Of Wages & Capabilities:

An Economic and Psychological Approach

to Estimating Living Wage in the
Philippines
Presenter:
Mendiola (Joy) Teng-Calleja, PhD
Department of Psychology
Ateneo de Manila University

Co-authors:
Donald Jay Bertulfo, Jose Antonio R. Clemente, PhD
and Ma. Ligaya M. Menguito , PhD

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 Living Wage
• incorporates humanistic elements into the economic
concept of ‘wage’ (Carr et al 2016)

• wages help realize some capabilities (Anand &Sen, 2005)

• indicates a critical wage level where capabilities

significantly improve(Carr, Parker, Arrowsmith, Haar & Jones,
2017)

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Measuring
Capabilities
• One way of measuring
capabilities is to define them
as components, indicators, or
dimensions that constitute a
“good” life.
• The Domains of a Good Life
or Magandang Buhay (Sycip,
Asis & Luna, 2000)
11 Domains of Magandang Buhay
Housing and Quality of Neighbourhood
Employment and Quality of Working Life
Savings, Wealth and Assets
Social Relationships
Leisure and Spare Time Activities
Physical Health
Psychological/ Mental Health and
Emotional Well-being
Religion and Spiritual LIfe
Information and Knowledge
Government Performance
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Participation
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Research Question
How much is needed by
Filipino workers to feel
capable of achieving
magandang buhay?

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 Method
• Purposive Sampling – two Low income and two Middle
Income Communities

• Systematic Random sampling (every 5th house); Face-to-

face survey administration with the primary breadwinner in
the household

• Participants:

• Pilot Study - 50 pax, Final Study: N=500

• 25-30 years old (28.6%), Male (67.8%), Has less than 5

family members in the household (67.6%), High school
graduate (36.4%), Full-time employees (95%), Regular
employees (61.4%), Tenure of 1-5 years (72%)
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 Determining Capability
• How important is (Housing & Quality of Neighborhood)
to say that you have a good life?

• To live in a secure community safe from fire and flood,

Easy access to work, school, leisure area; Clear of
crimes, drugs, gambling, and other vices; Having a
house with strong foundation, with toilet and bath
facilities; With regular supply of electricity and water;
With telephone service)

• How free/capable do you think you are to attain or

achieve this?
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 Measures & Analysis

• Individual Monthly Income

• Perceived Importance of Good Life Domains (PI)

• Perceived Capability/Freedom to Attain a Good Life

(PF)

• Stata was used in the statistical analysis

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WEIGHTED CAPABILITY
One’s Freedom to
Domains of a Good Life Achieve the Valued
that one values/ Domains/
Perceived as Important
and Perceived Freedom

PI PF

σ11
𝑖=1 𝑃𝐹𝑖 ∗ 𝑃𝐼𝑖
𝑤𝑡𝑑𝑐𝑎𝑝 =
σ11
𝑖=1 𝑃𝐼𝑖

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 Sample Computation: Weighted Capability
Perceived Perceived
Domains of a Good Life PF*PI
Freedom Importance
5 4 20
Physical Health
Employment & Quality of 4 3 12
Working Life
3 2 6
Social Relationships
2 1 2
Psychological/ Mental Health &
Emotional Well-Being 102/31=
Government Performance
1 5 5 3.29
Religion and Spiritual Life
1 2 2 Worker’s
2 3 6 weighted
Information and Knowledge
Housing and Quality of 3 4 12 capability
Neighborhood
4 5 20
Savings, Wealth and Assets
5 2 10
Leisure and Spare Time Activities
4 1 4
Political Participation
31 102
Total
 Weighted Capability
• Mean = 3.79, SD= 0.67.
• Range of weighted capability values:
Min of 1.78 Max of 5.00

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 Estimation Procedure
Goal: approximate the values of parameters to arrive at a
singular functional form that reflects the relationship
between weighted capability (DV) and monthly income (IV)

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 Estimation Procedure
Goal: approximate the monthly income based on
weighted capability

