Neda warns proposed P100 pay hike may hurt small businesses

Neda warns proposed P100 pay hike may hurt small businesses

While the proposed P100 daily wage hike sounds good, two 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.

Pay hike. stock image

Micro, small and medium enterprises (MSMEs) might not be able to afford the proposed P100 across-the-board increase in daily minimum wage for private workers, the state’s socioeconomic planning agency said.

Undersecretary Rosemarie Edillon of the National Economic and Development Authority (Neda) said that based on their analysis, the pay increase being pushed by the Senate may strain the balance sheet of MSMEs, which historically account for over 99 percent of business establishments nationwide.


Edillon added that even the savings generated by MSMEs from the Duterte-era tax reform law which lowered the corporate income tax rate would not be enough to shoulder the added costs of implementing a salary hike.


“We saw [that] for the micro small and medium [enterprises], they can’t afford it. The savings from CREATE will not be enough to cover the additional wage increase,” Edillon told reporters on the sidelines of a forum on Monday. She was referring to the Corporate Recovery and Tax Incentives for Enterprises or CREATE Act.

“For the large [companies], they can afford it, but only if it covers only the minimum wage,” she added.

READ: Wage hike to hurt MSMEs? Then gov’t should subsidize them, Espiritu says

A bill mandating an increase of P100 in the daily minimum wage of private sector workers was approved by the Senate on third and final reading on Monday.

Senate Bill No. 2534 under Committee Report No. 190 garnered 20 affirmative votes, zero negative votes and zero abstentions. Already, labor groups are urging the House of Representatives to file a counterpart legislation.

Bad for inflation?

But groups like the Foundation for Economic Freedom (FEF), a public advocacy organization, are opposing the measure which, they said, would “turbocharge inflation” and force the Bangko Sentral ng Pilipinas (BSP) to further hike borrowing costs that are already elevated at this point.


The FEF also warned that the MSMEs which could not afford the wage increase may resort to painful job cuts just to stay afloat.

Data showed inflation softened to 2.8 percent in January, the lowest reading in over three years. It was the second consecutive month that price growth moderated to within the BSP’s 2- to 4-percent target after hovering above that range for 20 months.

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”It will significantly turbocharge inflation, with the additional across-the-board wage increase pushing companies to charge higher prices. The subsequent wage-price spiral will trigger an erosion of the people’s purchasing power, causing widespread demands for future rounds of wage hikes,” the FEF said in a statement. INQ

TAGS: Business, NEDA, pay hike

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