Economists in House say P100 wage hike may hurt MSMEs, push inflation

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MANILA, Philippines — While the proposed P100 daily wage hike sounds good, leading economists in the House of Representatives have warned that such a proposal may hurt micro, small, and medium enterprises (MSMEs), which comprises a huge chunk of businesses in the country.

Marikina 2nd District Rep. Stella Quimbo, Albay 2nd District Rep. Joey Salceda, and Deputy Speaker Rep. David Suarez explained in a press briefing on Monday that MSMEs might not be able to bear giving out minimum wages at around P700 — should a Senate bill seeking a P100 daily wage increase gets passed and is enacted into law.

Salceda said it would be good if the policy can only apply to big companies, but MSMEs would take a hit should it be implemented.

“Sa mga malalaking (kumpanya), kung kaya lang kasing hiwalayin ‘yong mga malalaking kumpanya, pwede sana ‘yon eh, eh kaso tatamaan n’yan MSMEs eh, mamamatay lahat ‘yon eh.  Kasi hindi nila kakayanin eh, hindi nila talaga kakayanin, kumbaga 99 percent ng enterprise natin MSMEs,” Salceda said.

(If we can only do this for big companies, it’s okay but this would hit MSMEs eh, all of it would die.  They cannot handle that, since 99 percent of our enterprises are MSMEs.)

“Kasi may mga MSME hindi kakayanin ang P600 per day (salary) ah?  So imbes na meron man lang, makakuha man lang ng P400, eh magtatanggal sila para lang kayanin nila ‘yong P700 kasi obviously nasa P600 tayo ngayon ‘di ba?” he said.

(Because some MSMEs cannot cope with the P600 per day [salary]?  So instead of having employees, instead of employees getting the minimum wage, employers might remove workers just so they can comply with the P700 [per day].)

Quimbo, an economics professor at the University of the Philippines, explained that such a wage increase may be inflationary since companies would just pass on the burden of hiking workers’ salaries to the cost of services or goods they offer.

“Pag magtataas po tayo ng minimum wage, this means this is for all firms, ano sa tingin ninyo ang mangyayari?  Ang gagawin po ng mga kumpanya is ipapasa po nila ang pagtaas ng wage sa presyo.  Kaya aasahan po natin na inflationary po ‘yan.  So magkakaroon tayo ng cost-push inflation,” Quimbo said.

(If we increase our minimum wage, this means this is for all firms, so what do you think happens?  Companies would pass wages on to the price of goods.  That’s why we can expect it to be inflationary.  So we would have a cost-push inflation.)

“So you will temporarily satisfy our workers who are also consumers, hindi po ba (right)?  So eventually ‘yong tinaas sa sahod nila, ay kakainin din naman po sa pagtaas ng presyo ng bilihin,” she added.

(So eventually their salary increases would be eaten by higher cost of commodities.)

Suarez, meanwhile, said that small shops would be forced to either fire one of their employees just to implement the wage hike, or worse, close shop because they are unable to comply with the higher salaries.

“For the past five years I’ve been defending the budget of DOLE (Department of Labor and Employment) and that has been a perennial question.  And I think the answer of Joey (Salceda) hits it direct to the point, we have a mechanism to address minimum wage […] and they’re all working,” he said.

“Kunyari ang negosyo mo eh nag-aayos ka ng cellphone, ang trabahador mo eh apat.  ‘Pag tinaasan mo lahat ng sahod no’n eh it’s either magbabawas ka ng trabahador or magsasara ka.  So I mean it sounds nice, it feels nice, but once it gets there, it might not be very nice,” he added.

(For example you have a cell phone repair business.  You have four workers.  But when you increase their salaries it’s either you will reduce your workforce, or you will close shop.  So I mean it sounds nice, it feels nice, but once it gets there, it might not be very nice.)

Last February 7, Senate Bill No. 2534 which proposes a P100-daily minimum wage increase for private sector workers was forwarded to the Senate plenary, has

Senate committee on labor, employment, and human resources development chair Senator Jinggoy Estrada said that increasing the wages would help Filipinos cope with the burden of high prices of goods.

Salceda said he believes there is a need to increase salaries, but there should be a way for hikes to push through without harming small business.  According to Quimbo, the answer may be in economic charter change (cha-cha) — the House’ advocacy of amending the 1987 Constitution’s economic provisions.

“Ako I am sympathetic really to wage hikes.  Except that for one reason, 99 percent of our enterprise are MSMEs, so would you like to kill them?  So that’s the only issue there, we need to increase, a more expansive macroeconomic environment and that can only come—” Salceda said.

“With cha-cha.  With econ(omic) cha-cha,” Quimbo quipped.

READ: Zubiri on passage of RBH 6: Senate will not succumb to deadline pressure 

“(No), with foreign investments,” Salceda answered while laughing.

READ: House not rushing Senate on RBH 6, Cha-cha 

The House has been pushing for economic amendments to the 1987 Constitution, which they believe would usher in foreign investments.  Currently, the Senate is tackling its own version of Resolution of Both Houses (RBH) No. 6 — a resolution calling for amendments, which has been approved by the House last March 2023.