Slower inflation implies moderate erosion of real wages, analysts say

By Chloe Mari A. Hufana, Reporter

THE PHILIPPINE INFLATION in September, which slowed to an over four-year low, implied a moderate erosion of workers’ real wage as it remains below the cost of living, labor experts said.   

University of the Philippines Diliman School of Labor and Industrial Relations Assistant Professor Benjamin B. Velasco said that while slower inflation is welcome news, it implies that real wages have not increased.

“As per the Philippine Statistics Authority (PSA), whole-year inflation in 2023 was 6%. The recent National Capital Region minimum wage of P35 is a 5.7% rise over P610,” he told BusinessWorld in a Facebook Messenger chat over the weekend.

“We will have to see how the 2024 average inflation is, compared with 2023 inflation. Nominal minimum wages rose just below inflation. Real wages are stagnant or even dipped slightly, which is actually the long-term trend in the Philippines,” he added.

The consumer price index slowed to 1.9% year on year in September from 3.3% in August and 6.1% a year ago, the PSA said on Friday. This was linked to the declining food and transport costs.

“Prices still increased even if by a small amount. This implies a reduction of purchasing power,” Mr. Velasco noted.

Core inflation, which excludes volatile prices of food and fuel, eased to 2.4% in September from 5.9% a year ago. Core inflation averaged 3.1% in the January-September period.

Broken down, food inflation slowed to 1.4% from 4.2% in August and 10% in the previous year.

BOTTOM 30%
Mr. Velasco said inflation for the bottom 30% of the population is “usually higher,” citing a PSA report in 2023 which showed yearly inflation for the bottom 30% was 6.7%.

“As for the bottom 30%, the basket of goods of the poorer Filipinos is skewed for food. Unfortunately, food inflation is greater than nonfood inflation,” he said. “Despite lower inflation, we need pro-active interventions to assist [the] working poor and [the] poorest of the poor.”

Bukluran ng Manggagawang Pilipino National President Renecio “Luke” S. Espiritu, Jr. said the slower inflation rate last month is not “worth celebrating” as wages remain insufficient to cover day-to-day cost of living.

“Beyond looking at the inflation rate, let us look at the daily lives of the average Filipino,” he told BusinessWorld in a Facebook Messenger chat over the weekend.

“For a worker, a low inflation rate means little if the cost of everyday living remains sky-high and wages remain to be way below the cost of living.”

He added that the high costs of essential services, like electricity, water, and telecommunications continue to burden micro, small, and medium enterprises.

“There will be no ease for the working Filipino if wages do not keep up with inflation,” he added. “The little increases we get in the minimum wage do not reflect reality when it comes to actual needs of a working-class family.”

Federation of Free Workers President Jose Sonny G. Matula echoed that the drop in inflation would not necessarily help ease the burden of minimum wage workers.

“Even with lower inflation, many workers are still grappling with the effects of high living costs from previous inflationary periods,” he said in a Viber message.

“Minimum wage earners, in particular, have seen their purchasing power significantly reduced, and wage increases remain necessary to bring them back to a level where they can meet basic needs,” he added.

LEGISLATE WAGE HIKES
Both labor leaders reiterated their call for a legislated wage hike, noting the current daily minimum wages per region do not align with the inflation rates.

“While this (slower inflation) provides a window for wage hikes, especially where workers have long been demanding fair compensation, (such as) workers without a union and without bargaining power, it ultimately depends on how businesses choose to allocate their savings,” Mr. Matula added.

In February, the Senate approved on third and final reading a P100 across-the-board minimum wage increase for workers in the private sector. The House of Representatives has yet to pass similar legislation.

The current daily minimum wage in the capital region is P645 for non-agricultural workers and P608 for workers in agriculture and service/retail establishments employing 15 workers or fewer.