This week saw two economic adjustments, one on the minimum wage, and the other on the World Bank’s class-ranking of the Philippines.
Adjusting the minimum wage. On June 29 it was announced that the legal minimum daily wage in Metro Manila would be raised from P695 in two moves, to P755 this July, and then to P780 next January (see “DOLE: ‘Historic’ P85 wage hike set for Metro Manila workers,” Inquirer.net, 6/30/26). As usual, there were immediate complaints from businesses that the adjustment is too large, as well as from organized labor that it is too small.
Definitely, the wages of workers nationwide—not only in Metro Manila—need adjustment due to inflation of the general cost of living. So, why can’t the national government, the local governments, and the major business companies, voluntarily, initiate adjustments in what they pay their own employees? Why don’t they practice indexation, as they surely do for their top management?
For the country, the real issue is whether wage-adjustments are best done by means of the minimum wage law (MWL), since the MWL allows many exemptions, such as government employees, household service workers, retail and service establishments of at most 10 employees, regions other than the one that initiated the adjustment, etc.
The effects of past adjustments in minimum wages on actual wages received by workers has not been quantified, for lack of published data on wages over time. To my knowledge, the quarterly Labor Force Survey asks its national sample of the labor force if they worked recently, and if so about the actual wages they received. Unfortunately, its wage-findings are not published.
Change in per capita gross national income (GNI). The big news on June 30, that “PH attains ‘upper middle income rank’–World Bank” (business.inquirer.net, 7/2/26), was duly cheered by many quarters. It seems that the Philippines scored a GNI per capita of USD4,850 in 2025, compared to GNI per capita of USD4,470 in 2024, and thereby burst through the World Bank’s USD4,635 boundary between lower middle income and upper middle income.
There’s no problem with the original measurement of a country’s GNI, or its conversion into US dollars standardized by so-called “purchasing power parity” rather than by common foreign exchange rates, or a country’s population-denominator. Let’s just focus on the term “per capita.”
Now, income per capita means income per head, with capita from the Latin noun caput, meaning head. Income per capita is total income divided by the total population (the heads) receiving the income; it’s also called average income. Income per capita is the income for each person IF TOTAL INCOME IS SHARED EQUALLY. But since equal-sharing never happens, and in fact is very, very far from it, income per capita is only a short-cut, make-believe representation of a country’s economic health.
The World Bank (WB) also has country-ranks of “high income” (at least USD14,376) and “low income” (at most USD1,175), or a total of four country-ranks in all. This means that the Philippines keeps its “upper middle income” status as long as it loses no more than 5 percent of its 2025 score, in which case it would revert to “lower middle income” again. But it needs to triple its score to reach “high income” status, which is unlikely to happen for quite some time.
The relevance of the WB rank to the Philippines depends on how external parties react to it. Getting a higher rank has a downside of making us less eligible for foreign assistance or other form of concessionary treatment from abroad. I have no idea as to whether it makes us more attractive to foreign investors (see “Is national progress a sport?” Inquirer.net, 5/23/26).
Rising to “upper middle income” by WB standards has no more bearing on the economic well-being of the Filipino people than the gross national product does (see “What for, GNP?” 10/11/25). Neither is our WB ranking relevant to growing the size of the Filipino middle class.
The Philippines’ most important economic problem is that poverty and hunger have been high for several years now, and are still unrecovered to their historically low levels prior to the COVID-19 pandemic. If I may quote myself: “The good news, however, is that the Borderline poor have shrunk, while the Not Poor have grown to a record 37 percent as of last November. I see the Not Poor as the basis for the new Filipino Middle Class” (“Meaningful economic targeting,” 2/7/26).
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mahar.mangahas@sws.org.ph.