Business groups sound alarm on inflationary impact, harms of proposed wage hike

Business groups Philippine Chamber of Commerce and Industry (PCCI), Employers Confederation of the Philippines (ECOP), and the Makati Business Club (MBC) raised concern Thursday on the inflationary and economic implications of the proposed legislation increasing the daily minimum wage for private sector workers in the country.

In a statement, the PCCI said it “views with concern” the lawmakers’ move to legislate an across-all-regions minimum wage hike as it “was done without consideration to the impact it will have on the economy - on the price of goods and services, on those working in the informal sector who account for about 50-60% of the population, and on the micro and small enterprises (MSEs) that comprise 96% of the total number of enterprises in the country.”

“The wage hike leads to higher labor costs, consequently resulting in higher costs of goods and services, and inflation,” the PCCI said.

The business group issued the statement after the House of Representatives approved on third and final reading the proposed measure granting a P200 increase in the daily minimum wage for workers in the private sector.

The House version of the legislated wage hike offers a higher increase than the P100 approved by the Senate.

The House and the Senate will then have to reconcile the differences at the bicameral conference committee before transmitting the enrolled bill to Malacañang.

Congress has until June 13, 2025 or the last session day to reconcile their differing versions of the wage hike measure and ratify the reconciled version for the bill to be ready for the President’s signature. 

Otherwise, the measure has to be refiled in the next Congress.

Formal, informal sectors

While the minimum wage hike measure has yet to be legislated, the PCCI said it will only be enjoyed by workers in the formal sector, however, “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. Increased operational expense lends the risk of closure of smaller enterprises, reducing further the number of jobs in the formal sector,” the group said.

In a phone interview, ECOP president Sergio Ortiz-Luis Jr. likewise said that a legislated daily minimum wage hike would be “good news for a minority of our workers, but bad news for the super-majority of our workers… because out of the 52 million workers, only 10% are minimum wage [earners].”

“The remaining 90% will acquire all the harms due to inflation. Because, you know, there's no increase for the farmers, for the fisherfolks, for the jeepney drivers, for the market vendors… As companies are going to raise their prices so they can catch up with the increased salaries,” Ortiz-Luis said.

The employers group’s chief warned that if businesses, especially the micro and smaller ones, “can't afford to increase wages… they will reduce the number of people.”

MBC also cautioned that “this steep wage hike may have a tendency to trigger added inflation.”

“This wage rise represents 31% in Metro Manila, where the existing daily wage is P645. It’s 37% to 44% in Calabarzon, where the minimum wage ranges from P450 to P540. The Makati Business Club believes that our focus should be to bring prices of basic goods down, especially food,” MBC 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; for example Vietnam and Indonesia. This will result in making us less attractive for investors, and less job creation overall,” MBC added.

The proposed wage hike would also set a precedent that undermines the Regional Wages and Productivity Board (RWPB), “which was created primarily with the function to determine and set region-specific wages based on the local cost of living,” according to the PCCI.

The business group said that setting 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.

Thus, it said that “legislating a single wage [adjustment] 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.”

ECOP’s Ortiz-Luis added that in adjusting wages, the current system should be maintained as the Tripartite RWPBs was “established by the Congress, itself.”

The regional wage boards determine the appropriate minimum wage adjustments following a tedious process of dialogues among “representative of employers, there's the representative of workers, Labor and Trade departments as well as the National Economic and Development Authority (now Department of Economy, Planning and Development),” according to Ortiz-Luis.

The PCCI said it hopes that the bicameral conference committee will have consider the position of the business sector and adopt a comprehensive approach that balances the needs of workers with the capacity of businesses and ensure that micro, small and medium enterprises continue to thrive while still providing fair wages.

Malacañang earlier said that President Ferdinand ''Bongbong'' Marcos Jr. will look into the economic implications of the proposed increase in the minimum wage for workers. 

Labor and Employment Secretary Bienvenido Laguesma also said that “at first glance” a significant increase in the minimum wage could lead to several issues, such as non-compliance with labor standards, increased informality in employment, its impact on collective bargaining, and the potential negative effects on economic growth and employment level as indicated by the Department of Economy, Planning, and Development's macroeconomic analysis.

Laguesma added that prospective investors may be discouraged from establishing businesses and existing businesses may hesitate to expand. — RSJ, GMA Integrated News