The same ritual unfolds yearly. Workers demand higher wages because the cost of living has become unbearable. Employers warn that another increase could force businesses to reduce hiring or even close shop. Government brokers a compromise that satisfies no one completely.

Then, a year later, it's the same debate over minimum wage again.

We have become so accustomed to arguing over annual wage increase that we rarely ask the more important question: Why does the Philippine economy require government intervention every year just to keep millions of workers from falling further behind?

In healthy, highly productive economies, wages rise primarily because businesses become more productive. Companies create greater value, earn higher profits, compete for skilled workers, and voluntarily offer better pay. Government merely establishes the wage floor.

The Philippines has struggled to reach that stage.

For decades, growth has relied heavily on consumption, services, and remittances rather than on a broad expansion of high-value manufacturing and innovation-driven industries. Many businesses also contend with high electricity costs, expensive logistics, regulatory complexity, and persistent skills mismatches. The result is an economy that has created millions of jobs, but too many generate only modest value—and therefore modest wages.

This is why the annual wage debate often misses the larger story. The issue is not whether workers deserve higher pay. They unquestionably do. Nor is it whether employers deserve consideration. They do as well.

The real question is why the country continues producing so many jobs that cannot naturally support decent wages.

At last week’s Kapihan sa Manila Hotel, Labor Secretary Francis Tolentino defended the National Capital Region's new wage order granting an ₱85 increase in two tranches. About 1.1 million workers are expected to benefit, while government estimates roughly 12,000 employees could face reduced hours or retrenchment.

The most revealing part of Tolentino's presentation was not the amount of the increase but his acknowledgment that the minimum wage remains far below what could be considered a living wage—a level that would allow a family to enjoy the decent standard of living envisioned by the Constitution.

A minimum wage prevents exploitation. A living wage allows dignity.

For decades, Philippine wage policy has revolved around finding the largest increase employers can absorb without significantly disrupting employment. Businesses cannot pay wages they genuinely cannot afford. Yet workers cannot indefinitely survive wages that no longer keep pace with inflation.

This leaves wage boards with an unenviable task: raise wages too little and workers become poorer in real terms; raise them too much and struggling businesses may reduce hiring or shut down.

The deeper question is why a wage policy is expected to solve a problem it was not designed to fix: how to raise productivity so that higher wages come naturally.

Productivity grows with sustained investment in education, technical training, infrastructure, technology, and industries that create higher value. Workers who create greater value and produce more generally earn more.

That is why another part of Tolentino's presentation deserves greater attention. His discussion of the proposed Pax Silica technology corridor in Clark points toward a longer-term solution. If the country succeeds in attracting semiconductor, microchip, and other advanced manufacturing industries, it can gradually create the kind of high-productivity jobs that sustain higher wages.

The same logic underlies DOLE's emphasis on TESDA training and reintegration programs for returning overseas Filipino workers. Better skills do not merely improve employability. They increase productivity, which ultimately determines how much workers can earn.

None of this diminishes the importance of minimum wages. They remain an essential safeguard against exploitation, especially during periods of inflation.

But we should not confuse emergency medicine with long-term health. Minimum wage orders treat the symptoms. Productivity growth addresses the underlying condition.

The World Bank (WB) has just reclassified the Philippines as an upper-middle-income economy—a milestone celebrated as recognition of years of economic growth. Yet the achievement also exposes a paradox. If the country has climbed to a higher rung of development, why do so many Filipino workers still depend on government wage orders merely to keep pace with the rising cost of living?

Alas, national income and household income do not always move together. Economic growth can coexist with millions of workers trapped in low-productivity jobs that cannot command substantially higher pay. Growth, impressive as it may be, does not automatically translate into broadly shared prosperity.

As a UP professor explains, the WB income classifications are much like moving from one grade level to another in school. They measure a country's average income, not the financial condition of every family, whether poverty has disappeared or that people suddenly feel richer. It simply means the economy, taken as a whole, has reached a new level.

The World Bank answers one question: Has the Philippine economy grown? Ordinary Filipinos ask another: Has my life improved?

The questions are connected, but not identical. Economic growth is measured in national statistics. Development is measured in everyday life.

It is reflected in whether wages keep pace with rising prices, whether young professionals can build careers without leaving the country, whether families can afford quality healthcare and education, and whether hard work once again becomes a dependable path to a better future.

All these become more attainable when higher wages are driven not merely by government wage orders but by a more productive economy that creates greater value—and shares it more broadly. ([email protected])