and services, infrastructure, national economic growth, economic and political stability, political and religious freedom, environmental quality, climate and safety.

7. The prevailing wage levels;

A prevailing wage is defined as the hourly wage, usual benefits and overtime paid to the majority of workers within a particular area. It is established by regulatory agencies for each trade and occupation employed in the performance of work.

8. Fair return of the capital invested and capacity to pay of employers;

Return on invested capital is the ratio, used in finance and accounting, as a measure of the profitability and value-creating potential of companies after taking into account the amount of initial capital invested. The employer capacity to pay the wages of workers is anchored, in no small measure, on his return of investment.

9. Effects on employment generation and family income;

The foremost effect of employment generation is the alleviation of poverty. When family income is increase, the incidence of poverty is reduce.

10. The equitable distribution of income and wealth along the imperatives of economic and social development.

The distribution of income is substantially different from the distribution of wealth. According to the International Association for Research of Income and Wealth, the world distribution of wealth is much more unequal than that of income. Wealth generates income.

The wages prescribed in accordance with the provisions of the Labor Code, a.k.a. PD 442 as amended, shall be the standard prevailing minimum wages in every region. These wages shall include wages varying with industries, provinces or localities. If in the judgment of the Regional Board, conditions make such local differentiation proper and necessary to effectuate the purpose of this Law.