Legislated wage hikes to hurt economy, hurt poor Filipinos
The economic team of President Marcos warned about the pending wage hike bills, arguing that the proposed legislation could fan inflation and hurt the poor as well as small businesses.
Policymakers said they wrote to President Marcos to warn him of the “dangerous repercussions” of the measures seeking across-the-board minimum wage hikes.
Some senators are asking the House of Representatives to adopt the P100 wage hike bill it had passed in February 2024 in substitution for the P200 wage hike bill it recently approved.
Officials said businesses might have to increase their prices to absorb the additional staffing costs, which can stoke consumer prices. They added that micro, small and medium enterprises (MSMEs) might be forced to stop hiring people because of the wage hike, a development that can worsen joblessness.
The economic team estimated that a P200-increase in wages could raise inflation by around 2 percentage points (ppts), while a P100 hike may add 0.7 ppts. This, they said, could erase some of the government’s progress in bringing price growth within the 2 to 4 percent target range of the Bangko Sentral ng Pilipinas (BSP).
Meanwhile, policymakers said the proposal could bloat the unemployment rate by about 0.2 ppts for the P100 pay hike and by 0.6 ppts for the P200 increase. This would translate to around 105,000 to 300,000 persons possibly losing their jobs, they added.
Overall, the economic managers said the salary increases could trim gross domestic product growth by as much as 1.6 ppts. This would result in the economy missing the lower-end of the 6 to 8 percent official growth target.
“The substantial minimum wage increase may lead to higher production costs, which could result in higher prices that may disproportionately affect low-income households,” they said.
“Enterprises may be forced to either stop hiring or even lay off or retrench workers, resulting in unemployment. Employers—whether employing a lot or a few—will have to factor in the additional cost of production due to the wage hike, and may either stop hiring workers; lay off or retrench employees; or at least reduce work days,” they added.
The position paper submitted to Mr. Marcos was signed by Special Assistant to the President for Investment and Economic Affairs Frederick Go, Finance Secretary Ralph Recto, Economic Planning Secretary Arsenio Balisacan, Budget Secretary Amenah Pangandaman—as well as Trade and Industry Secretary Ma. Cristina Roque and BSP Governor Eli Remolona Jr.
The president recently said he would carefully study the potential economic implications of the proposal, which has been heavily opposed by business groups.
