Lower wages can be an attractive come-on to investors.

In the recent round of minimum wage increases granted by Regional Tripartite Wages and Productivity Boards (RTWPB), the National Capital Region RTWPB granted a wage increase of P25.00 that raised the minimum daily wage to P350.00. This is P130.00 or 37 percent higher than the minimum daily wage in Eastern Visayas which is P220.00, after the Region VIII RTWPB integrated the Cost of Living Allowance (COLA) of P18.00 to the minimum wage and also added P12.00 to the minimum wage.

We can relate these rates to efforts to attract Business Process Outsourcing (BPO) companies, such as call centers, to Eastern Visayas.

Moving some of their workforce (that is, recruiting call center agents here) from Metro Manila to Eastern Visayas such as to the ICT Park of the Province of Leyte makes a lot of business sense because the cost of labor will be 37% lower.

Even if entry level employees of call centers that will operate here are paid wages higher than the minimum wage, say by 20 percent, still there is a lot of room to be competitive.

Assuming that wages comprise 40 to 50 percent of the total operating expense of the BPO company then this “saving” could be higher than the tax incentives (e.g. corporate income tax holiday and tax free importation of equipment) granted by Board of Investments and the Department of Finance to locators in ICT Parks.

On top of this advantage, if we look at the future, the gap will continue to rise as the cost of living (as shown in inflation rates) in Metro Manila usually increases at a pace faster than that of Eastern Visayas.

The key here is to ensure the supply of qualified workers because if the demand for BPO employees will exceed the supply of such workers then wages will rise and the competitive edge in this expense item (i.e., wages) will disappear.

In this context, the RTWPB (which has representatives from both labor and management) did a good job in keeping wages competitive and as a strong come-on to investors. This means that this wage differential will create employment in this region.

Consequently, the desired effect of generating jobs can be achieved. With more jobs, more money will be in circulation in the region’s economy creating an upsurge in business.

Thus, the wage increase will eventually be a boon to companies (e.g. more sales revenues) whose payrolls may have increased as a result of the wage increase.