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Economic Policy Agenda Series No. 9
The Philippines:
In Pursuit of Higher Wages and Productivity
in a Globalizing Economy
Foundation for Economic Freedom, Inc.
The Philippines: In Pursuit of Higher Wages and Productivity in a Globalizing Economy
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Foundation for Economic Freedom, Inc.
The Philippines:
In Pursuit of Higher Wages and Productivity
in a Globalizing Economy *
by
Prof. Nieves Roldan-Confesor
With the recent announced and actual increases in oil prices, organized labor is once
more calling for wage adjustments to enable workers and their families to cope with the
rising prices of goods and commodities that come with such increases. Again and as
before, employers and capital have raised the threat of job losses as wage increases would
unduly threaten Philippine exports’ competitiveness that has sustained it during the crisis
just passed.
There are calls by labor groups for the President or Congress to legislate across-the-
board wage increases ranging from P125.00 to P243.00 per day and to abolish the Regional
Tripartite Wage Boards for slow action on the proposals. Petitions for wage increases
submitted to the regional Boards have been around P20.00 to P 60.00 per day.
Congress and the President will most likely leave the wage issue to the Regional
Boards to decide. After a series of public hearings, consultations and deliberations, the
Regional Boards are expected to issue wage orders. Such increases, of course, make no
one party happy. Labor has often stated that the increases have never really met their
needs, while management stresses the negative effect such an increase would have on the
competitiveness of our exports as we price ourselves out of the global markets.
*
A paper presented by Prof. Nieves Roldan-Confesor at the symposium series sponsored by the
Foundation for Economic Freedom, Inc. in cooperation with Philippine Exporters Confederation,
Inc.(Mandaluyong City, 11 June 1999). Ms. Confesor is presently Professor at the Asian Institute of
Management (AIM); formely Philippine Secretary of Labor and Employment (1992-95); Chairperson, ILO
Governing Body (1994-95), among others.
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The Philippines: In Pursuit of Higher Wages and Productivity in a Globalizing Economy
The main source of economic development is productivity, generated by surpluses
and profits necessary for reinvestment and growth. In an environment of high growth,
productivity becomes the requisite “driver “ for competitive industries and a competitive
economy in the new world order. In a period such as the East Asian economic crisis,
productivity and industry efficiency are requisites for maintaining the growth of an enterprise
and an economy, even when the resource inputs are scaled down.
This paper seeks to (1) describe Philippine productivity and its contribution to
Philippine competitiveness; (2) assess the linkage of wages/incomes and productivity in
Philippine policy and actuality; (3) describe the pressures exerted by globalization and
technology change on Philippine competitiveness, productivity and workers’ incomes; and
(4) present areas for study and reform.
Philippine Productivity and Competitiveness
Global and regional benchmarks reveal that Philippine labor productivity has
remained stagnant, if not decreased, over the past decade and has consequently lagged
behind its ASEAN neighbors and competitors.
In 1998, the Philippines ranked 32 in competitiveness from among the 46 countries
surveyed in the World Competitiveness Yearbook (WCY), a slight decrease from the 1996
and 1997 rank of 31, among 46 industrialized and emerging economies.1
Relative to the 45 countries in the WCY survey, the Philippines has exhibited
consistently poor showings in all three sectors (agriculture, services, industry) for the past
three years. (See Table 1). Overall productivity growth rate has moved from –3.7% in 1996
to a positive 8.4% in 1998. Labour productivity, however, remained almost stagnant at 1.42
in 1996 and 1.03 in 1998. Productivity in all sectors went down during the same period.
1
The World Competitiveness Yearbook analyzes and ranks the ability of the nation to provide the
environment which sustains the competitiveness of enterprise. It provides 259 different criteria, grouped into
Competitiveness Input Factors, 2/3 of the data are generated by international, regional and national statistics;
1/3 of the data are drawn from an Executive survey. The AIM is one of the partner-institutes worldwide.
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Together with Thailand and Indonesia, the Philippines has occupied the “bottom five
nations” in terms of overall productivity. In the 1998 survey, only China and Indonesia
ranked lower than the Philippines (44). Thailand and Malaysia had ranked ahead with (40)
and (42), respectively. (See Figure 1).
Broken down by sector, the Philippines ranked 41 in agricultural productivity, ahead
of only Indonesia, Thailand and China. In terms of productivity in industry as well as the
services sectors, the Philippines ranked ahead only of China and Indonesia. (See Figures
2,3,4).
In a discussion of the WCY survey results at the AIM-Washington Sycip Policy
Forum, it was recommended that the following measures, among others, will need to be
carried out to improve competitiveness:
(1) improve infrastructure, financial systems and bureaucratic procedures;
(2) improve public education, health and R & D investments;
(3) maintain quality and accessibility of engineering/technical schools;
(4) diversify export markets.
Regional data from the Asian Productivity Organization (APO, 1997) shows the
Philippines coming in last among its major competitors in the Region. Over the 1986-1995
period, a decade of economic and productivity growth in the Asia and Pacific Region,
Philippine productivity stagnated while those of Indonesia, Thailand, and Malaysia grew by
60 to 80 index points. Developing countries in the Region registered average economic
growth rates of 4% to 8% during this period. These statistics reflect the dynamism and
structural changes in these economies.
Major observations made include the following:
(1) Foreign direct investment (FDI) facilitated economic restructuring in most of the
countries, particularly the Philippines, Thailand, Malaysia and Indonesia. A
significant source of the FDI was Japan, followed later on by the Newly Industrialized
Economies (NIEs). Apart from bringing investment capital, FDI introduced
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The Philippines: In Pursuit of Higher Wages and Productivity in a Globalizing Economy
technology and management know-how as well as training to upgrade the skills of
the people.
(2) There is close correlation between economic growth and labour productivity.
Countries exhibiting high labor productivity growth also had high economic growth.
The relationship was particularly evident in the long-run, though in the short run,
adjustments in employment and production over business cycles were inevitable.
(3) The rapid economic transformation of Asian countries included labor productivity in
the manufacturing sector showing faster growth than that in the agricultural sector.
In Indonesia, while the labor productivity index for the manufacturing sector
increased from 100 to 141, the corresponding figures for agriculture were 100 and
then 120. In Thailand, while the labour productivity index for manufacturing sector
were 100 and then 146.66; the corresponding figures for the agriculture sector were
100 and then 151.80. For the Philippines, the labour productivity index for the
manufacturing sector were 100 and then 104.70, while the figures for the agriculture
sector were 100 and then 106.93. For Indonesia, tremendous efforts were made to
change its export dependence from commodity goods to industrial goods. This was
also true for the Philippines, with different results.
(4) All developing member countries of the APO registered an annual labor productivity
growth of 2 per cent to 5 per cent during the first half of the 1992, years ahead of the
Asian crisis. These were attributed to factors such as high rates of savings and
investments, supportive government policies for the development of a thriving private
sector, and concerted efforts for learning and adapting new technologies.
(Figure 5 compares the productivity indices of several Asian and ASEAN countries
from 1986 to 1995.)
The market-based pattern of growth in the East Asia and Pacific Region (before the
crisis) had led to a sustained increase in employment, wages and incomes. Growth in the
productivity of labor – especially through continued capital infusion and a deepening of skills
– is part of the Region’s paradigm of how international engagement brings large gains in
wage incomes. Export-led growth is the cornerstone of the competitive strategies and
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increasing levels of skills and incomes. The World Bank Report of 1995 states that the
challenge of the middle-and higher-income economies was, and continue to be, the
upgrading the their workforces and managing the relocation as unskilled jobs move to
lower-wage locations. As the Newly Industrialized Countries (NICs) became more
competitive, there was a backlash, now better managed and understood, from the industrial
countries against the rising competition from this Region. (World Bank, 1995)
The wide variance in labor outcomes in the Region today is largely the product of the
past two or three decades, as many were still in poverty as recently as 1960. Even the
Philippines, like Hong Kong, Taiwan and China, was seen once as a front-runner.
Participation in the global market expanded the size of the market available to the
aggressive economies of the Region as well as provided the means for capital
accumulation. Rising domestic savings rates and international capital (in loans and FDI)
financed the Region’s high level of productive investment. Access to technology enabled
many economies to climb the value-added ladder, moving from primary products to light
manufactures to higher technology goods. While governments intervened, the labor
markets were left relatively untouched. Success in exports was partly based on market-
determined wages, which had risen with productivity gains, rather than mandated increases
nor public sector job creation programs.
