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.

INTRODUCTION 1. THE ECONOMIC AND SOCIAL CONTEXT 2. WAGES AND PRODUCTIVITY GROWTH Declining real wages Low and stagnant productivity growth Trends in labour productivity growth Trends in total factor productivity growth Declining (non-information technology) capital deepening and increasing total factor productivity in recent years 3. UNIONIZATION AND COLLECTIVE BARGAINING IN THE PHILIPPINES Declining union density and collective bargaining coverage 4. LINKING WAGES AND PRODUCTIVITY: LAW AND (RARE) PRACTICE 5. THE NEW TWO-TIER WAGE SYSTEM IN REGION IV-A Tier 1: Setting the regional floor wage Tier 2: Productivity-based pay Implementation of productivity-based pay: an update Labour and employer objections to the two-tier wage system 6. THE POTENTIAL IMPACT OF THE TWO-TIER WAGE SYSTEM IN LINKING WAGES AND PRODUCTIVITY IN REGION IV-A: FINDINGS FROM SELECTED CASE STUDIES Case 1: Company A How the existing productivity incentive scheme works Union involvement and collective bargaining agreement coverage of the productivity incentive programme Outcomes of the incentive scheme and perfect attendance bonus Changes in productivity-based pay scheme in view of Wage Order IVA-15 Views on the two-tier wage system Case 2: Company B How Company B’s productivity programmes work Outcomes of the productivity programmes prior to the wage order Changes in productivity-based pay scheme in view of Wage Order IVA-15 Outcomes of productivity-based pay scheme with Wage Order IVA-15 Views on the two-tier wage system Case 3: Company C Mechanics of the productivity-based pay scheme prior to the wage order Outcomes of the old productivity-based pay scheme Changes in productivity-based pay scheme in view of the wage order Views on the two-tier wage system Lessons and insights from the case studies 7. CONCLUSIONS AND POLICY CONSIDERATIONS BIBLIOGRAPHY CONDITIONS OF WORK AND EMPLOYMENT SERIES