Lerias, Mary Cielo

Llagas, Neil Alden

Magkilat, Joana Rose
Pintac, Euverly

Determinants of Regional Minimum Wages in the Philippines

1. What is the research question? (What)
- This study is about the regions of the Philippines using the following available data
for 1980-2012:
 Non-agricultural minimum wage
 Consumer price index
 Employment rate
 Gross regional domestic product
These factors were all determined using the results of Bersales (2011)

2. How did the author(s) motivate the study? (Why)

- The authors motivate the study with the purpose of updating Bersales (2011)'s
covered timeframe and investigating the possibility that shocks would introduce
abnormal wage setting behavior on the part of wage boards. They aim to develop
econometric models in predicting regional wage boards’ determination of non-
agriculture minimum wage. They also aim to assess if the following shocks would
likely introduce abnormal wage setting behavior on the part of the wage boards were
not significant:
 1997-1998 – Asian Financial Crisis
 2002 – spillover effects from U.S. technology bubble burst
 2008-2009 – spillover effects from Global Financial Crisis.

3. How did the authors address the research question? For example, the analytical models,
theories, empirical framework, and measurement of key variables. (How)
- The following Fixed Effects Model for Panel Data was used in coming up with a
prediction equation:
MWit = μi+ π1CPIit+ π2APR_EMPit-1 + π3GRDPit + εit(Model 1)
εit= ρεit-1+ νit
νit is white noise
where,
MWit is non-agriculture minimum wage in region i for year t
CPIit is consumer price index in region i for year t
 GRDPit is gross regional domestic product in region i for year t
APR_EMPit is employment rate in April of the year (t – 1) in region i.
Estimation was done using two-stage least squares to deal with simultaneity bias due
to correlations of errors of MW with the errors of the CPI, APR_EMP, and GRDP.
The following indicator variables representing shocks were added separately in
Model (1) to determine if they are also significant predictors of how the wage boards
determined MW:
ASIAN= 1 for 1997-1998 (Asian Financial Crisis) and 0 for other years
US_TECH = 1 for 2002 (spillover effects from U.S. technology bubble burst) and 0
for other years
GLOBAL_FIN = 1 for 2008-2009 (spillover effects from Global Financial Crisis) and
0 for other years.

4. Are the authors’ conclusions justified? What could be the alternative explanations for the
findings?
- Yes, it is justified. An alternative explanation for the findings could be as already
mentioned, R.A. 6727 stipulates that the regional wage boards should consider
the following factors in setting the minimum wage:
 the demand for living wages;
 wage adjustment vis-à-vis the CPI;
 the cost of living and changes or increases therein;
 the needs of workers and their families;
 the need to induce industries to invest in the countryside;
 improvements in standards of living;
 the prevailing wage levels;
 fair return of the capital invested and capacity to pay of employers;
 effects on employment generation and family income; and
 the equitable distribution of income and wealth along the imperatives of
economic and social development.
Pember and Dupre (1997) have suggested another set of criteria for determining the
level of minimum wage. These criteria largely overlap with the factors mentioned in R.A.
6727. The criteria they suggest are the following: Criterion 1: The needs of workers and
their families; Criterion 2: The general level of wages in the country; Criterion 3: The
cost of living and changes therein; Criterion 4: Social security benefits; Criterion 5: The
relative living standards of other social groups; and Criterion 6: Economic factors,
including the requirements of economic development, levels of productivity and the
level of employment.

5. Overall, what is the new in the study and what is the takeaway? (So, what)
- The findings on the relationships of the indicators with minimum wage were
generally different for the different regions. However, common to all three are the
 significance of the correlations of minimum wage with each of the following
indicators: CPI, GRDP, and April employment rate. Thus, the formula based on CPI,
GRDP and April employment rate may be used as a baseline value for minimum
wage. It does not include the other criteria listed in R.A. 6727 due to unavailable
data or non-significant result in econometric modeling. Thus, the baseline value may
be adjusted by the wage boards to take into account these other criteria. The lower
and upper estimates from the formula may be intervals that the wage boards can use
in making final determination of minimum wage.
- The key takeaway for this research is that the Wage Rationalization Act (R.A.6727)
of the Philippines established regional Tripartite Wage and Productivity Boards to
determine regional minimum wages and mandated the National Wages and
Productivity Commission (NWPC) to develop policies and guidelines for regional
boards to use in determining the minimum wage

Minimum Wage Coverage and Compliance in Developing Countries

1. What is the research question? (What)
- This research is focusing on the gaps of minimum wage across various developing
and emerging countries in terms of their coverage and compliance. It highlights the
wage earners from various social groups in these countries. Different types of works
being performed by different social groups in these countries are being mentioned in
this study too for differentiation purposes as to how the legislation towards minimum
wage of the 11 developing and emerging countries being constituted.

2. How did the author(s) motivate the study? (Why)

- The authors purpose why they dig into this kind of study is to achieve fairness and
equality between different types of workers. The pay gap of women and minorities in
developing and emerging countries such as India, Indonesia, and South Africa are one
of those issues that the authors wanted to consider by making any legislation in
constituting minimum wage. Even if you belong to an ethnic group, unskilled and
informal workers, everyone should be treated fairly and with justified rulings when it
comes to minimum wages. The authors also want to improve the living conditions of
the vulnerable workers such as domestic workers.

3. How did the authors address the research question? For example, the analytical models,
theories, empirical framework, and measurement of key variables. (How)
- The authors way to address this study is first they showed as to what extent the
minimum wage is legally covered in the 11 developing countries that are under
analysis. Various labor laws, labor codes, and wages rulings that were enacted in the
11 countries are the basis of this analysis. The authors also measured the extent to
 which employees were complying with the legal minimum wage. And was Illustrated
by charts to see clearly how they come up with this analysis.

4. Are the authors’ conclusions justified? What could be the alternative explanations for the
findings?
- The conclusions that was being presented by the authors are all justified because they
tackle all the important elements that would give value and support to this study. The
authors also noted that awareness raising and information dissemination are key
factors that can improve the compliance rate of hybrid national minimum wage
systems. In addition, they also mentioned about strategies in respect of minimum
wages, adapted to the country-specific environment. Thus, in all fairness all the
important elements are mentioned.

5. Overall, what is the new in the study and what is the takeaway? (So What)
- This study is an eye opener to all lawmakers that in constituting a law it should be
balanced and with a proper basis. Because laws should not be unfair, oppressive,
inadequate and insufficient. Any kinds of workers are doing their job in all the best
way that they can. Thus, in return they must have a just compensation. But what
happened is that, policymakers tend to miscalculate the efforts of the workers. It is a
sad reality so the law making body should make actions to this.