The huge variance in earnings is due to occupational structures within countries.
Some are due to international returns to different occupations. One recent international
survey of occupational earnings in 1994 (before the crisis) confirms the huge variance. (See
Figure 6) Measured in terms of purchasing power parity (PPP), the wages of an engineer in
Tokyo are thirty times those of an unskilled female textile worker in Jakarta. The pay ratio of
engineers or unskilled female textile workers is 9 to 1 in Jakarta and 2.5 to 1 in Tokyo. And
some is due to international returns for some occupations --- the pay ratio between Jakarta
and Tokyo is 3 to 1 for engineers and 12 to 1 for unskilled female textile workers. (WB,
1995)
A study on the export performance and competitiveness of the Philippines (1998)
revealed that the main competitive strength of the Philippines in the semiconductor industry
over its closest competitor, Malaysia is the lower salaries of engineers and other workers. In
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The Philippines: In Pursuit of Higher Wages and Productivity in a Globalizing Economy
1995, shop floor wages are $200-$250 per month, compared to Malaysia’s $300-$350. A
new graduate engineer is available at $400-$500 in the Philippines, compared to Malaysia’s
$800-$1000; a Filipino production manager, $1,000-$2000, compared to $3,600 for the
Malaysian counterpart. (World Bank, 1998)
A Vietnamese farmer may earn half of the wages of the Vietnamese construction
worker. Adding Vietnam’s rural workers to the hierarchy of the Region suggests a ratio of
60 to 1 in labor income between a Tokyo engineer and the Vietnamese rice farmer. (WB
1993 Vietnam Living Standards Household Survey).
Rapid productivity growth was the rule for East Asia before the crisis. (See Figure 7)
Average labor productivity growth from 1980 to 1993 was more than 2.5 percent per year,
well above the average for any region in the world.
For the successful economies, three interrelated processes contributed to rising
incomes for workers: gains in rural productivity and wages, movement of workers from the
low-wage/low productivity agriculture sector to the high-productivity industry and services
sectors, and the rising wages in the urban economy.
According to World Bank estimates, the poverty incidence fell from 70 percent in
1970 to 23 percent in 1990 of the rural population in Indonesia and from 55 percent to less
than 20 percent for Malaysia, over the same period. (World Bank, 1997)
With labor moving out of low-productivity agriculture towards higher-productivity
activities in industry and services, employment structure was transformed. (See Figure 8)
In the Republic of Korea, WB estimates show that employment in services and industry grew
from 39 percent of total employment in 1962 to 82 percent in 1990.
The Philippine case is different. The transformation did occur as a result of the
movement in employment. Between 1960 and 1970, the share of employment in industry
and services expanded from 36 to 46 percent. But over the next twenty years, as
productivity growth slowed down and eventually turned negative, the share increased only
by 8 percentage points. Even more telling, the WB estimates showed that only 2
percentage points of that increase was in private wage employment. The economy’s
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growing labor supply was being absorbed by low-productivity employment in the urban
informal sector. (World Bank, 1993)
This was not the case with the rest of the Asian “miracle”, where the expanding
workforce gained a rising share of formal wage employment sector as labor productivity
improved.
Between 1990 and 1998, the employment share of agriculture in the Philippines
continued to decline from 44.90 percent to 40.83 percent in 1997 and 39.2 percent in 1998.
Industry’s share rose only from 15.42 in 1990 to 16.71 percent in 1997 and 16.4 percent in
1998. While the services sector made more dramatic increases, from 39.62 percent in 1990
to 44.40 in 1998, such transformation was nowhere the dramatic transformation achieved by
the Republic of Korea and the NICs.
The “industry” sector reveals the expansion in the modern sector. Workers who
secured jobs in this sector received higher wages than their rural counterparts and benefited
from industrial wage rates. Evidence from surveys of manufacturing establishments
indicates the speed with which the average labor costs, a proxy for gross earnings, rose
across the region. Since the early Seventies, average real earnings for manufacturing sector
workers have quadrupled in the Republic of Korea and Taiwan, tripled in Singapore, and
roughly doubled for Hong Kong, Indonesia, and Malaysia. In the Philippines, real wages
grew only 25 percent from 1972 to 1990, though economic reforms were started earlier in
our country.
In the early Seventies, the NICs had a combined workforce equivalent to only 1
percent of the global workforce, as it still does. But this workforce now accounts for about 2
percent of the world’s total industrial employment and 7 percent of the trade in goods.(WB,
1995) Today this workforce accounts for 35 percent of the world’s industrial workers , much
more than in the high-income OECD economies.
For the Philippines, while there are indications that productivity in some sectors is
improving, such improvements have not been adequate to offset the decrease in
productivity in the major sectors. High unemployment rates continue to constitute a serious
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The Philippines: In Pursuit of Higher Wages and Productivity in a Globalizing Economy
threat to the increase of productivity as well as the equitable distribution of gains from
productivity increases.
The Philippine statistics and survey results described above are also reflected in
major studies of productivity. A study conducted by the Philippine Institute for Development
Studies (PIDS, 1998) covering the 1971-1992 period showed that the number of industries
with declining total factor productivity (TFP) grew from 12 to 14. These industries include
sugar milling, beverages, tobacco, textiles, leather products, furniture, printing and
publishing, industrial chemicals, non-metallic mineral products, iron and steel basic
industries, fabricated metal products, machinery, electric machinery and transport
equipment. While TFP for manufacturing, as a whole, was positive from 1952 to 1992, half
of Industry posted negative growth rates for the same period.
The Philippines’ low productivity at the national and regional levels may be attributed
to poor technology transfer, import-intensive exports, and weak backward and forward
industry linkages—areas in which government policy may have been required or may have
retarded firm level productivity. Many factors account for labour productivity, much less for
total factor productivity. In most productivity studies, we have measured productivity, at the
economy level, as GDP over the number of persons employed. But the more useful
measures are really at the firm level where various productivity measures and methods have
been adopted by specific firms. An ILO study states that 85 percent of the productivity of
the American companies are internal to the organization and controllable by management,
while only 15 per cent are external and beyond management control. But, in developing
countries like the Philippines, the reverse is true due to the economic crisis, the
unnecessarily high government intervention and the firms’ dependence upon the more
developed economies’ markets. Anecdotal information from Chief Executive Officers
(CEOs) indicate that more than 50 per cent of the factors affecting productivity of local firms
lie outside management control, making productivity improvement at the firm level difficult.
Philippine competitiveness and improvements in productivity cannot only be based
on firm level initiatives but a policy environment conducive to improving all factors of
productivity must be made. The WCY and APO studies indicate the need for improvements
in infrastructure, R & D investments, and capital inputs as their inadequacy severely
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constrain productivity, competitiveness, and growth. And consequently, a better life for the
country’s workers and their families.
The improvement of total, not only worker, productivity is necessary for us to
participate effectively in the changing global economy. The apprehensions concerning the
impact of jobs and earnings on increasing competition posed by other countries fueled by
globalization is based on the traditional approach of looking at competitiveness from just
costs or price considerations. Traditional responses have included real devaluation of
currency or the reduction of real wages. While these may lead to short-term
competitiveness of exports, such approaches have been known to lead to domestic inflation
and severe reduction in the income and purchasing power of workers.
The traditional concept which looks at productivity as the ratio of outputs over inputs
(that is, as a purely efficiency concept) is not sufficient anymore. Such a limited view –
specially when productivity is equated solely to labor productivity – could lead, and has led,
to very short-term and myopic decisions, such as productivity improvement through lay-offs.
A survey of policies and practices at the economy and enterprise levels reveal
another approach to productivity improvement through increased value-added creation
rather than through labor input minimization.
Philippine Productivity, Incomes and Wages
The “boom-bust” cycle of the Philippine economy has left it stagnant in the long run.
The failure to sustain growth also meant the failure to transform the economy from being
backward and predominantly agriculture into one that has a sturdy basis in industry. The
sharp economic decline in the mid-Eighties was an economic crisis comparable to the
decline of Indonesia today. The economic contraction in 1984 and 1985 alone is said to
have brought the Philippines back more than ten years in terms of GNP per capita. The
economic recovery of 1986 to 1990 was short-lived as the foreign debt problem pre-empted
the build-up of foreign exchange reserves, a fiscal crisis ensued, and military coups against
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The Philippines: In Pursuit of Higher Wages and Productivity in a Globalizing Economy
the Aquino government unleashed political instability, therefore scuttling the needed
investments for an extended period of time.
