Business groups have voiced concern over Congress’ move to legislate a wage hike, saying it was a unilateral decision done without considering its impact on the economy.
Enunina Mangio, president of the Philippine Chamber of Commerce and Industry (PCCI), in a statement on Thursday said the group hopes the bicameral conference committee will consider the position of the business sector.
She called for a comprehensive approach that balances the needs of workers and the capacity of businesses, at the same time ensuring that micro, small and medium enterprises continue to thrive while still providing fair wages.
In an interview on Thursday, Employers Confederation of the Philippines President Sergio Ortiz-Luis Jr. said a legislated wage “has no rhyme or reason, sometimes out of this world.”
He said investors may be turned off by this pronouncement, even if the wage increase is still under deliberation, due to erratic policies like those on wages.
Bad news for informal sector workers
“This (wage hike) may be good news for formal workers but bad news to those working in the underground economy who have no employers,” he added.
Ortiz-Luis said 90 percent of the formal economy are micro enterprises and eight percent are small businesses which cannot afford the cost of a wage hike.
“They may have to raise prices and eventually lay off workers or worse, shut down their operations,” he added.
Ortiz-Luis said ECOP still leaves it up to the Regional Wages and Productivity Board (RWPB) to set the increases.
Mangio in the statement said businesses would have to pass on part of the additional cost caused by the P200 wage hike on the prices of goods and services, thereby creating a burden on consumers.
She said those working in the informal sector — such as jeepney drivers, market vendors, fishermen, farmers etc — which account for about 50 to 60 percent of the population — will not gain from the wage increase as this will only benefit those employed by the formal sector.
Inflationary effect
“Even as the benefit will only be enjoyed by workers in the formal sector, the inflationary effect will erode purchasing power negating the wage hike’s intended benefit. This will bear down more on workers in the informal sector who are not bound by the minimum wage law,” Mangio said.
She said increased operational expense puts smaller enterprises at risk of closure, further reducing the number of jobs in the formal sector.
The unilateral wage hike sets a precedent that undermines the RWPB, which was created primarily with the function to determine and set region-specific wages based on the local cost of living, Mangio added.
She said under the RWPB, the setting of minimum wages takes into account the differences in the cost of living across regions as well as the unique needs of businesses based on specific industry, location, and type of labor they need.
“Legislating a single wage for all areas can harm businesses in lower-cost regions and removes the flexibility of the RWBs to set wages that are aligned with the situation in the local areas,” Mangio said.
The Makati Business Club (MBC), in a separate statement on Thursday, cautioned that the steep wage hike may have a tendency to trigger added inflation.
The group warned the wage increase will result in making the Philippines less attractive for investors, which means less job creation.
MBC said the wage rise represents a 31 percent increase in Metro Manila, where the existing daily wage is P645. In Calabarzon, where the minimum wage ranges from P450 to P540, it means a 37 percent to 44 percent hike.
Bring down prices of basic goods
“The Makati Business Club believes that our focus should be to bring prices of basic goods down, especially food,” the group said. “If we don’t address the prices of basic goods, there will be continuing pressure to keep increasing wages, which is not only inflationary, but also makes us less competitive and productive versus other Asean countries like Vietnam and Indonesia.”
MBC said it is not against wage increases per se.
“We do acknowledge the argument for wage increases now. We believe that these should be addressed by the regional wage boards, which take into account the cost of living in the particular area. There is no compelling reason for Congress to bypass these wage boards, as it has in this instance,” it said.
