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Business warns of costly economic backlash

Hike in teachers’ pay

Published

By Bernie Cahiles-Magkilat

Business has warned the government of costly economic backlash once it grants the demand for new round of increases in public school teachers’ salaries that would cost government P150 billion annually with no identified new sources of funding.

In a joint statement, six business and professional organizations composed of the Management Association of the Philippines, Financial Executives Institute of the Philippines, Foundation for Economic Freedom, Makati Business Club, Philippine Business for Education and Action for Economic Reforms urged President Duterte to weigh the consequences of granting the demands for an immediate P10,000 a month increase in the already high salary rates of public school teachers compared to private school teachers.

“We, the undersigned business and professional organizations, believe that better education is a top national priority. We need it to make the Philippines and Filipinos more competitive, secure and productive. We recognize, appreciate, and value public school teachers as central to this goal, aside from being important leaders of our communities, including during election time. They deserve to be compensated better and given better training opportunities and tools, and we join other sectors in making that a goal,” the statement said.

But they also warned: “There are numerous examples of economic collapse that trace to fiscal imprudence — unmanaged salary increases and poorly targeted subsidies. The most recent and very visible one is Venezuela.”

Instead, the business groups have called for a phased salary increases and for government to consider three major factors in granting the demand based on fairness, fiscal affordability, and heavy economic and social effects.

On fairness, the groups asked the government to consider the public school teachers’ pay compared to other civil servants, and the recent increases in their pay.

On fiscal affordability, they said the government should consider sustainability, and the competing demands for other essential public expenditures. These include other parts of the education sector itself, the health sector, social spending such as Conditional Cash Transfer (CCT), and investments in hard infrastructure. All these are needed to lift our people out of poverty, broaden and enrich the middle where our school teachers belong.
The first two factors, the groups said would have a heavy economic and social effects from granting the demand as inflation, low growth, and unemployment, that go with spending beyond the government coffers. “This hits the poorest hardest,” they warned.

In terms of market competitiveness, the groups cited that Teacher 1 in 2019 (the entry level salary grade 11) is already 58 percent more than their private school counterpart. An Associate Professor (salary grade 23) earned 109 percent more. According to the regional labor force survey, as early as 2016, public school teachers received on average 71 percent more than private school teachers nationally. This premium ranges anywhere from a low of 34 percent in Cordillera Autonomous Region to a high of 158 percent in the Autonomous Region of Muslim Mindanao.

Education Secretary Leonor Briones herself acknowledged that salaries of public school teachers have “overtaken” those of private schools and debunks characterizations that they are “the most pitiful and lowest paid profession.” This is especially so in rural areas as the salary of public school teachers is standard nationwide. Compared to private teachers’ pay which is determined by local cost of living in the area they are working.

“These market comparisons are important grounding — to deviate markedly from such would precipitate demands of one group of public servants vs. whoever is the current highest in a wage spiral that could lead to fiscal unsustainability. It could even spill over to private pay demands and inflation pressures,” the groups added.

Raising the disparity in pay between public and private school teachers would further fuel the migration of private school teachers to public schools and exert financial pressures on private schools whose tuition fees are regulated by government.

And yet, public school teachers are disadvantaged compared to private school teachers in terms of lack of training opportunities and tools like books, school supplies, and computers. There are other factors to consider in providing better education than salary rates.

“There is also a lack of teachers and classrooms, resulting in big classes spread over the day in shifts. These must be addressed to alleviate the burden of teachers and improve the quality of education,” the groups pointed out.

On the macro impact on the fiscal sector, the P150 B annual cost of the salary increase is roughly 1 percent of GDP. According to the group, the entire budget for the CCT program, which benefits 4.3 million households and promises to break inter-generational poverty, will cost less than half of the P150 billion annual cost of the public school teachers’ salaries.

Worse, there is no identified recurring source of funding for this salary increase. As such, it will raise the national government annual fiscal deficit from 3 percent to 4 percent of GDP.

“The last time our fiscal deficit to GDP breached 4 percent was in 2002 and 2003, driving the country’s credit ratings down by two rungs. This led to higher borrowing cost to both government and private sectors, and lower investments. If the gains in managing our economy recently affirmed by the upgrade to just below ‘A’ are put at risk, our public school teachers will also suffer,” they pointed out.

Thus, the business organization have urged for fiscal prudence to avoid economic collapse from such a noble goal of rewarding public school teachers for being important leaders of communities, including during election time.

“We fully endorse the proposal of fiscal and education authorities for moderated adjustments in pay which are phased, reflect recent salary adjustments made, benchmarked to the market and other civil service employee comparators, count the benefits of TRAIN 1 on their take home pay, and are matched by new revenue. This should allow approach to the sought-for P10,000 salary increase over time,” the business groups concluded.

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