Functional form specifications explored in this study

General functional form Type
𝑏1 Logistic
1 𝑦= +𝑐
1+𝑒 −𝑏2 (𝑥−𝑏3 )
−𝑏2 (𝑥−𝑏3 )
2 𝑦 = 𝑏1 𝑒 −𝑒 +𝑐 Gompertz

3 𝑦 = 𝑏1 𝑏2𝑥 + 𝑐 Exponential
4 𝑦 = 𝑏1 𝑥 3 + 𝑏2 𝑥 2 + 𝑏3 𝑥 + 𝑐 Cubic
5 𝑦 = 𝑏1 𝑥 2 + 𝑏2 𝑥 + 𝑐 Quadratic
6 𝑦 = 𝑏1 𝑥 + 𝑐 Linear

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 Regression Results
𝑐 Adj 𝑅2
Type 𝑏1 𝑏2 𝑏3
F 4.155431 *** 0.000098*** -10342.01* 97.22%
1 Logistic (.0886852) (.0000337) (5877.405)
R 4.177210*** 0.000093*** -10998.31* 97.16%
(.1331312) (.00004) (6927.722)
F 4.158443*** .0000921*** -12306.1* 97.22%
2 Gompertz (.0908027) (.0000324) (6595.677)
R 4.184845*** .0000861** -13274.82 97.16%
(.1398256) (.0000388) (8118.644)
F 97.08%
Exponen- 3.683865*** 1.000002***
3 (.0490426) (5.85e-07)
tial
R 3.491056*** 1.000005*** 97.13%
(.0596972) (8.33e-07)
F 2.50e-15** -6.53e-10*** .0000465*** 3.252905*** 7.32%
4 Cubic (1.02e-15) (1.98e-10) (9.60e-06) (.1084254)
R 2.17e-14 -2.22e-09 .0000811** 3.045284*** 6.72%
(2.09e-14) (1.64e-09) (.0000374) (.2473547)
F -1.71e-10*** .0000264*** 3.431418*** 6.36%
5 Quadratic (4.28e-11) (4.36e-06) (.0705012)
R -6.58e-10** .0000501*** 3.216621*** 6.56%
(2.60e-10) (.0000128) (.1321176)
F 7.76e-06*** 3.662145*** 2.80 %
6 Linear (2.56e-06) (.054057)
R .0000215*** 3.460669***
(3.45e-06) (.06677)
 Regression Results
Type Resulting
Formula Equation Monthly
Income
Logistic 1 𝑏1
𝑏1 𝑥 = 𝑏3 − ln( − 1)
1 𝑦= +𝑐 𝑏2 𝑦
1+ 𝑒 −𝑏2 (𝑥−𝑏3 )
𝐏𝐡𝐏
1 4.155431
𝑥 = −10342.01 − ln −1 𝟐𝟐, 𝟕𝟗𝟗. 𝟐𝟗
0.000098 4
−𝑏2 (𝑥−𝑏3 )
2 Gompertz 𝑦 = 𝑏1 𝑒 −𝑒 +𝑐 x=b_3-1/b_2 ln(ln b_1/y)
PhP
1 4.158443 𝟐𝟐, 𝟗𝟔𝟏. 𝟒𝟒
𝑥 = −12306.1 − ln 𝑙𝑛
.0000921 4

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 Strengths
• multidimensional - takes into account the multiple
material and non-material factors that comprise
quality of life.

• singular capability measure - bypasses the difficulty

of examining each quality of life domain in isolation
with other related, but not necessarily similar,
domains

• measure acknowledges the heterogeneity in

individual valuations of the different domains of
quality of life

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Implications
• Determine ways of providing
compensation and benefits packages
that consider needs of specific groups/
of individual employees

• Engage in reflective conversations on

how we can support workers and their
families in a manner that do not
undermine the interests of various
stakeholders

• Conduct researches that capture the

ideas and opinions of business owners
on how to address the wage issues

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 Thank you

Mendiola Teng-Calleja, PhD

mcalleja@ateneo.edu

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