Some initial devaluation, a fiscal crisis, high inflation and high interest rates once
more sent the economy “bust” in 1991 and 1992. A supply side shock due to prolonged
electricity shortages also hobbled the economy at that time. Just when growth had turned
respectable in the 1994 to 1997 period, the Asian crisis rocked the region in July 1997 and,
together with the El Niño/La Niña phenomena, dragged the economy into stagnation for the
whole of 1998 and into the present year.
Declining employment share of agriculture, services rising (1990-1998)
Industry shares (%) 1990 1991 1992 1993 1994 1995 1996 1997 1998
Agriculture 44.9 44.9 45.3 45.7 43.1 43.4 42.8 40.83 39.2
Industry 15.4 15.8 16.1 15.6 15.7 16.1 16.3 16.71 16.4
Services 39.6 39.2 38.5 38.6 39.1 40.4 40.8 42.46 44.4
The lack of transformation of the Philippine economy may best be understood by
looking at the basic transformation that its neighbors were able to achieve in the last two
decades. Three factors explain this generally good record on poverty reduction, none of
which is to be found in the Philippines. These are the rapid growth in output and incomes,
the generally high employment elasticity of output growth, and the sustained growth in
agricultural productivity. There was reasonably high growth in agricultural output in
Indonesia, Malaysia and Thailand, contributing to rising rural incomes, both in agriculture
and in linked non-agricultural activities. These countries, in contrast to the Philippines,
enjoyed growth in per capita income of 6-8 percent for most of the period. Moreover, the
growth was led by labor-intensive exports, generating a fast rise in employment. For
example, in the 1980s, Indonesia’s manufacturing employment is estimated to have grown
by an average of 11 percent a year, while that of Malaysia by over 4 percent a year (Ranis
and Stewart, 1998).
In the Philippines, in contrast, per capita incomes grew sluggishly and manufacturing
employment fell during the 1980s. Despite the apparent success of the non-traditional
Philippine exports (e.g. garments, footwear, semi-conductor, electronics) during the nineties,
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especially during the 1994-1998 growth episode, the share of manufacturing in total
employment creation continued to decline (See Table 2). Within industry, the growth was
largely seen in construction; within manufacturing, the growth was concentrated in the low
value-adding electronics sub-sector, which contributed low value-added and employed very
few workers. By 1996, export growth was declining, save for the spectacular growth in highly
import-dependent and capital-intensive enclave agricultural incomes stagnated. Spatially,
the growth was concentrated in the highly urbanized areas of Luzon in and around Metro
Manila and in Central Visayas.
The stagnation in manufacturing and agriculture was cut out of the same cloth-the
opening up of the economy to enhance competition without the necessary complement of a
competitive exchange rate and investment in essential infrastructure. Labor often had to be
shed instead of being absorbed.
Land and labor, the factors of production that were abundant in the Philippines, were
vastly underutilized, if not rendered idle. Overall labor productivity in 1997 barely breached
the levels it had reached before the crisis years of the 1980s before being unceremoniously
pulled down once again by the present crisis. With this pattern of development and the
failure to sustain growth for any significant length of time, it is no surprise that the real wage,
after rising briefly in the late 1980s, was barely above its level in 1985 and has been on a
path of decline since 1997 (See Table 3).
Thus, overall labor productivity in 1997 barely breached the levels it had reached
before the crisis years of the 1980s before being unceremoniously pulled down, once again,
by the Asian crisis. With this pattern of growth that cannot be sustained over a significant
period of time, it is then no surprise that real wages have been on the decline since 1997,
once again. At the same time, the downward trend in labour productivity presented the loss
of competitiveness of the Philippines vis-à-vis its neighbors, whose labour productivity had
grown steadily over the years before the Asian crisis.
The long- run trend in the decline in real wages is consistent with the decline in
labour productivity. The “busts” in the cycle deprived workers of income via increasing levels
of unemployment/underemployment, or outright wage reduction.
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The Philippines: In Pursuit of Higher Wages and Productivity in a Globalizing Economy
It must be pointed out that income deterioration during the economic crisis years is
hardest on the lower income groups, mostly made up of either fixed wage earners, or self-
employed in the rural and/or informal sectors. Higher unemployment further reduced the
share of income of the unemployed and the previously employed, while both inflation and
unemployment reduced the real wages, and, consequently, their share of income. The
incomes of the self-employed were also reduced as the economic contraction resulted in the
concentration of the demand for their services and inflation further cut into their real
incomes. Unlike the richer income groups, this group did not have other assets nor savings
to fend off declines in their real incomes. (Lim, 1999).
Studies also indicate that in the 1990s, the wage-setting system in the country did
not seem to have introduced rigidities in the labor market sufficient to threaten
competitiveness. (Balicasan, 1999). Compensation indices have been declining in the years
before this last crisis. (See Table 2).
Ironically, Philippine wages vis-à-vis its neighbors were high and rising in 1998 and
for much of the Nineties. Thailand, whose per capita income has risen almost twice that of
the Philippines, was just a little less than the Philippines’ prevailing wage in 1998.
Indonesian wages were much lower in dollar terms. (See Table 3)
Since over-all compensation in real peso terms has been relatively stagnant in the
1990s, the nearly 40 percent real exchange rate appreciation between 1990 and mid-1997
must bear much of the responsibility for the increased remuneration, measured in foreign
currency terms. This, in turn, has contributed to the stagnation in the growth of the
garments and footwear industries in recent years, a trend that appears premature when
viewed against the Philippines large pool of surplus labor and growing labor force relative to
the major competitors in these industries. Moreover, while unit labor costs have been on the
decline, this is primarily the result of the declining compensation, since labor productivity has
been relatively stagnant in the 1990s, particularly when ranged with the performance of the
neighboring economies. (Balicasan, 1999).
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Linking Wages and Productivity
Philippine wage policy has attempted to link wages and productivity. This was most
obvious with the merger of the National Wages Commission and the National Productivity
Commission into the National Wages and Productivity Commission, or the NWPC.
The move to link the two has been largely due to the employers’ demand that any
increases in the minimum wages be based on productivity increases. A review of the
discussions at the regional wage boards show that other factors have largely been the basis
of any increase, such as oil price hikes and the increase in basic commodities.
Linking is best achieved at the wage and compensation systems established at the
firm level. Studies indicate that job creation and the sound, long-term growth of living
standards are more likely to flow from enterprise level negotiations than from mandated,
national level, substantive standards and the empirical evidence do point in that direction.
Competitive wage levels have to be determined by productivity and the capacity of
enterprises to compete.
At the same time, the "inequality" or perception of an increasing gap between the
lowest-paid and highest paid in an enterprise or in an economy can very well destabilize the
enterprise or economy so effectively to hinder any growth. Many multi-national corporations
(MNCs) and their local companies have fortified their industrial relations systems and human
resource management programs to ensure stability and high worker motivation.
Changes in productivity can affect wages. Rising productivity makes it possible for
wages to increase. However, whether wages will increase with productivity or not depends
on labor market conditions. Increasing productivity is a necessary but not sufficient
condition for increasing wages. For wages to increase, productivity must be increasing and
unemployment must be low.
Wages can affect productivity. Rapidly rising wages can encourage substitution by
machinery. Wages affect productivity as the cost of labor changes. However, increasing
wages also mean increased demand for goods and services.
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The Philippines: In Pursuit of Higher Wages and Productivity in a Globalizing Economy
When productivity grows, someone gains. Studies indicate that four factors influence
how the gains from productivity growth are distributed, namely:
(1) degree of competition among firms;
(2) government’s ability to tax the wealthy and corporations;
(3) unemployment levels;
(4) labour unions/labor parties.
When Competition, Government, and Labor Unions are strong and Unemployment is
low, gains from productivity growth go to higher living standards. When Unemployment is
high, Government, Competition, and Labor Unions are weak, the Gains go to Profits and/or
Top Management salaries.
