Fare Hike in the Philippines and Its Impact

Affordable House and Lot in San Jose Del Monte: MRT-7 advances, expected to be completed by end of 2021

As the pandemic progressed, problems on supply chain arose due to the pandemic protocols of each area in different parts of the world. New expenditures are necessitated to be paid for the supply chain to continue operating. This resulted for higher pricing of commodities as manufacturers and wholesalers incur higher costs to enable their products to reach their customers and end-users. Adding the impact of Russia-Ukraine War, gasoline prices surged at a great extent. This hurts transportation of all sorts, whether for the supply chain or commuting system. These unforeseen events made inflation level to skyrocket and severely impacted the buying power of consumers. In fact, within a span of a month, the inflation rate in the Philippines climbed from 5.4% to 6.1% this June 2022. This is considered as the highest level of inflation since 2018. Minimum wage earners will surely be the first to feel the negative impacts of inflation on their buying powers. Recently, a wage hike took place, but the relief is not felt as commodities’ prices increased as well. Additionally, jeepney drivers demanded a transportation fare hike as they are both impacted by the inflated prices of gasoline and commodities. The demand and approval of transportation fare hike is inevitable as drivers are the most vulnerable group impacted by the elevated pricing of necessities. As positive as it may seem on the earnings of the PUV drivers, its impact is beyond to what are eyes can see. Here are some of the impacts of transport hike on the overall behavior of the consumers and inflation rate of the economy.

Higher Fares Cause Further Increase in Inflation Rates

Last March 2022, National Economic and Development Authority (NEDA) stated that if a transport hike is implemented, a 0.3 percentage points increase on inflation will take place as well. In economic terms, this number is high. This is the reason why transportation fare hike is not easily approved by the government as it will trigger further inflation of other aspects as wage hike demand will likely happen. If this happens and approved by the government, companies will increase the pricing of its products to cover the additional costs of manpower. With this, transportation fare plays a vital role in determining the market price of necessities as it causes a domino effect to commodity pricing during fare adjustments. 

Higher Transportation Expense, Possible Demand for Another Wage Hike

This might be the unavoidable and complementary effect of higher transportation fare. For workers living nearby their workplaces or those who only pay a minimum fare to reach their offices, this may not be a problem at all. But for people living more than four kilometers away from their workplaces, this transportation fare hike will be felt gradually. Basically, the farther you are, the greater its impact on your daily budget.

Currently, in a span of two months, the base fare increased by PHP 2.00. For low-income earners, every peso counts so this transportation fare hike might lead for another demand to increase their minimum wage to cope with the elevating costs of affording their necessities which include commuting to their workplaces.

Continuous Transport Hike Entails Shifting to Active Transport System

Even before the pandemic started, there is a shortage in PUVs. In fact, in 2019 there is a massive shortage of 2.8 million daily passenger trips in Metro Manila. Additionally, based on PSA, 75,000 jobs in the transportation and storage industry were lost from February to March 2022.

When the pandemic started and protocols were imposed, it became even harder for PUVs to acquire passengers because of the new work-from-home (WFH) setup. For workers still on a face-to-face setup, they had no option but to shift to active transport like cycling and walking to reach their workplaces. As the number of infections subsides, transport systems started to open. However, commuting is still a hassle because of longer waiting times due to social distancing protocols and lower passenger capacity. With this, a lot of drivers left the transportation sector. For commuters to save time from waiting long lines in transport terminals and save transport fare, they might shift to these alternatives. Active transport does not only benefit a commuter’s finances but also his or her physical health as well.

Work from Setup May Become Viable Again Amid Return to Office Policies

This may not be popular right now but there are companies that instead of pursing a return to office policy, it shifts back to a WFH setup. With the rise of gasoline prices and transportation fares, it is better for companies to grant a WFH setup again to its employees instead of increasing their salaries. In this way, not only employees save costs, but companies prevent the possible costs it may have in the future caused by the inflation. But as this gets popular again, drivers will have a hard time to reach the full seating capacity of their PUVs. The worst scenario is demands will not be enough even transportation fare is set to maximum thus making the earnings of drivers too low which might discourage them to leave the transportation industry and find another good-paying job. Previously, to lessen the effects of low demand for transport system, a service contracting program was implemented by the Department of Transportation (DOTr). But financial aids are just a temporary solution in this economic situation. A more viable solution must be implemented to make a sustainable comeback on the transportation industry for the public’s welfare and convenience.  

What Does the Government Do to Minimize Its Impacts?

            When the pandemic started, the transportation sector is greatly affected because of the protocols imposed by the government particularly social distancing. This made them demand a fare hike to compensate the losses felt by the mandatory downsizing of PUV seating capacity. The government recognizes the hardship of the drivers, so it rolled out a service contracting program that provides a financial aid to driver based on their performance and a fuel subsidy to bring home more profit to add to their daily budget. The program encourages the PUV drivers to continue its operation even with lower demand and seating capacity for the welfare of the working population.

