Two-tiered wage puts premium on productivity

THE Labor Department says a proposed two-tiered wage system is gaining support from workers and employers, but their representatives say obstacles remain before it can replace the mechanism for setting the minimum wage.

The government will set a fixed wage for workers, with added compensation depending on the worker’s productivity, once it decides to shift to that system.

“While there are pros and cons to the planned shift to a two-tiered wage system, all concerned sectors are supporting the new system,” said Ciriaco Lagunzad III, executive director of the National Wage and Productivity Council.

“A tripartite consultation among employers, workers and government sectors is carefully studying the new system,” he said, adding the Labor Department had already consulted the International Labor Organization and other countries on the planned shift.

“We have asked the ILO for assistance in doing policy research on the proposed wage system and to provide labor experts from Singapore who can discuss industry-based minimum wage systems with us,” Labor Secretary Rosalinda Baldoz said.

Still, the Employers Confederation of the Philippines says setting a national floor wage cannot not be done without enabling legislation.

“Wage-fixing is a function of Congress,” group director-general Vicente Leogardo Jr. said.

“Fixing a national floor wage requires legislation.”

But the Ecumenical Institute for Labor Education and Research Inc. says the government’s idea of shifting to a two-tiered wage system will make the goal of achieving decent wages more difficult, and because it places a premium on productivity over a decent livelihood and workers’ survival amid declining standards of living.

The group’s executive director, Anna Leah Escresa-Colina, says determining wages based on productivity will also further skew the highly varied wage levels across the nation, since productivity levels varied per region, per industry and even per company.

The minimum daily wage is highest in Metro Manila at P404, and lowest in the Autonomous Region in Muslim Mindanao at P222

“[A Metro Manila] worker in a small enterprise with low productivity will receive a smaller wage hike compared to a fellow worker employed in a big company if the two-tiered system is approved,” Colina said.

“Under the current system, they stand to receive the same amount of wage increase as approved by the regional wage board.”

The two-tiered wage mechanism seeks to establish a floor wage to protect the income of vulnerable workers, and a productivity-based approach to determine wages above the minimum.

“The first tier is a mandatory national wage, or a floor wage, which will protect the incomes of the most vulnerable sectors from undue low wages,” Lagunzad said.

“The second tier above the national floor is productivity-based. This seeks to encourage improved work performance, remove the disincentive for collective bargaining, and promote bipartite modes in determining wages and other terms and conditions of work.”

Baldoz says countries such as Singapore have been successful in implementing a two-tiered wage system, with industry standards as the first tier and productivity-based bonuses as the second tier.

She says a two-tiered wage policy reform can be initiated within the present system of wage- fixing under the Wage Rationalization Act.

The law allows the the Regional Tripartite Wages and Productivity Board to set the minimum or floor wage rates in the region along industry lines, and to promote productivity improvement at all levels. –Vito Barcelo, Manila Standard Today