Republic of the Philippines

PHILIPPINE MODEL CONGRESS

Pasay City, Metro Manila

FOURTH (4TH ) CONGRESS

Regular Session

PMC Bill No. 000000000

Introduced by: Honorable Vladimir C. Santos

Explanatory Note

A developed and modernized agricultural sector is the ultimate goal of any country
that relies on agriculture for inclusive growth. The Philippines relies on the agricultural sector
as the source of inclusive growth. Therefore, it is important that proper policies cater to the
development and modernization of the agricultural sector. A developed and modernized
agricultural sector produces the highest quantity and quality of output at minimal cost, which
benefits society as a whole. However, it has certain prerequisites that are not yet met in the
current state. First, agribusinesses should be capital-intensive to be efficient at production to
be able to produce the highest amount of output per Peso spent on input. This means that
the contribution of capital should be higher than labor, and thus should increase capital-labor
ratio. Currently, the agriculture sector relies on primitive labor-intensive farming methods.
Second, in order to maximize limited resources such as land, equipment, and labor,
technological advancement must be maximized. In terms of equipment, this means the state
of the art machineries; in terms of laborers, this means hiring highly skilled farmers through
proper education. Currently, farmers are not properly educated and agribusinesses lack the
initiative to invest in technological advancements to promote long-term sustainability and
improvement in their respective agribusinesses. Third, farmers must be properly
compensated for their labor input to motivate them to work and increase their quality of life.
Currently, farmers have one of the lowest minimum wage in the country, not to mention
suffering daily from harsh work conditions in which they are poorly compensated.

There is a significant income inequality that exists between the agricultural sector and
industrial sector. Farmers are the most important laborers in any nation whose backbone is
agriculture; such is the case for the Philippines. One can be the best lawyer or doctor, but at
the end of the day, if one cannot eat, one dies. In 2014, PSA (Philippine Statistical Authority)
released their annual statistical yearbook. A quick look shows that laborers in the industrial
sector earn 8-9% higher minimum wage (P466 vs. P429) than laborers in the agricultural sector,
while the median monthly wage of workers in the industrial sector earn close to 30% higher
than workers in the agricultural sector. This encourages higher-skilled laborers to pursue a
career in the industrial sector, leaving the agricultural sector brain-drained in a way. This is
not an independent case. In fact, Todaro in his book Economic Development has produced
a substantial amount of evidence proving the existence of a significant income inequality
between the industrial and agricultural sector. Wage is sticky enough that it changes on an
average of three years.

In order to boost productivity in the agricultural sector, higher-skilled laborers should

work in that sector. Not only that, to produce at the maximum output given the least cost
possible to reduce food prices, agribusinesses should be motivated to make their business
more capital-intensive than labor-intensive because capital produces more output per unit
Peso spent; this can be done through increasing the wage of farmers to make labor wage
comparatively more expensive than capital rent vs. labor wage and capital rent before,
reducing the number of unnecessary surplus of farmers that drive the price of farm produce
up through wage expenses. The basis of the wage will be the annual PSA data on wages
between the agricultural sector and the industrial sector. Bureau of Agricultural Research,
working hand in hand with Bureau of Agricultural Statistics, will be responsible for developing
policies to eliminate unfavorable income inequality between these two sectors, if not
providing the agricultural sector with the highest monthly wage. We do not need more
farmers; we need better farmers. This bill aims to (1) eliminate income inequality between the
agricultural and industrial sector to prevent laborers from being discouraged to work in the
agricultural sector simply because of wage differences, (2) permanently solve the income
inequality so that no additional laws are needed from time to time, and (3) improve the lives
of currently employed farmers to promote social justice.

