Determinants of regional minimum wages in the Philippines

Year: 2014       Vol.: 63       No.: 2      

Authors: Lisa Grace S. Bersales; Michael Daniel C. Lucagbo

Abstract:

In the Philippines, the National Wages and Productivity Commission (NWPC) formulates policies and guidelines that Tripartite Wage and Productivity Boards use in determining minimum wages in their respective regions. Reviews of the implementation of the minimum wage determination have been done in past studies to determine which of the factors listed by NWPC for consideration by the wage boards are actually used to determine minimum wage. Results indicated that the significant determinant of minimum wage is consumer price index. Two stage least squares estimation of a Fixed Effects Model for Panel Data for the period 1990-2012 showed that significant determinants of regional minimum wage for non-agriculture are: Consumer Price Index, Gross Regional Domestic Product, and April employment rate. The lower and upper estimates from the estimated equation of the Fixed Effects Model for Panel Data may provide intervals that the wage boards can use in making the final determination of minimum wage. The following shocks which 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.

Keywords: tripartite wage and productivity boards, minimum wage, fixed effects models for panel data, shocks, two stage least squares, fixed effects model for panel data

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