Sergio Ortiz Luis, Jr., the president of the Employers Confederation of the Philippines, during the “Pandesal Forum.” (File photo by NOY MORCOSO / INQUIRER.net)
MANILA, Philippines — It would be a catastrophe to increase the daily minimum wage by P100 as it could cause prices of goods to spiral higher or even force small firms struggling to pay higher salaries to lay off workers.
The Employers Confederation of the Philippines (Ecop) issued the warning on Thursday as it objected to a Senate bill pushing for a P100 across-the-board hike in the daily minimum pay of private sector employees.
At the televised Bagong Pilipinas Ngayon briefing, Ecop president Sergio Ortiz-Luis Jr. said economists were unlikely to support Senate Bill No. 2354, which was passed on second reading on Wednesday. The Senate is expected to approve it on third and final reading next week.
“Even economists have qualms over it. They say P30 or P60 increases are doable. But P100, that’s a catastrophe. You know what companies will do,” Ortiz-Luis noted.
Only 10 percent
He said: “If you increase wages without considering your sales or profit, you can only resort to two things—pass on the cost [to consumers] or reduce your number of workers. Would we want that to happen?”
Ortiz-Luis added that the push for a P100 increase in the daily minimum wage would benefit only 10 percent of the country’s labor force who are employed in stable, medium- to large-sized companies that could afford to pay higher salaries.
However, he noted that the rest of the workforce were employed in micro and small-sized enterprises that might struggle to pay higher wages, or were in the informal economy, such as farmers, vendors and tricycle drivers.
“If inflation catches up with that wage increase, then it loses its effect. The ones who will suffer are those in the informal sector, who won’t get an increase because they don’t have employers,” he said.
A higher minimum wage would also lead to higher inflation, the Ecop head said.
Impact on consumer prices
“Companies will pass on the cost of the wage increase on their products, so prices of goods will go up. When that happens, we should remember that farmers and tricycle drivers are not exempted from that price increase. Where will they get the money for that higher price?” Ortiz-Luis asked.
“Inflation is now going down, slowly but surely, and we are also increasing our employment rate. We should not introduce a problem that is not needed just to address a minority of our workers,” he said.
The Ecop official said it would likewise significantly impact the country’s job creation initiative this year, noting that the proposed wage hike was already turning off investors from pushing through with their plans to establish or expand local operations.
“They are saying that the government policies in the Philippines are very erratic. And this is the best example of that,” Ortiz-Luis said.
“The Philippines already has an established system of implementing wage hikes. But [lawmakers] are suddenly creating a new system. Investors are afraid of that,” he added.
Ortiz-Luis pointed out that foreign investors preferred countries with “stable” policies, such as Thailand, Vietnam and Indonesia, and that the Philippines’ “arbitrariness” was scaring away foreign investors.
Lukewarm House response
Even the Lower House is not too keen on rushing a wage hike bill, noting that lawmakers also needed to consider its potential impact on small businesses.
Speaking to reporters on Thursday, Iloilo Rep. Janette Garin said that while the House had pending bills seeking significantly higher wage hikes, they still needed to deliberate on how to balance the needs of workers with the realities of businesses, noting that the majority of the country’s businesses were micro-, small and medium-sized enterprises which might not be able to shoulder such increases.
But Garin admitted that a P100 wage hike was “insufficient given the rising cost of living,” saying there were pending bills in the House seeking a P350 wage hike.
“But we need balance,” she said. “It’s nice to craft good laws but it’s hard to make people hope for something that’s hopeless. If we raise wages, it should be at a rate that our business people could shoulder.”
She expressed concerns that an abrupt wage hike could cause many businesses to close, as what had happened during and after the COVID-19 pandemic.
“Good intentions must be met with realistic implementation,” Garin added.
In the meantime, she said, the government could tap its Ayuda para sa Kapos ang Kita Program as a temporary measure to support workers while Congress deliberates on a long-term solution.
A welcome relief
On the labor front, the Nagkaisa labor coalition on Thursday called on the House to get its own version of the bill moving and to raise wages higher than what the Senate was planning.
“If the [House] can create mountains out of a molehill, like what it does for a more complicated process of revising the Constitution, then they can do the same for the higher wage hike bills and in correcting the defective wage setting mechanism in the country,” Nagkaisa chair Sonny Matula and spokesperson Rene Magtubo said in a statement.
Pending before the House are bills seeking a P150 hike and P750 across-the-board minimum daily wage for private sector workers and P33,000-a-month entry level for public sector workers. Early this week, a bill was also filed seeking a P50,000 entry salary base for teachers.
Matula and Magtubo said the P100 wage proposal fell short of the P150 originally promised and “a far cry from what was needed to save minimum wage earners from the poverty wages imposed upon them by all the regional wage boards.”
“Still, we welcome it as a form of relief, and a good start as well to correcting the problems created by the regional wage setting mechanism. Once legislated, this should be followed by reforming the wage setting mechanism, which both Houses should initiate rather than consume their time on Charter change,” they added.