July 16, 2025 l Business Mirror
We have always assumed that the minimum wage is there to protect our work force from abusive employers that cannot be entrusted with the welfare of their work force. However, it is about time we ask ourselves if this is really true.
According to the Philippine Statistics Authority, as of April 2005, our national unemployment rate is at 4.07 percent and the underemployment rate is at 14.57 percent! This means close to 19 percent of our labor force do not benefit from the minimum wage at all and is probably adversely affected by a high minimum wage.
Why would a high minimum wage adversely affect employment opportunities for the labor force? The simple answer is that employers need to make money or benefit from the work done by their employees. This becomes more difficult when such employees have limited experience, education, training and other qualifications. Thus, the lowest segment of the population is left more vulnerable to further marginalization due to lack of employment opportunities.
Many labor leaders and politicians would argue that the Philippines does not have a high minimum wage and are actually clamoring for a dramatic increase in our minimum wage. The latter, in turn, would lead into a vicious cycle of higher unemployment and underemployment rates leading into the further marginalization of the least educated segment of our society.
With readily available information, it is quite easy to expose the truth. It is only logical to assume that more progressive or wealthier countries should have a higher minimum wage due to their better standards of living.
You may be surprised to find out that the minimum wage in the Philippines this year is already more than countries with a higher GDP-per-capita than us! We have a higher minimum wage than China, Thailand, Indonesia and Vietnam! How could we possibly attract more businesses into our country with such a high cost of labor and other inputs such as electricity? It is also distressing to see that the ratio of the annual gross income at minimum wage over the GDP-per-capita for the Philippines is so glaring that it seems that our minimum wage is used like a magic wand to improve the quality of life for Filipinos; but is having the opposite effect!
In the Philippines, the annual gross income at minimum wage is at $3,405 while the GDP-per-capita is at $3,805 which gives us a fantasy ratio of 89.5 percent. When this ratio hits 100 percent, this means EVERYONE is on minimum wage. The higher this percentage is, the closer your minimum wage is to the gross domestic product (GDP)! Also, the more you are dreaming that the minimum wage is actually protecting the work force, which is a fantasy!
For what many Filipinos would consider as a top-tier country to work in or migrate to, the United States of America is at 18.2 percent, Hong Kong is at 21.2 percent and China is at 20.9 percent. Other Asian countries that have a higher GDP-per-capita than the Philippines are Taiwan at 34.8 percent, Vietnam at 37.1 percent, Malaysia at 38.2 percent, Thailand at 52 percent and Indonesia at 50.2 percent. Laos which has a lower GDP than the Philippines has a fantasy ratio that came close to us at 83.8 percent.
You may be wondering what is the ratio of our Asean superstar Singapore? Well, it is 0.0 percent since they do not have a minimum wage! Perhaps they know something we don’t.
There is nothing wrong with aspiring to have a high wage or income, as long a you are able to justify it and earn it. Don’t you think it is about time we abolish the minimum wage and let those that are providing the jobs be able to hire who they want, at a salary that they can justify? After all, workers can choose who they want to work for, assuming they get a job offer.
***The views expressed herein are his own and do not necessarily reflect the opinion of his office as well as FINEX. For comments, email georgechuaph@yahoo.com. Photo is from Pinterest.