MANILA, Philippines--Jumping the gun on the wage board in Metro Manila, President Gloria Macapagal-Arroyo excitedly announced Friday before employers that the tripartite body had approved a P20 increase in the daily minimum wage of private workers, or P600 per month, to allow them to cope with soaring fuel and food prices.

The President also said the wage board in Northern Mindanao (Region X) had agreed on a P16 increase or "part of the integrated minimum wage," plus a P22 raise in cost-of-living allowance (Cola).

Ms Arroyo said the new adjustment would raise the daily minimum wage in the NCR to P382. But she said the board had yet to determine whether the P20 would be an outright increase in the minimum wage, or P15 for the wage plus P5 in additional Cola.

Workers have frowned on increasing the Cola instead of wages since the allowance is not considered in computing for bonuses, separation pay, longevity and other benefits.

Inflationary

Although the increase of 5.5 percent or P20 per day was smaller than expected, analysts said it would still add to inflation, already near a three-year high, and could nudge the central bank to raise interest rates at its June 5 meeting.

"The price increase will inevitably trickle through the price chain," said Frederic Neumann, an economist at HSBC. "The increase, therefore, amounts to a so-called second-round effect."

In Calabarzon (Cavite, Laguna, Batangas, Rizal and Quezon), the Regional Tripartite Wages and Productivity Board (RTWPB) approved increases of P12-P20 in the daily pay of minimum wage earners, citing rising prices of products and services.

"The NCR (National Capital Region) wage board has come to an agreement which will be refined today," Ms Arroyo said at the close of the 29th national conference of the Employers Confederation of the Philippines (Ecop) at Manila Hotel, which was attended by top employers and Chinese-Filipino businessmen.

She said Labor Secretary Marianito Roque brought the "good news" to her late Wednesday but he could not make it to Ecop's closing program because he was busy ironing out some unresolved issues pertaining to the soon-to-be-released wage order.

Reached by the Inquirer last night to clarify Ms Arroyo's announcement of the P20 wage increase in Metro Manila, Roque said the adjustment was derived from "preliminary deliberations" of the wage board, composed of labor officials and representatives of employers' and workers' groups.

"But that is not yet fixed. Workers are asking for a higher salary adjustment. It may still change, depending on the outcome of the wage board deliberation," he said.

Militant labor groups led by the Kilusang Mayo Uno (KMU) have demanded a P125 across-the-board wage increase, while the Trade Union Congress of the Philippines (TUCP) has sought P80.

The NCR wage board may decide on the form of adjustment before noon Friday, according to Ciriaco Lagunzad III, executive director of the National Wages and Productivity Commission (NWPC).

Doomsday scenario

While employers openly applauded Ms Arroyo's announcement, their leaders grumbled from the sidelines.

"We follow it. We have said from the very start we will abide by the decision of the wage boards. Definitely, there's an effect. Even before the negotiations, we knew there is an effect," Ecop president Sergio Ortiz-Luis Jr. told reporters after Ms Arroyo left Manila Hotel.

Doomsday scenario
Luis, however, painted a doomsday scenario for small and medium enterprises (SMEs), which make up 97 percent of companies across the country. Thousands of workers would be laid off as a result of the new wage order, he said.

"Obviously, many [companies can't shoulder the additional wage increase], so they will be forced to downsize," Luis said. Coupled with the skyrocketing prices of fuel and food, he said, "there will be casualties."

Many small exporters had already closed shop as a result of the stronger peso, Luis said. "So we don't know how many of them [will follow suit]. We just hope for the best that this will not happen."

Calabarzon's hikes

In issuing Wage Order No. 13, the RTWPB in Calabarzon said the P12 daily adjustment would apply to minimum-wage earners in the resource-based area, P14 for those in the emerging growth area, and P16-P20 for those in the growth corridor area.

The highest basic pay will now be P320 for nonagricultural workers.

"The board has considered the increases in the prices of products and services, brought about by shortages in supply, high importation costs, and upward trend in world market prices," Ricardo S. Martinez Sr., labor regional director and board chair, said in a statement.

Exemptions

The wage order exempts establishments that are newly registered and financially distressed, and exporters greatly affected by the volatility of peso-dollar exchange rate, household or domestic helpers and persons in the personal service, including family drivers and workers of barangay micro-business enterprises.

Roque explained the new wage levels for Northern Mindanao, which is composed of Bukidnon, Misamis Occidental, Lanao del Norte, Misamis Oriental and Camiguin, and the cities of Malaybalay, Valencia, Cagayan de Oro, Ozamiz, Gingoog, Iligan, Oroquieta and Tangub.

"Of the existing P26 Cola, they took away P16 out of the P26 and put it as part of the additional minimum wage. So effectively, [there's a] P16 increase in minimum wage," he said.

"The remaining P10 in the original P26 Cola, [the board] added P12, [for a total of P22 Cola]," he said.

The TUCP had earlier asked the board for P100 in additional daily wage, citing the skyrocketing prices of basic needs. It said the current minimum daily wage of P244 in the region was not enough for the families of workers to survive.

But Allan Macaraya, labor regional director and board chair, said the granting of the P12 additional daily allowance was fair for all sectors concerned.

Both the TUCP and the KMU said the additional allowance was a pittance. Nick Borja, vice president of the Associated Labor Union (ALU)-TUCP in Northern Mindanao, said he would not sign the wage order because "it is not enough to cope with the price increases."

'Within assumptions'

The wage increase announced by Ms Arroyo would add to inflation but was "within assumptions," Diwa Guinigundo, deputy governor of the Bangko Sentral ng Pilipinas (BSP, the Philippine central bank), said.

"It will generate pressure, but the same is captured within our forecasts," Guinigundo said in a text message to reporters.

The BSP had said a wage rise higher than P25 daily would set off alarm bells and force it to lift its 2008 inflation forecast, already raised to 5.5-6.5 percent from an original target of 3-5 percent.

Analysts said that while the wage rise came below the central bank's pain threshold, it would reinforce rate rise expectations.

"The move, while expected, will likely stoke rate hike expectations, but the central bank may still hold off as growth concerns are equally important," said Christy Tan at Bank of America.

Dampening effect on growth

As elsewhere in Asia, policy-makers in Manila are concerned that monetary tightening may weaken the economy at a time when it already faces pressure from a slowdown in the United States, the country's biggest trading partner.

Economists say that whereas the risk of a cost-wage spiral is considerable in the Philippines or in Thailand, due to discuss wages in June, for other nations the main, longer-run impact of record commodity prices will be their dampening effect on growth.

"Given that there is no widespread minimum wage policy in most Asian countries, any rise in inflation is not accompanied by a wage spiral," said Suresh Ramanathan, a strategist at CIMB investment bank in Malaysia.

Instead, inflation eats away disposable incomes, hurting growth prospects, Ramanathan added.

Even before the minimum wage news, many economists had penciled in a 25-basis-point rise in Philippine rates next month after annual inflation soared to 8.3 percent in April, averaging 6 percent so far this year after 2.8 percent in 2007.