Strong competition will tend to benefit the consumers as productivity growth quickly
leads to lower prices. When competition is low, firms with growing productivity can keep
prices high and take the productivity improvements as higher profits. A strong competition
can capture some of the productivity gains through taxes which can be used to fund health,
education, and other programs which will spread out the gains of the rest of the population.
Unemployment is also a major area of concern. When there is difficulty to source
skilled workers, productivity gains will be utilized as higher wages for their workers. With
high unemployment, companies need not be pressured into raising, as a means of
redistributing such gains.
Strong unions (and labor parties, for that matter) can capture productivity gains for
their members and their families in terms of wages, benefits, and non-wage good. In the
Region, the NICs, because of their export orientation and integration with world markets,
subject their product markets to highly competitive pressures. This has limited unions’ ability
to obtain higher wages for their members and their organizations. In less competitive
environments, unions would attempt to capture who wish to perpetuate those rents. (World
Bank Report, 1995)
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“The Brief Reign of the Knowledge Worker”
Weak Competition Strong
Gains from Gains from
Productivity Weak Government Strong Productivity
Growth go to Growth go to
Profits and/or Higher
Top Living
Management Standards
Weak Unemployment Strong
Salaries
Weak Labor Unions Strong
For the Philippines and many firms in it, the second condition exists.
The government wage policy follows the guiding principle of tripartism in minimum
wage fixing which allows workers and employers to be partners with government in
determining the appropriate wages. The principle of tripartism is embodied in the policy and
operational aspects of wage fixing, as well as in the structure of both the Commission and
the Regional Tripartite Wage and Productivity Boards (RTWPBs).
Since 1994, the Commission has adopted the concept of “safety net” wage fixing
which provides for a floor wage or safety net protection to workers in the lowest pay scale.
Determination of above-minimum wages is best left to collective bargaining (for organized
workers) or wage negotiations (for unorganized workers). The safety net wage policy
assumes wage fixing for minimum wage earners only and ought to prelude across-the-
board- or salary ceiling-based wage adjustments, indicate the lack of a uniform
understanding of the concept of safety net wages, as well as the dearth of economic and
social data to support this approach, including the required technical capability for the
Secretariats of the board. [The Commission has conducted an experts conference on
wages, incomes and productivity for all the RTWPBs precisely to address the issue.]
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The Philippines: In Pursuit of Higher Wages and Productivity in a Globalizing Economy
The draft medium-term development plan for the Estrada administration provides
that government intervention in wage setting shall be minimized in the long-term; that
regional minimum wage fixing through the Regional Tripartite Wage and Productivity Boards
shall be overshadowed by market-based wages; that flexible wage systems
accommodating greater productivity-based components shall be promoted at the firm level.
In the short term, the regional wage system shall continue, along the lines of a safety net
approach. (NWPC notes, 1999)
With the new rounds of oil price increases effected during the 1st semester of 1999,
petitions for wage increases ranging from P20 to P60 per day were filed with the RTWPBs in
NCR and Regions VI, X and XI. The concerned Boards are still conducting the required
public hearings and consultations to determine whether adjustments in wage are in order.
Almost all wage orders issued in 1997-1998 are more than 12 months old. (See
Table 3)
Linking wages to productivity is important to competitiveness. Productivity
gainsharing, a mode now in legislation, is equally important. The issue on the equitable
sharing of the gains from productivity increases among the stakeholders – the workers, the
owners, the consumers, the suppliers, the other members of the integrated networks, and
the public-at-large – needs to be urgently addressed as globalization, as it has been shown,
can result in increased inequality internationally and among the different interest and social
groups within a national economy. The “wage” issue is part of this discussion.
But, productivity improvement programs as well as gainsharing schemes, even
where encouraged by legislation, have been quite few.
An NWPC survey of some 2,500 establishments, nationwide, showed that (1) 28
percent has productivity improvement programs only; (2) 5.2 percent had gainsharing
scheme only; (3) only ten per cent had BOTH the productivity improvement program as well
as the gainsharing scheme as well; (4) 70 per cent who had them were large firms.
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A majority did not implement any of these schemes as they meant additional
workload, lack of understanding regarding the schemes. The problems relate to the
measurement of productivity gains ,i.e. how to develop a "yardstick" for measuring the
prosperity of a firm and the families of its employees which is understood and accepted by
the parties. (NWPC, 1997)
Education and Training
Education and training are critical in addressing the need for unskilled workers to be
able to enter high-wage/high-skill jobs and for the "displaced " workers (due to technology
change, or enterprise mobility) to access to other employment opportunities. While the
Philippines ranks 1 in the WCY survey in terms of "skilled labour, the changing workplace
and liberalization have made the existing stock inadequately prepared for the “new” jobs and
skills requirements of the changing workplace.
Firms are more likely to provide for worker training when they are large, employ an
educated and skilled workforce, invest in research and development, have foreign capital
and export to foreign markets. These results tell us of strong complementarities between
training and schooling, of strong links between firms' training, technology and exports.
Studies also show that the large inter-industry and firm size wage differentials commonly
observed in many countries are primarily the outcomes of employer technology investments.
These technology investments give rise to sizable wage premia for skilled but not unskilled
workers.
Without appropriate interventions from the private sector and the Government, the
outcome is likely to result in a gap between skilled and unskilled workers, between those
educated and less educated workers.
Training for entrepreneurship will need to be increased as training for the formal jobs.
Cross-national evidence suggests that small and medium enterprises (SMEs) are not always
less efficient than the large firms. Given the strong inter-dependencies among training,
investments in technology, and organizational practices, a package of integrated services
can be introduced for the less efficient as well as a proactive service delivery system to
respond to the severe informational constraints of such enterprises. Part of the package
19
The Philippines: In Pursuit of Higher Wages and Productivity in a Globalizing Economy
includes state-of-the-art human resource management (HRM) practices that emphasize job
stability and skills acquisition.
Globalization: its Promises and Challenges for the Philippines
Apprehensions have been expressed by people in both the developed and
developing countries that this global competition leads to lower wages and the general
deterioration of the quality of working life and forces enterprises into a strategy of cost
minimization with adverse effects on wages and terms of employment. Many have pointed
to the increasing polarization of labor markets (the skilled vs. the unskilled; the highly-
paid/highly-skilled workers vs. the low-paid/low-skilled, and usually ill-protected worker). At
the same time, the pressure for greater productivity, flexibility and adaptation of enterprises
themselves have become more intense.
The “market” has become the central coordinating mechanism. Prices can then
regulate the employment relationship when work is low skilled and easy to monitor, so that
turnover is not costly to the firm. Many of the “assembly” stage firms in the garments and
semiconductor industries have adopted this employment system as part of its competitive
strategy.
With the new global environment and competitive emphasis on innovation, speed
and flexibility, new employment patterns have emphasized less firm-specific and more
profession-specific skills.
With heightened competition, wage differentials are rising between
professionals/highly-skilled and those lower-skilled as professional wages go up as other
labor markets attract the “highly-skilled”; as well as low-skilled wages go down as lower
wages of low-skilled workers in other developing countries provide a downward pressure.
Current organizational changes of firms in the global network would thus include (1)
a transformation of the internal labour markets toward a more flexible work organization, and
(2) a diminution of their relative importance together with the growth of external labour
20
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markets, based on traditional employment systems for low-skilled work and the professional
system for the high-skilled work (software developers, for example). [Palpacuer, 1997]
This perspective implies that firms use complementary forms of unstable
employment in order to buffer their core workers from the unstable environment in the same
manner in which firms develop long-term and stable links with their core partners, but meet
the sudden changes in output demand by resorting to short-term, unstable trading relations
with “peripheral partners.” An ILO study of the garments industry in New York however
points out that the dynamics supporting labour market segmentation appear to be reversed
today; “it is the periphery, and not the core, that is developing and influences the average
evolution of wages and employment conditions.” [Palpacuer, 1997]
Workforce segmentation, employment instability, growth of contingent forms of
employment, and the polarization of wages has emerged from these strategies. Low capital
intensiveness, low educational level and high proportion of women and production workers
in the workforce of the garments industry translate into a strong core-periphery division, an
important periphery, strong competitive pressures exerted on the workforce, as well as a
long term decline in real average wages for production workers.
The findings of the study suggest that industry structure, inter-firm linkages, as well
as labour market characteristics, determine the firm’s ability to stabilize employment and
improve employees’ welfare. An appreciation of the global commodity chain and the location
of our industries within the global production systems will be required.
