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Minimum wage on Philippine Economy

By: Cristine Ann B. Parungao

 

The number of workers settling on the minimum wage is increasing every year. Most of these individuals are believe to be younger and less educated. They are the individuals who may need cash in a short term basis and prefer to work without sufficient benefits.

But is there an effect on how the minimum wage affects the country’s economy? According to a study of Leonardo A. Lanzona, Jr. on the “Effects of minimum wage on the Philippines economy”, “Minimum wages, more than other forms of regulation, are more directly associated with unemployment.”

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Minimum wages —Reason why firms reduce their production workers

  • BY: Jhade Quiamco

“Firms (In the Philippines) are reluctant to hire younger, less educated and female production workers.” according to professor and ACERD Director Leonardo A. Lanzona Jr., on his Journal titled: Effects of minimum wage on the Philippine economy, at Philippine Institute for Development Studies (PIDS).

Lanzona is a professor at Ateneo De Manila on the School of Social Sciences. He finished his doctorate degree at the University of the Philippines, Diliman.

For years, people have been questioning the Philippines’ economic growth while there is still big percentage of jobless Filipinos in the country.

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Minimum wage causes unemployment

By: Carissa Marie Palpal-latoc

The direct relation of minimum wage and employment were the subject of the study released by the Philippine Institute for Development Studies last August 2014.

Leonardo A. Lanzona Jr., the author of the paper mentioned the use of various methods to prove that the minimum wage law causes unemployment.

“By means of various econometric methods, the study was able to establish a causal relationship between minimum wages and employment. In particular, the analyses based on both national and regional pooled data and panel data showed that minimum wage policy reduces employment.”

The study showed how labor policies such as the minimum wage affect the economy.

“In this case, labor market policies, such as the minimum wage, results in labor market failure or distortions and lower social welfare, in the form of deadweight losses” Lanzona said in his study.

Because of the minimum wage law, small-scale businesses are also affected which results to lower benefits for the workers.

“Workers carry part of the burden of higher minimum wages in the form of lower benefits (though somewhat mitigated by mandatory benefit restrictions) and reduced worker security” Lanzona explained, citing Maloney and Mendez as his reference.

Lanzona also talked about how the reduce in the employment in the small-scale businesses which resulted in the production of more workers for the large-scale businesses but inevitably reduced the minimum wage usually received by these workers.