Conditions of Work and Employment Series No. 59

The (missing) link between wages and productivity in the Philippines: What role for collective bargaining and the new two-tier wage system?

On 28 March 2012, the Philippine Government, through the Regional Tripartite Wages and Productivity Board of Region IV-A, issued Wage Order IVA-15. Its purpose was to further strengthen the policy framework to encourage improvements in productivity, including by enhancing the link between wages and productivity at the enterprise level. This wage order has piloted the implementation of a two-tier wage system in Region IV-A (CALABARZON), which is home to many export-processing and industrial zones. On 1 May 2014, another wage order was issued – Wage Order IVA-16 – clarifying some confusing provisions of the earlier order.

This paper explores how the wage order is being implemented two years (2013 to 2014) after its issuance in Region IV-A by examining the various schemes and processes involved in devising various productivity-based pay schemes through case studies of selected companies in the region. It also examines the extent of coverage of the productivity-based pay tier in terms of the number of participating establishments as of 2014.