Social consensus mechanisms will need to be developed in order to set up new
“rules” in the new competitive environment, including those on wage-setting and other terms
and conditions of employment.
With unionization on the decline to influence wages and government policy more
unlikely to intervene in the setting of wages and employment rules, what should be used in
order to respond to the needs of the low-wage, labor intensive industries, such as garments
and apparel? Industry policy, for example towards lean retailing production channels, cannot
be carried out independently of labour market regulation.
21
The Philippines: In Pursuit of Higher Wages and Productivity in a Globalizing Economy
How does one offset the slowdown in the growth of exports in the garments industry?
In the employment of workers in the firms of these industries? Most of our garment exports
have moved to the “high-end” where the “value-added” has been much higher. At the same
time we have lost many of the garment firms at the lower end, who have since moved to
China and Indonesia. What is the effect on total domestic employment?
With the growing number of unskilled labour in the country, what kinds of jobs are
available for them? The low-skilled, low-wage and more labor intensive garments firms have
moved to “cheaper” places as the costs of turnover are low for the firms in this assembly
stage. Should we not differentiate the labor market segments as they are segmented
anyway as firms decide to bring themselves to various locations in the global network?
The competition really is among the unskilled labour forces of the different locations
of the globe and there is very little differentiation that exists to differentiate them from each
other. Given the low skill requirements, productivity may not be significant as basis for a
decision in favor of one unskilled workforce. Wages can mean the difference. And given the
“footloose” nature of foreign direct investment especially in the export sector goods
(garments, footwear) there is genuine concern that with the full implementation of the WTO,
this investment would move out to lower wage economies in the region. This would create
serious problems of unemployment unless the economy graduate into the production of
more skill and technology intensive production. This is used also as a major argument to
keep down the level of real wages in the labour-intensive industries.
Studies indicate that for the global apparel industry, for example, the period of
transition to regional economies has been based on divisions of labor between high and low
wage economies. A networks approach within a commodity chains framework can illuminate
the dynamic relationship between the global and local, which affects firms and workers in
developed as well as developing countries. Governments play an important role in shaping
these networks and the transition from assembly to full package production as a form of
industrial upgrading with important implication for workers and firms alike. The challenge
underscored by the study is for policymakers to promote institutional environments which
create opportunities for firms and workers in developing countries which “plug in” firms and
workers into networks offering possibilities of growth instead of stagnant marginalization.
[Bair and Gereffi, 1998]
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On the other hand, there has also been an emerging appreciation that the potential
benefits of such competitiveness could far outweigh the costs involved. Competitiveness
based on total productivity improvement can reap these benefits and minimize the effects of
lower wages, increased unemployment, job and social insecurity, and deteriorating
conditions of employment.
Competitiveness is seen not only as the ability to sell more products and services in
the global market but also the ability to attract foreign direct investments and to generate
and retain the better jobs. For those who have entered the global market, such as the East
Asian countries and the NICs of this Region, economic growth has been achieved by
economic and enterprise restructuring, product and process innovations and the
enhancement of human resource development efforts.
It has become more and more evident that productivity improvement will require not
only micro-measures in the enterprise, but also of macro-level and global efforts and
changes in the quality of public policies and strategies as they shape the social and
business environments.
Real wages and job quality are to increase in this “new” environment. As the modern
formal sector expands, more workers move from low-quality/low-wage jobs in the informal
sector and subsistence agriculture to the higher productivity, higher wage jobs in the
expanding manufacturing and services sectors. To the developing economy such as the
Philippines such a result is most attractive. But the “new jobs” require sustained human
resource development as these are marked with higher intellectual and technical contents.
Wages in the economy are pulled up by the increased demand for labor while the
purchasing power of incomes are maintained by lower inflation rates generated by
productivity improvement. A time series analysis of relationships between real earnings and
productivity clearly showed that movements in real wages were closely correlated to those in
labour productivity. (ILO, 1996).
Can the Philippines benefit from this new order?
23
The Philippines: In Pursuit of Higher Wages and Productivity in a Globalizing Economy
Conclusions and Recommendations
1. Given the discussion above, the recommendations for the diversification of exports,
the enhancement of research & development investments, improvement in
infrastructure, financial systems, and bureaucratic procedures, and the maintenance
of the pace of liberalization of trade are endorsed. These are significant components
of what can increase productivity, and the need for the Philippines to sustain its
competitive advantage in selected sectors and continue to benefit from the new
world order.
2. Initial NWPC estimates show minimum wages in many parts of the country to be 80
percent of average wage not a safety net at all. The present system has generated
200 minimum wages operating at any one time. The complexity of enforcement
serves to undermine its effectiveness. Under the current system of region-based
MW-fixing, the MW as "safety net" must be applied. This is to allow the enterprises to
provide productivity or performance -based pay as part of the general compensation.
Flexibility must be allowed to account for and induce productivity improvement. Such
an approach would effectively do away with the "fine" intra-regional /intra-sub-
regional differentials of the different factors listed in the law. In relation to this, it is
critical that the wage and earnings data should be available be upgraded to allow for
the regional boards to do their jobs well.
3. During the crisis, low-wage/productivity may result as firms attempt to protect human
capital accumulation and go into some form of "labor hoarding." In this context, firms
should be allowed to set their wages and provide a “package” of services to include
public support (such as rice subsidies, social security assistance, postponement of
payment of amortization of housing loans, etc.) in wage and non-wage goods to
allow for enterprise and job preservation.
Global Networks and Small and Medium Entreprises (SMEs)
4. The global networks and multi-national corporations will "bypass" the majority of
small firms or those in the informal sector. Productivity within the rural traditional and
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Foundation for Economic Freedom, Inc.
the urban informal sectors must be increased as they are generally the low-wage,
low-skilled, low-productivity areas. A more deliberate and focused program for
linking these sectors to modern sector through subcontracting and similar modes
should be pursued. In this instance, the wage setting mechanism for these sectors
should be reviewed with the end in view of allowing for more flexibility for wage-
setting at the enterprise level and allowing various modes of sub-contracting
especially for those who lie in the “periphery” of the global production system.
SMEs continue to be main generator of employment and production as well.
While we view the challenge as moving the informal sector worker from the informal
to formal (due to low productivity, low wage, job instability, lack of benefits, as this
sector's shortcomings), we must also see that excessive government regulation and
a lack of financial and technical assistance are choking off the entrepreneurial
dynamism of the sector. SMEs may be made to be efficient through the proactive
delivery of SME services (given the severity of informational constraints of SMEs)
and a package of services ( given the strong inter-dependencies between training,
investments in technology, and organizational practices)including variable pay
methods, productivity/ performance based methods of wage-setting, and HRM
practices for skills acquisition and job stability.
5. It may not be necessarily bad that workers are flexible, temporary and home-based.
Work sharing may be better than the segmentation of workers into protected formal,
full time workers and the unemployed. The question is whether such workers are
really less productive? If so, what is the delivery system for improving their
productivity; and at the same time, how do we help them manage their risks --
attendant to being flexible and temporary?
Niches in the Global Networks
6. The national government and the private sector together must review the status of
the "export winners" of firms/ industries and our position/participation in the global
production chain (for example, software development or the electronics industry)
and/or the geographical configuration of the global production networks.
Infrastructure and power generation are key problems to be addressed if we are to
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The Philippines: In Pursuit of Higher Wages and Productivity in a Globalizing Economy
move to the next level of production in the semi-conductor industry (which now
accounts for almost half of the exports of the country). Equally important is the
establishment of efficient local systems to develop technical and managerial skills to
support the firms in either the software development or the semiconductor industry in
their effort to upgrade.
7. The challenge, in the face of such global production networks, for Government and
private sector is not so much to just enter the global networks (which can be done
relatively easy) but to reach more profitable positions within these networks. We
need to examine/analyze the production chain of the final good, whether knitwear of
softwear, due to the integration of the discrete processes or steps, which are
performed in different locations of the world. Location, depending on the specific
activity and industry, depends on a number of factors such as availability of
resources, cost and infrastructure. This is especially true for the electronics industry.
We will need to understand the stages in the chain, the skills requirements, the
geographic spread of such activities and linkages. We have seen this happen in the
garments and semiconductor industries. Local producers move within the chain from
export processing assembly to original equipment manufacturing (OEM) to original
brand-name manufacturing (OBM). Increasing levels of productivity will be required
by such trajectories for all inputs.