Vladimir C. Santos
 Republic of the Philippines
PHILIPPINE MODEL CONGRESS
Pasay City, Metro Manila

FOURTH (4TH ) CONGRESS

Regular Session

PMC Bill No. 000000000

Introduced by: Honorable Vladimir C. Santos

AN ACT TO PERMANENTLY ELIMINATE THE INCOME INEQUALITY BETWEEN THE

AGRICULTURAL SECTOR AND INDUSTRIAL SECTOR

Be it enacted by the Senate and House of Representatives of the Philippines in Congress

assembled:

1 CHAPTER I
2 GENERAL PROVISIONS
3
4 SECTION 1. Short Title. This act shall be known as the Agriculture Sector Income
5 Solution
6
7 Sec. 2. Declaration of Policy.
8
9 a) The State shall promote the improvement of the living conditions of ordinary Filipinos,
10 particularly the working class, through policies that provide for decent and humane standard of
11 living and improved quality of life such as proper living wage.
12
13 b) The State shall promote economic and social justice by minimizing wage inequalities
14 that contribute to the divergence of people falling under certain income groups.
15
16 c) The State shall provide non-formal education and training to farmers, farm workers and
17 out-of-school youths in the rural areas.
18
19 d) The State shall promote the development and modernization of the agricultural sector
20 through policies that encourage agribusinesses to operate at a level where in the long run, firm
21 output and positive externalities are maximized, cost and negative externalities are minimized.
22
23
24
25
26
27 Sec. 3. Definition of Terms. For the purpose of this act, the following terms shall mean
28 and be understood as follows:
29
30 (a) Income inequality refers to the level of divergence of income from people falling under
31 one income group to another.
32 (b) Agribusiness is the business of agricultural production. It includes agrichemicals,
33 breeding, crop production (farming and contract farming), distribution, farm machinery,
34 processing, and seed supply, as well as marketing and retail sales.
35 (c) Capital-intensive farming refers to the share of input that uses more capital than labor
36 to produce a unit of output.
37 (d) Minimum wage refers to the minimum amount a laborer receives in a day regardless
38 of output.
39
40 Sec. 4. Roles and Functions of Institutions.
41
42 (a) The National Agriculture Education System (NAES) is the network of qualified
43 public and private educational institutions formed through the S.B. 282 Agriculture
44 Education Act to have a unified, coordinated and improved system of implementation
45 of academic program thrusts geared toward achieving agriculture and rural
46 development of the community and country. NAES is responsible for educating the
47 out-of-work farmers so that in the next hiring stage, they are prioritized by
48 agribusinesses.
49 (b) The Bureau of Agricultural Statistics (BAS) is a branch of Department of Agriculture
50 responsible for being the central information source and providing technical assistance
51 to end-users in accessing and analyzing product and market information. It is
52 responsible for estimating the number of farmers that will be affected by any change in
53 wage.
54
55 Sec. 5. Coverage. This bill covers all legally registered agribusinesses in the Philippines.
56 It covers all Filipino employees working in the Philippines, regardless of whether the agribusiness
57 is a local or multinational company.
58
59 Sec. 5. Implementation Guidelines. The following section refers to the chain of events
60 that applies the principles and put this bill to effective use.
61
62 (a) BAS will set the new minimum wage once every year, whose value will depend on the
63 value of minimum wage of the industrial sector.
64 (b) BAS will then estimate the number of farmers that will be affected by the increase in
65 minimum wage. The number of farmers that BAS will produce will be the number of
66 farmers that NAES will educate.
67 (c) Agribusinesses will then see labor as relatively more expensive or capital as relatively
68 cheaper thus shifting the capital-labor ratio towards that of the use of more capital per
69 unit of output.
70 (d) The educated farmers by NAES will now be the next set of farmers that agribusinesses
71 will employ.
72 (e) The cycle repeats as the minimum wage is set again the next year. Additional funding
73 will be provided by the government through increasing the budget of NAES as they
74 deem necessary to educate all farmers.
75
76 Sec. 6. Repealing Clause. - All laws, rules, regulations, orders, circulars and memoranda
77 inconsistent with this Act are hereby repealed or modified accordingly.
78
79 Sec. 7. Effectivity. - This Act shall take effect immediately upon approval.