Real wages stagnant in 20 years—ADB

REAL wages in the Philippines have stagnated over the past two decades as the monopolies have been taking advantage of the large supply of job seekers fighting for a few jobs in the country, the Asian Development Bank says in a report.

As a result, Asia’s policymakers must generate high-quality jobs if the region is to sustain and broaden the benefits of its economic expansion of the past two decades, the bank says in special chapter of its Key Indicators for Asia and the Pacific 2011 report released Tuesday.

“The percentage of workers in informal employment in Asia remains sharply higher than in most other regions,” Changyong Rhee, the bank’s chief economist, says in the report.

“Quality jobs are important for reducing poverty and income inequality, and for promoting social cohesion and political stability.”

The bank says Asia in general has outstripped other regions in growth and employment creation since 1990, which have led to substantial improvements in living standards. But progress has been uneven in the heterogeneous region.

Workers in Indonesia, the Philippines and Vietnam seem more concerned with having safe and secure jobs, reflecting that there may be a relative lack of security in many jobs in these countries. While most Asian countries have experienced a continuing rise in the average wages of workers in the formal sector, the Philippines has experienced the opposite.

“In general, wages in the People’s Republic of China rose much more rapidly than in other countries, while in countries such as the Philippines [the] wages remained relatively stagnant,” the report says.

The growth in the wages in China has been much higher than the growth in productivity.

“However, in some countries such as India and the Philippines, wage growth has lagged behind growth in productivity. This may reflect that the institutional environment fails to support gains in productivity that can result in higher wages.”

The report says the Philippines was able to reduce the share of people employed in agriculture by 9.4 percentage points, which was accompanied by a comparatively larger decrease (9.6 percentage points) in the share of people who were informally employed between 1990 and 2008.

“The Philippines has done relatively well in moving people from informal to more formalized employment and increasing labor productivity, but this has resulted in little wage growth in formal employment.

“In contrast, Indonesia has had relatively high wage growth in formal employment compared with labor productivity, but only a very small shift of workers out of the informal sector.”

The report notes that manufacturing in the Philippines has been moribund for the better part of the last three decades.

While the share of agriculture in the Philippines has fallen from 52 percent to 34 percent, virtually all of the relative decline went to the services sector. By contrast, the share of manufacturing in total employment has stagnated at around 15 percent between 1983 and 2009.

The report cites a 2004 study showing that the extent of monopolies and oligopolies in the Philippines has increased, explaining the stagnation in real wages that has accompanied labor productivity growth.

“Given that the Philippines has a relatively stable and overly abundant supply of highly qualified and skilled labor, the competition for higher quality positions is fierce and places the power of negotiations and rise in wages in the hands of the monopolies,” the report says. –Roderick T. dela Cruz, Manila Standard Today