8. The EPZ provides an effective vehicle for local job creation. The activities here ,
however, are low-skilled, low-value assembly stages of global production chains, in
which cost-based competition is achieved by "sweating labour." It is only through
industrial upgrading that the quality of jobs can be improved.
9. What is our strategy to remain competitive in certain core industries where we have
excelled? Competition from other countries have resulted in companies moving
away. For footwear and the garments industries, many firms in the lower-end, lower
value added activities have moved to lower cost locations outside the country. With
unemployment and underemployment levels increasing, is it possible to accept the
lower-value added, lower-end, lower cost contracts and companies for the lower -
cost locations in our country? While the higher cost locations such as the
Calabarzon or the Metro Manila can compete for the higher - end tasks?
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Foundation for Economic Freedom, Inc.
10. In the longer - term, we will need to provide a wide, more sophisticated array of
services within an industry in order to capture the high-end as well as keep the
lower-end to employ those in our labor force with less preparation and education.
This also helps us to avoid the danger of getting trapped at the bottom of the value
chain, where we will be less competitive vis-à-vis China, Vietnam and the like. This
would be facilitated by an internal division of labour, whereby lower cost locations
within the country compete for the lower-value added activities, while the higher cost
locations, such as the Calabarzon and the like, specialise in the higher end tasks.
There is great potential in this type of arrangement for FDI to come in at various
levels and to various cost locations in the country. Related to this is the potential for
the establishment of efficient local systems to develop technical and managerial
skills to support this wide array of services within a particular industry. These
industries include garments, footwear, electronics, etc. For the semi-conductor
industry, this will mean providing the incentives and policy environment for the
establishment of the higher-end activities to be established in the country.
11. Despite the view that the nation-state is becoming less and less able to regulate the
global economy, Governments can play a powerful role in this instance -- providing
the infrastructure for the "winners" to plug into the global economy at different levels
of competition or of the value chain of an industry; accessing into creative capital,
esp. for the SMEs.
Education and Training
12. One of the effects of capital migration to developing countries can be a degree of
deskilling of the labour force where the processes which are transferred to offshore
production locations are simply assembly or fabrication operations. Moreover, foreign
firms are generally able to offer higher wages which attracts the lower levels of
skilled labour, employed gainfully elsewhere, into these occupations. The actual
magnitude of this phenomenon will depend upon the time taken for wages in general
to be bid up in the economy and the nature of supply response. With sufficient
attention and resources being channeled to training and education this may not have
a strong adverse impact on the rest of the economy.
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The Philippines: In Pursuit of Higher Wages and Productivity in a Globalizing Economy
13. The Philippines continues to be a major source of engineers for countries such as
Thailand. But the need for skilled labour and educated workforce continues if we
plan to move up the value chain in industries where we excel. Complaints as to
shortages of specific skills are increasing requiring negotiations between private
sector and Government on how such requirements may be met. The wage gap
between skilled and unskilled is increasing sharply, and in the absence of efforts to
increase the capacity of the currently uneducated and unskilled, this gap would
create a permanent wage-earning underclass.
14. Government intervention and subsidies have mostly focused on the “supply” side of
the skills equation of skills demand and supply. Given the fast technology changes
and the mobility of capital and firms, subsidies and tax credits may be provided for
increasing the capability of the "demand" side to provide such activities. The
increasing use of the "tendering" and the "vouchering" systems of the TESDA still
focus on building up the capability of the training suppliers (institutions). Studies
show that the firms themselves and the in-house training programs provide the more
significant interventions. Firms in the EPZ should be encouraged to upgrade job
quality and the training be provided for such upgrading.
15. Given the requirements of industry, stronger basic and high school education will be
required to access to employment opportunities for "skilled" labour. Multi-skilled
labour will provide greater access to such opportunities. The initial resistance of
workers in the formal sector to social dialogue and linking multi-skilling and
compensation as a form of exploitation.
16. As we move from a low-cost export-oriented strategy to a higher, value-added
export-oriented strategy, the focus should be from cost containment to skills
development and workforce flexibility. Cost-based strategies require a cheap and
compliant labour force, higher value strategies rely on teamwork , workers' training,
and performance -based pay.
17. Flexibility will be required to achieve this strategy. Legislation will have to be
amended, including the law on productivity gainsharing, the minimum wage law , as
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well as those which relate to terminations and dismissals. These laws should be
studied within the framework of the strategy mentioned above.
Social dialogue
18. No scheme for linking wages with productivity can succeed without worker
involvement and acceptance. The mechanisms for social dialogue, at the enterprise,
community, national, global levels , must be organized and strengthened as the
globalization and change will produce tensions and conflicts within enterprises and
communities. Consensus building will be required by the global networks.
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The Philippines: In Pursuit of Higher Wages and Productivity in a Globalizing Economy
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Additional data sources:
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Annexes
33
Figure 1
Overall Productivity
GDP (PPP) Per Person Employed, in US$ (1997)
(40) Malaysia
(42) Thailand
(44) Philippines
(45) Indonesia
(46) China
5,000 15,000 25,000
Source: The World Competitiveness Yearbook, 1999
Figure 2
Agricultural Productivity
GDP (PPP) Per Person Employed, in US$ (1997)
(26) Malaysia
(41) Philippines
(43) Indonesia
(44) Thailand
(45) China
0 5,000 10,000 15,000 20,000
Source: The World Competitiveness Yearbook, 1999
Figure 3
Productivity in Industry
GDP (PPP) Per Person Employed, in US$ (1997)
(33) Thailand
(35) Malaysia
(41) Philippines
(43) Indonesia
(46) China
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000
Source: The World Competitiveness Yearbook, 1999
Figure 4
Productivity in Services
GDP (PPP) Per Person Employed, in US$ (1997)
(38) Malaysia
(42) Thailand
(43) Philippines
(45) Indonesia
(47) China
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000
Figure 5A
Productivity Indices (China, Indonesia, India)
180
160
140
120
100
86 87 88 89 90 91 92 93 94 95
China Indonesia India
Source: Productivity Statistics: Productivity Indices and Levels on APO Member Countries.
APO, 1997
Figure 5B
Productivity Indices (Korea, Malaysia, Japan)
180
160
140
120
100
86 87 88 89 90 91 92 93 94 95
Republic of Korea Malaysia Japan
Source: Productivity Statistics: Productivity Indices and Levels on APO Member Countries.
APO, 1997
Figure 5C
Productivity Indices (Thailand, Singapore, Philippines)
180
160
140
120
100
86 87 88 89 90 91 92 93 94 95
Thailand Singapore Philippines
Source: Productivity Statistics: Productivity Indices and Levels on APO Member Countries.
APO, 1997
Figure 6
Occupational Earnings Across the Region
Wage Hierarchy in East Asia and the Pacific, 1994
(U.S. dollars per year)
Note: Wages are based on earnings adjusted for purchasing power parity.
Source: Union Bank of Switzerland, 1994 (World Bank Report, 1995)
Figure 7
Growth Rate of GDP Per Worker
Selected East Asian Economies, 1965-1993
(In Percent)
Note: For Taiwan, China, GDP per worker in the second period refers to 1980-90.
Source: World Bank data; for Taiwan, Chin, Summers and Heston 1991; for Vietnam, Socialist
Republic of Vietnam 1993.
Figure 8
Share of Industry and Services in Total Employment 1960 and 1990
Note: Countries ranked by 1993 GNP per capita
Source: ILO 1986 and Updates
Figure 9
Increases in Wages and Productivity (1986-1996)
Productivity Wages
Hong Kong
Singapore
South Korea
Taiwan
Thailand
Indonesia
Malaysia
Philippines
0 125 250 375 500
Source: Jardine Fleming Research, December 1996.
