Browsing by Author "Vergara, Jan Paula"

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    The impact of minimum wage, capital-labor ratio and labor productivity on the employment of production workers in the manufacturing sector using three-digit industries (1988-1995)
    (2009-04) Vergara, Jan Paula; Feliciano, Paul Neilmar; Tan, Edita
    This paper reviews the impact of Minimum Wage on the production workers in the manufacturing sector right after the imposition of regional minimum wage. Other factors such as labor productivity's and capital-labor ratio's effects on the employment of the said group of workers are also included. The demand elasticity of the industries serves as the link between the three factors to the employment. The empirical study is carried out using regression analysis and OLS method of the cross-sectional data on the 29 3-digit industries in the Philippine manufacturing sector. During 1989-1992, there is an almost proportionate change between wage and employment. A 10% increase in the statutory minimum wage would result to a 10.69% decrease in employment, ceteris paribus. In period 1992-1995, there is higher employment loss for every increase in wage compared to the first period. Specifically, a 10% increase in statutory minimum wage would result to a 12% increase in employment foregone, ceteris paribus. Another independent variable (capital-labor ratio) has a negative relationship but proved as insignificant. A possible explanation is that capital and labor are not perfect substitutes. Wage and output per worker variables are added to the equation. For the 1989 to 1992 period, it is shown that a change in wage will have a stronger effect on employment than a change in output per worker. However, surprising changes have manifested in period 1992 to 1995. Changes in output per worker dominantly explain the changes in employment in period 1992 to 1995. The rate of change of output per worker has a more significant role in determining the rate of employment foregone in the manufacturing sector for the 1992 to 1995 period. Lastly, three independent variables are regressed against the independent variable. The results show that wage still has the most influence in changes in employment in period 1989 to 1992. In the 1992 to 1995 period, output per worker is the most influential factor in the change in employment.