It’s complicated

DEMAND AND SUPPLY - Boo Chanco - The Philippine Star
It�s complicated
Scenes around Ongpin, Manila, better known as Chinatown on February 10, 2024.
STAR / Edd Gumban

Times are hard and it is obvious that workers need to earn more to survive. A Filipino family of five needs at least P13,797 a month or P460 a day to meet their basic needs, according to the Philippine Statistics Authority.

Metro Manila’s daily minimum wage rose by P40 to P610 in June. But honestly, with inflation, particularly on the prices of food items, it is not possible to live in Metro Manila on P610 a day.

But is an across-the-board increase of P100 a day the right response? Many will say it is not enough, and they will be right. Others will say it is too much for businesses to bear and may cause business closures and layoffs that will increase the ranks of the unemployed.

If we think of businesses in terms of SM, San Miguel, Megaworld, ICTSI, Ayala, etc. we can rightly conclude they can afford the wage increase. Better for them to give the money to their workers than to the government in terms of taxes that will only be wasted.

According to DTI, collectively, micro, small and medium enterprises or MSMEs generated 5,607,748 jobs or 65.10 percent of the country’s total employment. Micro enterprises produced the biggest share at 32.69 percent, followed by small enterprises at 25.35 percent and medium enterprises at 7.06 percent.

Small and medium enterprises may not be able to afford an increase in wages. Net result is that workers whose employers can afford the increase are somewhat happy but those who end up losing their jobs because their employers can’t afford the added cost will be worse off. Maybe enterprises with less than 100 workers should be exempted. The current exemption is just 10 workers.

Predictably, the business chambers are not in favor of legislated across the board wage increases. They would rather leave the matter to the regional wage boards.

“It is worth mentioning that 15 of the 16 regional boards have just granted another round of increase in minimum wages for the very same people that this proposed P100 legislated minimum wage increase aims to assist. At the very least, the wage boards where government, labor and employers are represented are guided in their decision to adjust minimum wages by objective parameters following consultations and public hearings.”

In a position paper, the business chambers noted that legislated wages also “worsen the plight of the informal sector and its overwhelming 47-million strong presence in the workforce and contribution to the economy.”

The chambers observed, “that in the proposed legislated wage increase, only the five million minimum wage earners matter to the prejudice of 47 million others.”

The chambers identified the informal sector as composed of agricultural workers with no employers, fisherfolk, unpaid family workers, home-based workers, ambulant vendors and street hawkers, jeepney/tricycle and pedicab drivers, temporary construction workers, small-scale miners and quarry workers… They do not benefit from any legislated wage increase but will be hurt by the higher inflation rate resulting from the proposed legislated minimum wage increase.

A labor group however, countered that “wage increases will also be spent locally and on MSMEs including informal enterprises in their communities, which will spur local economic activity.”

There is no denying that real wages and living standards have been eroded by high and persistent inflation rates and rising costs of housing. But Marikina City Rep. Stella Luz A. Quimbo, an economist, said the government should focus on easing inflation and boosting productivity to ease the risks of wage increases.

The chambers agree with Ms. Quimbo. They urged “passing legislation to once and for all solve low productivity, poor governance, excessive regulations, worsening poverty and serious income inequality which characterize a country with a large informal sector.”

Calixto V. Chikiamco, president of the Foundation for Economic Freedom, said the proposal is bad for the economy. He said the legislated wage increase would cause more joblessness as companies adjust to higher wages while suffering from stagnant productivity through downsizing.

The Employers Confederation of the Philippines (ECoP) said a legislated wage would only benefit 16 percent of the country’s workforce.

ECoP president Sergio R. Ortiz-Luis, Jr. also warned that legislated wage increases outside of the regional wage boards betray the Philippines’ “erratic policies” that foreign investors hate.

High food prices are behind the demand for higher wages. Lower income groups spend over 60 percent of their household money on food. Our low agricultural productivity and bad logistics cause high food prices. Government should intensify efforts to improve productivity and logistics but that takes time. In the meantime, liberalize food imports to lower food costs for everyone. Then give directed assistance to domestic food producers to help them become more productive and be competitive.

A Congressional Committee once asked NEDA Secretary Arsenio Balisacan if the government would increase wages as a solution to current rising prices. “We can’t do that. It does more harm to the economy in the longer term than it benefits,” Balisacan said. “If wages rise not because of high demand for labor and improved productivity, our exports become more expensive and less competitive. That is not helpful.”

The easiest thing for clueless legislators to do is to throw money, not theirs, to the problem by increasing the minimum wage. We must help every Filipino live decently, of course. So, maybe for the meantime, targeted assistance to those in dire need is a better approach.

Where do we get the money for that “ayuda?” Cut the budget for the upkeep of Congress as well as their pork funds. The Duterte son getting P51 billion in pork is excessive. If Congress wants to help our workers, let them be open to some sacrifices too.



Boo Chanco’s email address is [email protected]. Follow him on X @boochanco

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