Figure 1
Overall Productivity
GDP (PPP) Per Person Employed, in US$ (1997)
(40) Malaysia
(42) Thailand
(44) Philippines
(45) Indonesia
(46) China
5,000 15,000 25,000
Source: The World Competitiveness Yearbook, 1999
Figure 2
Agricultural Productivity
GDP (PPP) Per Person Employed, in US$ (1997)
(26) Malaysia
(41) Philippines
(43) Indonesia
(44) Thailand
(45) China
0 5,000 10,000 15,000 20,000
Source: The World Competitiveness Yearbook, 1999
Figure 3
Productivity in Industry
GDP (PPP) Per Person Employed, in US$ (1997)
(33) Thailand
(35) Malaysia
(41) Philippines
(43) Indonesia
(46) China
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000
Source: The World Competitiveness Yearbook, 1999
Figure 4
Productivity in Services
GDP (PPP) Per Person Employed, in US$ (1997)
(38) Malaysia
(42) Thailand
(43) Philippines
(45) Indonesia
(47) China
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000
Figure 5A
Productivity Indices (China, Indonesia, India)
180
160
140
120
100
86 87 88 89 90 91 92 93 94 95
China Indonesia India
Source: Productivity Statistics: Productivity Indices and Levels on APO Member Countries.
APO, 1997
Figure 5B
Productivity Indices (Korea, Malaysia, Japan)
180
160
140
120
100
86 87 88 89 90 91 92 93 94 95
Republic of Korea Malaysia Japan
Source: Productivity Statistics: Productivity Indices and Levels on APO Member Countries.
APO, 1997
Figure 5C
Productivity Indices (Thailand, Singapore, Philippines)
180
160
140
120
100
86 87 88 89 90 91 92 93 94 95
Thailand Singapore Philippines
Source: Productivity Statistics: Productivity Indices and Levels on APO Member Countries.
APO, 1997
Figure 6
Occupational Earnings Across the Region
Wage Hierarchy in East Asia and the Pacific, 1994
(U.S. dollars per year)
Note: Wages are based on earnings adjusted for purchasing power parity.
Source: Union Bank of Switzerland, 1994 (World Bank Report, 1995)
Figure 7
Growth Rate of GDP Per Worker
Selected East Asian Economies, 1965-1993
(In Percent)
Note: For Taiwan, China, GDP per worker in the second period refers to 1980-90.
Source: World Bank data; for Taiwan, Chin, Summers and Heston 1991; for Vietnam, Socialist
Republic of Vietnam 1993.
Figure 8
Share of Industry and Services in Total Employment 1960 and 1990
Note: Countries ranked by 1993 GNP per capita
Source: ILO 1986 and Updates
Figure 9
Increases in Wages and Productivity (1986-1996)
Productivity Wages
Hong Kong
Singapore
South Korea
Taiwan
Thailand
Indonesia
Malaysia
Philippines
0 125 250 375 500
Source: Jardine Fleming Research, December 1996.
Table 1
WCY Survey Results: Philippines (1997-1999)
Criteria 1997 1998 1999
Management
(1) Overall Productivity 3,072 10,063
(2) Overall Productivity Growth -3.7% 8.4%
(3) Labour Productivity 1.42 1.03
(4) Agricultural Productivity 1,256 1.040
(5) Productivity in Industry 5,254 4,690
(6) Productivity in Services 2,936 2,596
(7) Price/Quality Ratio 3.95 4.11 3.86
(8) Corporate Credibility 6.83 6.53 7.19
(9) IR 6.39 6.53 5.96
(10) Worker Motivation 5.95 5.55 6.44
(11) Entrepreneurship 6.15 6.05 5.71
(14) Total Exp. on R & D 115
Source: The World Competitiveness Yearbook, 1997-1999
Table 2: Sectoral Characteristics of the Philippine Labor Market, 1990-1998
1990 1991 1992 1993 1994 1995 1996 1997 1998
AGRICULTURE
Employed ('000s) 9,981.00 10,290.00 10,726.00 11,139.00 11,286.00 11,147.00 11,645.00 11,314.00 10,933.00
% of Total Employment 44.90 44.90 45.30 45.70 45.10 43.40 42.80 40.80 39.20
Average Daily Wage Rate 39.38 38.11 39.87 41.62 42.46 44.91
Labor Productivity na 15,834.00 15,250.00 14,997.00 15,193.00 15,520.00 15,318.00 16,207.00
Productivity Growth (%) na -3.70 -1.70 1.30 2.20 -1.30 5.80
INDUSTRY
#Employed 3.38 3.36 3.82 3.80 3.94 4.14 4.43 4.63 4.58
% of Total Employment 15.42 15.80 16.10 15.60 15.80 16.10 16.30 16.70 16.40
Mining
#Employed ('000s) 129.00 140.00 147.00 135.00 111.00 107.00 113.00 130.00
% of Total Employment 0.60 0.60 0.60 0.60 0.40 0.40 0.40 0.50
Index of Compensation 97.00 96.00 105.00 119.00 119.00 119.00 114.00 154.00
Labor Productivity 76,929.00 78,197.00 85,711.00 96,964.00 106,505.00 89,965.00 79,523.00
Productivity Growth (%) na 1.60 9.60 13.10 9.80 -15.50 11.60
Manufacturing
#Employed ('000s) 2,236.00 2,374.00 2,523.00 2,457.00 2,539.00 2,617.00 2,696.00 2,732.00
% of Total Employment 10.10 10.40 10.60 10.10 10.10 10.20 9.90 10.00
Index of Compensation 124.00 103.00 102.00 95.00 87.00 81.00 74.00 71.00
Labor Productivity 77,132.00 71,323.00 73,785.00 74,980.00 77,673.00 79,604.00 81,644.00
Productivity Growth (%) na -7.50 3.50 1.60 3.60 2.50 2.60
Construction
#Employed ('000s) 968.00 1,018.00 1,062.00 1,110.00 1,187.00 1,302.00 1,504.00 1,637.00
% of Total Employment 4.40 4.40 4.50 4.60 4.70 5.10 5.50 6.00
Index of Compensation 129.00 120.00 116.00 119.00 123.00 114.00 Na
Labor Productivity 34,661.00 34,144.00 34,544.00 35,193.00 34,172.00 32,805.00 35,016.00
Productivity Growth (%) na -1.50 1.20 1.90 -2.90 -4.00 6.70
Utilities
#Employed ('000s) 89.00 99.00 91.00 102.00 112.00 114.00 118.00 132.00
% of Total Employment 0.40 10.40 0.40 0.40 0.40 0.40 0.40 0.40
Index of Compensation 165.00 137.00 168.00 160.00 155.00 157.00 190.00 207.00
Labor Productivity 197,495.00 216,275.00 198,578.00 250,902.00 228,596.00 237,356.00 222,402.00
Productivity Growth (%) na 9.50 -8.20 3.70 11.00 3.80 -6.30
(…continuation)
Table 2: Sectoral Characteristics of the Philippine Labor Market, 1990-1998
1990 1991 1992 1993 1994 1995 1996 1997 1998
SERVICES
#Employed 8.94 8.98 9.13 9.42 9.79 10.37 11.11 11.76 12.39
% of Total Employment 39.70 39.20 38.50 38.70 39.10 40.40 40.90 42.40 44.40
Transport and
Communication
#Employed ('000s) 1,096.00 1,142.00 1,204.00 1,291.00 1,392.00 1,477.00 1,631.00 1,742.00
% of Total Employment 49.00 5.00 5.10 5.30 5.60 5.80 6.00 6.40
Index of Compensation -187.00 184.00 197.00 193.00 202.00 216.00 211.00 223.00
Labor Productivity 36,157.00 34,776.00 33,262.00 32,158.00 32,069.00 31,194.00 31,611.00
Productivity Growth (%) na -3.80 -4.40 -3.30 -0.30 -2.70 1.30
Trade
#Employed ('000s) 3,156.00 3,218.00 3,276.00 3,389.00 3,520.00 3,767.00 4,013.00 4,138.00