On the side of consumers, another program was implemented to help them cope with the global inflation. Last March 2022, free Metro Rail Transit (MRT) and EDSA Carousel rides were rolled out to the public. It is originally set to end last April 2022 but was extended until the last week of July 2022. Its goal is to minimize the financial impact of inflation and other hikes that might be demanded by the public. On a surface level, this is a good solution for commuters because it gives them a lot of savings for many months. It is also undeniable that a huge part of an individual’s budget is allocated for transportation expenses. Availing free rides will sure give higher financial flexibility especially for low-income earners. However, this is a threat to fare-based PUVs as consumers choose to avail free rides even it costs their time to wait in long lines in transport terminals. Commuters are not to be blamed for this decision, but transportation sector might collapse if this continues along with inflation.

Current Situations of PUV Drivers

            The pumped-up prices of gasoline and commodities give PUV drivers a hard time. In a report by GMA News, one of the jeepney drivers named Ferdie Calagayan was forced to shift on tricycle driving because of the unprofitable jeepney rides. The driver mentioned in the interview that the life of his family was severely impacted by the uncontrolled inflation faced by the Philippine economy. In fact, his children cannot even attend online classes because he cannot provide them money for their mobile data.

            This situation of a jeepney driver was supported by Pagkakaisa ng mga Samahan ng Tsuper at Operator Nationwide (Piston) as they expressed frustration that their member-drivers and operators are not earning enough because of the upward adjustment of gasoline prices. Some of the members are forced to stop operations because of the little to none profit on their daily rides. In numbers, a wife of a jeepney driver said that her husband has only PHP 300 daily earnings which is budgeted for their family.

            Despite the economic situation of the country, Martin Andanar, the former president’s spokesperson, requested the drivers and operators to continue their operations for the welfare of the public. He said that the government does everything it could to support the PUV drivers especially through financial aid in the form of fuel subsidy. In fact, the budget department had released a PHP 3 billion funds for this aid to mitigate the uncontrolled gasoline price increases.  The fuel subsidy program does not only cover the PUV drivers but also the farmers who uses fuel for their livelihood activity. A PHP 6,500 subsidy was distributed to PUV drivers while PHP 3,000 goes for the farmers.

            Despite the budget rollouts, not all the beneficiaries received the subsidy intended for them. Bottlenecks on production of Landbank fuel subsidy cards made the distribution to slowdown. With this, traditional jeepney operators and drivers are put on a tight spot despite the government efforts. To add, these groups of people shifted their livelihood to selling products which will give them more earnings to suffice their daily budget needs.

The Real Problem and Viable Solutions

            Although the government provided program for its consumers and PUV drivers. The implemented aids were contradicting to each other. Obviously, free rides will be chosen by the majority even they need to wait in long lines. The transport vehicles for this free ride program are modernized as well hence more convenient to the passengers. This is very beneficial for commuters in terms of convenience and finances as they can cut their costs and allocate it this portion to something more useful on their everyday living. With this, service contracting program becomes a nonsensical for the drivers. Even it is promised that drivers will be granted a financial aid based on the number of rides they render disregarding the number of passengers, it will not be enough to compensate the highly inflated prices of commodities especially the gasoline.

            With this, what can be done or what should the government focus on? Maybe the service contracting program should be reviewed to make amendments that would be more beneficial to PUV drivers. It is not enough that hikes take place when inflation happen because approval of such is a trigger for a higher inflation rate. In fact, it was suggested by Move as One transport coalition that the service contracting program is best implemented as partial subsidy to public transportation instead of free rides. This will enable operators and drivers to earn profits and consumers will not be burdened to carry the costs of inflation. Another suggestion by Federation of Jeepney Operators and Drivers Association of the Philippines (Fejodap) is government should also try exploring new vehicles with alternative power sources so transportation fare will not be greatly affected by higher oil prices. It will be viable to review the supply chain as well and observe each stage to know which aspect can have adjustments. By adjustments, it means cost cutting or eliminating a stage if its primary effect is to incur further costs.

            Inflation is inevitable because of the pandemic and Russia-Ukraine war. However, its impact can be reduced through the expertise of economic managers. Financial aids are not just the solution for this economic situation. Continuous dependence on such solution is like implementing the idea of “print more money so people will not have financial problems.” Hike should be the least priority in evaluating alternatives because of its major impact on determining commodity pricing and appropriate wages.

The government plays a vital role in diminishing the impacts of inflation thus the root of problem must be reviewed often to cut unnecessary costs so consumers will not experience a high inflation rate in cases where it is inevitable. On an economic standpoint, whether inflation happens or not, this should be done for the welfare of the public. Every individual wants to save every peso they can do allocate it for better investments like paying for an affordable house and lot or funding their high-value investment purchases through bank loan. Having a great economic manager in the government will not only ensure minimized effects of inflation but also gives financial flexibility to its consumers and businessmen because of the prevention of unnecessary costs in the supply chain.