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Wages In The Philippines

Singapore-Philippines Business & Management Consulting Services.

WAGES IN THE PHILIPPINES

From http://www.bworldonline.com/main/content.php?id=24243

A Nov. 27-30 SWS poll, the results of which were made exclusive to BusinessWorld, had 18.1% of the respondents — or an estimated 3.4 million families — claiming to have gone hungry in the last three months because they lacked anything to eat.

This was up from the 2010 low of 15.9% (3.0 million families) recorded last September and — given the 21.2% in March and 21.1% in June — was slightly below the 19.1% average for the year.

It was also four points over the 12-year average of 13.7%, the SWS noted, but still far from the record high of 24% hit in December 2009. The record low is 7.4%, hit in March 2004. Some 9.2 million families or 49% of the respondents, meanwhile, considered themselves poor, barely changed from September’s 48%. Over a third — 36% or an estimated 6.7 million households — considered themselves food-poor, down from 38% previously.

…Government officials blamed higher food prices in the last quarter of 2010 and noted the need to deliver on promises to reduce poverty.

…As of November 2010 the median poverty thresholds for poor households were P15,000 in Metro Manila, P9,000 in the rest of Luzon, P8,000 in the Visayas and P5,000 in Mindanao. The median food-poverty threshold, meanwhile, hit a new high of P9,000 in Metro Manila, breaking the previous P8,000 record. It was at P4,000 for both the rest of Luzon and the Visayas, and at P3,000 in Mindanao.

In Metro Manila, the SWS said the median poverty threshold of P15,000 was barely above the P10,000 in 2000 even though the Consumer Price Index (CPI)had risen by over 60%. The P15,000 is equivalent to only P9,096 in terms of 2000 purchasing power and is a throwback to living standards 15 years ago, the SWS added

Ends–

Stats from the Department of Labor and Employment (DOLE) tell us a daily minimum wage earner in the Philippines should be getting anywhere from P367-P404 in the National Capitol Region (NCR). Now, there’s no rocket science in noting that these daily minimum wage workers will on an average of 24 working days per month Monday through Friday earn between P8,808-P9696 per month ($199-$219 U.S. dollars per month).

Reflecting back on the numbers (in bold above), it’s pretty simple to see that yes, the poverty level is set to increase, the numbers of families going hungry will increase. If a person today is making  P8,000-10,000 per month he essentially is even more impoverished, or his standard of living is even less then a worker of 10-15 years ago.

So how do things get better?

First, the belief of being a low-cost producer or working with minimal margins for an SME (which naturally means you will pay your people low) is only a temporary business strategy. More importantly, here’s why it does not make sense.

When you do a job cheap for someone, then they pay you on terms-what happens with your operating expenses and cash flow? They become very minimal or you find yourself in negative numbers.

Here’s a very basic example. You do a job for $150,000, your operating expenses are $50,000 per month. If your client pays you everything in a month, great-you are up $100,000. Although let’s say your client pays you $50,000 over 3 months (90 day terms). Essentially, you made nothing.

Now, being a low-cost producer may have worked before. Although with technology that is ever changing and getting better, the SME that cannot break old or outdated ways, old mindsets, old managerial styles will be just a memory. When businesses select a low-cost producer strategy, set poor terms, select poor clients, mismanage funds, do not apply technology in terms of equipment for processing and infrastructure,  more then often I find this is a business that does not pay employees well. How can they when they do not improve themselves and how can they keep up with companies fast approaching that will pass them by.

The first step in increasing wages is to increase efficiency in your business.When you increase efficiency you find savings. And, instead of putting that savings back into the business, put it in your employees by means of differentiation. Why employees and not the business?

When you re-invest in employees, you give them incentive to do a better job, to learn another skill, to take on new responsibilities, to grow. In short, you saved capital and got a better employee without spending anything. I hear all the time how increasing an employees pay will cause a company financial distress. I tend to disagree.

The distress raising salaries will cause is not on the business-it is on managers and owners to think. Owners and managers of SMEs are often set in their ways and often do not plan becoming very short-sighted. I can go on and on, but the long and short of it all is this.

When you become more efficient you find new capital. When you put that capital in your employees, your business gets a lift without spending anything. And to sweeten it all, when you pay your employees more, you set your business up for more savings when it comes to tax incentives.

The rule of thumb is when you set your margins and wages at a minimum-you will at best get the minimum in terms of good customers and good employees. And that equals no to slow to low growth. When that happens an owner of an SME will more then likely forever be chained to-and a prisoner of their business. Ironically, this was perhaps the same business which was supposed to allow personal and financial freedom.

A business should not solely run on the back of low paid employees. It should be run on the brains and wit, the vision and the know-how of its owners and managers.

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