Should Congress raise wages?
Is the P200 minimum wage hike passed by the House of Representatives a good idea? Practically every Congress over the last three decades has proposed a nationwide minimum wage hike only to see the light and junk it. After all, many believe that the government already got it right when it adopted a region-based tripartite wage-setting mechanism through Republic Act No. 6727, or the Wage Rationalization Act of 1989. The law formed Regional Tripartite Wages and Productivity Boards aka regional wage boards, where representatives of workers, employers, and the government take part in the wage-setting process. It also provided that minimum wages would be set at the regional level, which makes eminent sense in an archipelagic country with widely varying levels of economic development, cost of living, and other socioeconomic attributes across regions.
As the President studies the pros and cons of a legislated minimum wage hike, there are three important points he might find worth considering:
First, a nationwide across-the-board wage increase, especially at the magnitude envisaged by our lawmakers, is distortive and could further widen already wide regional disparities across the country. There’s a reason why Metro Manila has a minimum nonagricultural daily wage of P645 that is one and a half to nearly two times the levels set for other regions—P336 for the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) and P414 for the Zamboanga Peninsula, for example. Local socioeconomic conditions that affect labor demand and supply in each region determine the appropriate wage levels, i.e., those at which employment can be maximized. Lower wages in certain regions reflect lower demand for labor due to weaker economic activity owing to a lack of investment, infrastructure or natural endowments, and/or a large supply of labor relative to demand. A uniform wage increase nationwide would raise wages by proportionally more in lower-wage regions. For example, a P200 minimum wage increase would mean a 31 percent hike in labor costs in Metro Manila, 48 percent for Zamboanga, and a steep 60 percent in the BARMM, thereby inducing even more unemployment where jobs are needed most.
Second, any minimum wage hike would benefit only a small minority of workers in the economy. It’s important to note that less than two-thirds (63 percent) of our total employed workers are wage and salary workers. Many are individually self-employed (28 percent), self-employed in their enterprise with hired employees (2 percent), and unpaid family workers (6.8 percent). Minimum wages are not applicable to these latter groups, who comprise 37 percent of our employed workforce. The Department of Labor and Employment estimates about 4.9 million minimum wage earners in the country out of 48.7 million employed workers reported in the April 2025 Labor Force Survey of the Philippine Statistics Authority (PSA). While that number is not small, it is less than a tenth of our workers if you include the more than 2 million jobless who cannot find a job and may have even greater difficulty finding one if the law is enacted.
Third, those most hurt by the law would be small enterprises, for which labor costs tend to be prominent, even dominant. Profitable large enterprises can better absorb higher wage costs, and most already pay wages above the minimum, especially where collective bargaining agreements are in place with their labor unions. But it’s the small firms that employ most of the minimum wage earners, and for them, a P200 minimum wage increase would mean a hefty 31 to 60 percent hike in labor costs, depending on where they are. Their logical recourse would either be to raise their prices accordingly, hitting consumers with higher price inflation, or let go of some workers and somehow make do with less; or at worst, close down completely. The last two would lead to even more joblessness, and for these workers, the law would be a bane rather than a blessing.
There’s a saying that “if it ain’t broke, don’t fix it.” The tripartite regional wage boards have functioned well for over three decades now. The index of compensation per employee, (i.e., average pay) as tracked by the PSA has gone up in real terms (i.e., measured in constant prices) over time, indicating that wages have more than caught up with inflation (even as there were some years when they did not). The inflation-adjusted index is now 16.8 percent higher than in 2005.
These numbers imply that poverty in the Philippines is not rooted in low wages, but in the perennial lack of quality jobs. What Congress ought to do is not throw out the regional wage boards by legislating wages directly, but focus on the governance blocks that turn away investments and keep demand for Filipino workers low. Legislating wages would do the exact opposite.
