February 28, 2024

A top official of a national employers’ group warned that a P150 legislated daily wage increase will inflict incalculable damage on the Philippine economy as he urged for more sustainable alternatives to help workers cope with the rising cost of living.

Edgardo Lacson, chair of the Employers Confederation of the Philippines, in a recent forum in Makati said if approved, Senate Bill (SB)  2002 will “deliver a fatal blow to our national economic programs, inflict shock on employers, and disincentivize investors or job generators.”

SB 2002 provides for a P150 daily across-the-board increase in the salary rates of employees and workers in the private sector. It was introduced by Senate President Juan Miguel Zubiri on March 14 and is pending at the Senate committee level.

Lacson on Oct. 4 warned of several consequences from the passage of the wage bill as he urged Zubiri and co-author Senator Loren Legarda to withdraw their proposal.

“Ultimately this bill will cause incalculable damage to our economy, hitting the micro, small, and medium enterprises the hardest,” he said.

MSMEs are the backbone of the Philippine economy, accounting for 99.5 percent of registered enterprises, 62.4 percent of the country’s total employment, and 40 percent of the gross national product.

Historically, Lacson continued, the failure rate of Philippine MSMEs ranges from 50 to 80 percent every 10 years because of increasing operational costs that are mostly triggered by minimum wage increases.

“With SB 2002, MSME failure will happen sooner,” he said.

Lacson said one of the repercussions of MSME closures is higher unemployment and underemployment. MSMEs respond to the higher cost of labor by lowering their operational and manpower levels, instituting job rotations, stopping hiring activities, and automating their processes as they fight to avoid bankruptcy.

“Any upward adjustment of the wage automatically carries a 30 percent additional cost due to the increases in the payroll for the SSS and PhilHealth contributions, the overtime pay, and the retirement pay of workers,” he said.

Another impact of raising wages is inflation, as producers add the new round of hikes to their prices.

Workers in the formal sector only temporarily benefit from the wage adjustment because inflation eventually reduces their purchasing power, Lacson said.

Informal workers, who are not covered by any mandated minimum wage increase, suffer as well, since the ensuing inflation only serves to drive them further down the economic ladder, Lacson said.

Ma. Flordeliza C. Leong, vice president of the Philippine Exporters Confederation, Inc., said wage hikes do not end up improving consumers’ buying power because these only intensify inflationary pressures as producers raise the prices of their goods and services to offset higher expenditures.

“The increased money in circulation would further push prices up so it defeats the purpose. It’s a bad cycle that we are always dragged into,” she said.

Unlike the wage adjustments proposed by the regional wage boards, across-the-board increases mandated through legislation do not consider the economic situation in the local areas, Leong said.

Instead of wage hikes, Lacson and Leong said solons can better serve the people by passing bills that promote jobs and attract investments.

Leong also suggested giving a bigger budget to the Department of Trade and Industry so that it can be better positioned to extend help to MSMEs, especially those crippled by the pandemic, as well as providing drowning enterprises more opportunities to access financial support and low-interest credit.

She also pressed for lowering the prices of basic goods by cutting logistics costs, and passing the amendments to the Magna Carta for MSMEs, the landmark legislation that mandates government support for MSME growth and development. – Press release