‘Wage hike to turbocharge inflation’

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A national wage increase of P100 daily in the private sector will have “damaging effects” on the national economy, the Foundation for Economic Freedom (FEF) said over the weekend.

“It will significantly turbocharge inflation, with the additional across-the-board wage increase pushing companies to charge higher prices,” the FEF said in a press statement.

“We firmly oppose Senate Bill No. 2534 mandating a national wage increase of P100 daily in the private sector,” the group said.

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“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 statement said.

Increased inflation will force the Bangko Sentral ng Pilipinas (BSP) to hike interest rates, which will raise the cost of housing, cars and appliances, which are mostly bought on credit, the FEF said.

“Increased interest rates will force companies to reduce investments and cut back on employment,” it warned.

“We are not against wage increases but we urge the Senate not to tamper with the existing mechanism of regional wage boards to adjust wages if needed,” it said.

“Regional wage boards take into account the interests of both employers and workers and the different cost and employment situations of various regions,” it added.

The FEF urged that instead of a nationally legislated wage increase, the government liberalize food imports by reducing the tariffs on rice from 35 percent to 10 percent and abolishing or vastly expanding the import quotas for corn, chicken, pork and fish.

It said liberalizing food imports will see an immediate fall in the price of food, thereby increasing the purchasing power of all Filipinos.

Since food inflation has been the major factor behind recent inflation, the BSP will likely reduce interest rates, which can increase investment spending and boost employment, the FEF said.

“Making more food affordable will help reduce pervasive malnutrition among our children and make our workers healthier and more productive.

“Senate Bill 2534 is inflationary; food import liberalization is deflationary,” the FEF said.

“A national wage increase doesn’t take into account the different cost factors and employment situations across different regions,” it said. “It will force many small and medium-sized enterprises, which employ the most in the country, to either close shop and lay off workers.”

A national wage increase of P100 daily “will only cause more suffering for informal workers, such as seasonal workers, fishermen, gig economy workers, and market vendors, because they won’t benefit from the mandated daily wage increase but will suffer from the higher inflation that Senate Bill 2534, if passed into law, will bring,” the FEF said.

The FEF Board of Advisers includes former Prime Minister Cesar E.A. Virata, former Socioeconomic Planning Secretary Dr. Gerardo Sicat, National Scientist Dr. Raul Fabella, and former World Bank resident representative Thomas Allen.

Its Board of Trustees includes former Finance Secretary Roberto de Ocampo, former Development Bank of the Philippines President Simon Paterno, and former Finance Secretary Margarito Teves.

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