% of Total Employment 14.20 14.00 13.80 13.90 14.10 14.70 14.80 15.20
Index of Compensation 96.00 90.00 91.00 95.00 112.00 103.00 95.00 96.00
Labor Productivity 33,562.00 33,510.00 33,189.00 33,217.00 32,766.00 32,456.00 32,703.00
Producflvity Growth na -0.20 -1.00 0.10 -1.40 -0.90 0.80
Finance
#Employed ('000s) 435.00 464.00 444.00 503.00 490.00 535.00 615.00 688.00
% of Total Employment 2.00 2.00 1.90 2.10 2.00 2.10 2.30 2.50
Index of Compensation 104.00 105.00 112.00 122.00 128.00 123.00 115.00
Labor Productivity 92,164.00 96,673.00 87,089.00 94,069.00 92,039.00 62,623.00 63,237.00
Productivity Growth na 49.00 -9.90 8.00 -2.20 -31.90 1.00
Community, Social and Personal Services
#Employed ('000s) 4,107.00 4,158.00 4,203.00 4,244.00 4,386.00 4,600.00 4,850.00 5,196.00
% of Total Employment 18.50 18.10 17.70 17.40 175.00 17.90 17.80 19.10
Index of Compensation 135.00 142.00 143.00 144.00 143.00 221.00 252.00 257.00
Labor Productivity 19,345.00 19,240.00 19,637.00 19,894.00 19,659.00 12,006.00 11,747.00
Productivity Growth na -0.50 2.10 1.30 -1.20 -38.90 -2.20
Table 3: Philippines: Wages and Productivity, 1992-1997
1992 1993 1994 1995 1996 1997
Minimum Wages (in current Pesos)
Agriculture
Plantation
National Capital Region 108 108 135 135 155 175
Outside National Capital Region 79.0-112.0 79.0-112.0 87.0-128.0 76.0-128.0 93.8-145.0 94.4-150.0
Nonplantation
National Capital Region 97.50 97.50 124.50 124.50 144.50 164
Outside National Capital Region 58.5-82.5 58.5-82.5 62.1-107.5 62.1-107.5 76.5-125.0 79.9-130.0
Nonagriculture
National Capital Region 118 119.40 145 145 165 185
Outside National Capital Region 89.0-113.0 89.0-127.0 93.0-138.0 92.1-138.0 94.0-155.0 101.0-175.0
Minimum Wages (% real growth)
Agriculture
Plantation
National Capital Region -10.9 -9.5 11.60 -9.4 10 5.90
Outside National Capital Region (-8.3)-(10.6) (-5.6)-(13.6) (-6.4)-9.6 (-19.3)-(-9.5) (-15.6)-(-10.2) (-3.8)-(-1.1)
Nonplantation
National Capital Region -11 -9.5 14 -9.4 11.20 6.50
Outside National Capital Region (-8.3)-(-0.5) (-5.6)-(8.6) (-9.3)-20.8 (-8.2)-(-9.6) 13.1-15.4 (-0.2)-(-0.6)
Nonagriculture
National Capital Region -16.1 -2.7 8.40 -9.4 9 5.20
Outside National Capital Region (-8.3)-(-0.6) 4.70 (-16.2)-(-1.1) (-6.2)-(-9.6) 1.3-9.2 2.7-7.9
Productivity (real growth)
All sectors -3 -0.8 1.70 2.10 -0.2 3.10
Agriculture 3.70 -1.7 1.30 2.10 -1.3 5.80
Industry -5.6 2.20 1.90 2 -0.7 1.20
of which: Manufacturing -7.5 3.40 1.60 3.60 2.50 2.60
Services -0.7 0.70 0.40 -1 -0.5 -0.3
Source: National Wages and Productivity Commission, 1998
Table 4: GNP and GDP by Industrial Origin, Percent Share to GDP (at constant 1985 prices)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
AGRI. FISHERY, FORESTRY 23.50 23.54 22.30 22.74 22.75 22.75 22.36 21.55 21.13 20.68 19.40
a. Agriculture industry 20.94 21.29 22.08 22.17 22.28 21.98 21.32 20.91 20.56 19.30
b. Forestry 2.61 1.02 0.66 0.58 0.48 0.39 0.22 0.22 0.00 0.10
INDUSTRY SECTOR 40.52 41 35.46 34.71 34.41 34.25 34.71 35.38 35.38 35.91 35.46
a. Mining & Quarying 1.50 1.48 1.54 1.50 1.60 1.58 1.40 1.25 1.20 1.16 1.18
b. Manufacturing 27.60 27.21 25.52 25.56 25.03 24.69 24.84 25.34 25.27 25.05 24.90
c. Construction 9.39 10.06 5.81 4.92 5.04 5.22 5.45 5.55 5.81 6.42 5.92
d. Elect, Gas and Water 2.03 2.25 2.59 2.73 2.74 2.76 3.01 3.25 3.30 3.29 3.45
SERVICE SECTOR 35.98 35.46 42.24 42.55 42.84 42.99 42.93 43.07 43.29 43.41 45.14
a. Trans., Comm. & Stor. 4.78 4.86 5.70 5.76 5.82 5.85 5.84 5.90 5.99 6.17 6.59
b. Trade 13.01 12.61 14.91 15.07 15.27 15.32 15.26 15.39 15.34 15.15 15.60
c. Finance 3.94 3.29 4.16 4.06 4.06 4.07 4.12 4.22 4.54 4.87 5.12
d. 0. Dwellings & R. Estate 5.19 5.04 5.57 5.62 5.64 5.62 5.54 5.46 5.37 5.30 5.41
e. Private Services 4.90 5.36 6.58 6.88 6.89 6.94 6.94 6.91 6.86 6.84 7.21
f. Government Services 4.16 4.30 5.05 5.16 5.15 5.18 5.24 5.19 5.19 5.08 5.22
GROSS DOMESTIC PRODUCT 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
Net factor income from abroad -0.19 -0.37 -0.84 0.15 1.10 1.74 2.58 2.78 4.13 4.27 4.84
GROSS NATIONAL PRODUCT 99.81 99.63 99.16 100.15 101.10 101.74 102.58 102.78 104.13 104.27 104.84
Source: NSO Bulletins
Table 5: Selected Macroeconomics Statistics
GDP GNP GNP per Growth in Labor Unem Exchange
Real Wage Inflation T-Bill Rates
Year Growth Growth capita GNP per capita Productivity ployment Rate
(1985=100) Rate (%) (91 days)
Rate Rate (1985 prices) (1985 prices) (1985 prices) Rate (%) (P/US$)
1981 3.42 3.24 12643 38002 102.4 17.30 12.55 7.90
1984 -7.32 -8.83 11110 -11.3 33729 94.0 47.06 28.24 16.70
1985 -7.31 -7.02 10086 -9.22 31533 100.0 23.45 25.87 18.61
1990 3.04 3.69 11554 1.48 32446 9.53 135.7 14.17 26.67 24.31
1991 -0.58 0.41 11306 -2.15 31270 10.5 119.8 18.66 21.11 27.48
1992 0.34 1.29 11194 -0.99 30340 9.82 121.8 8.95 16.02 25.51
1993 2.12 2.76 11151 -0.38 30111 9.27 116.6 7.61 12.45 27.12
1994 4.39 5.25 11456 2.74 30616 9.48 112.0 7.06 12.71 26.45
1995 4.76 4.96 11743 2.51 31269 9.52 117.7 8.10 11.76 25.70
1996 5.7 6.9 12275 4.53 31209 8.58 115.4 8.50 12.34 26.21
1997 5.1 5.8 12693 3.41 32168 8.7 114.1 5.10 12.89 29.47
1998 -0.5 0.1 12362 -2.61 31841 10.1 na 9.70 15.27 40.54
Source: National Statistics Coordination Board, NSO, Bangko Sentral ng Pilipinas
(Balisacan, Esguerra, Confesor: 1999)
Table 6: Comparative Wages in Selected ASEAN countries, June, 1998
Daily Minimum Wage Monthly Wage Exchange Rate
Country/City
In Country Currency In US$ In Country Currency In US$ Per US$1
Thailand/Bangkok 162 baht 3.95 4,860 baht 118.5 41.0 baht
Indonesia/Jakarta 7,000 rupiah 0.70 210,000 rupiah 21.0 10,000 rupiah
Philippines 198 pesos 4.70 5,940 pesos 141.1 42.10 pesos
Malaysia 20-30 ringgit 8-12 600-900 ringgit 223-335 2.683 ringgit
Singapore 630 S$ 368 1.71 S$
South Korea 778.1 won 562.2 1,384 won
Note:
a/ April 1998
b/ Monthly equivalent of DMW computed using 30 days
c/ Lowest average monthly commencing basic wage (Plant & Machine Operators)
d/ Lowest average monthly earnings (In thousand won) in Wearing Apparel industry, 1st Quarter 1998
e/ Dec. 1997; No Minimum wage; data based on prevailing wages of unskilled laborers.
Source: Data furnished by respective embassies
