Economists see wage hikes stoking inflation

The Pasay City government holds the ‘Trabaho Pasayeño: Mega Job Fair’ conducted by the Pasay Employment Services Offi ce yesterday at the Mall of Asia Music Hall.
Ernie Peñaredondo

MANILA, Philippines — Economists believe that the recently approved wage hike in the National Capital Region (NCR) that takes effect this month, as well as pending increases in the provinces, could stoke inflation.

Aris Dacanay, economist for ASEAN at HSBC, said the impact of the seven percent increase in the minimum wage in NCR to inflation is about 0.4 to 0.6 percentage points.

“We estimate the maximum impact to inflation to be around 0.4 to 0.6 ppt. We emphasize that this is the maximum impact since not all of the higher operating cost of firms will be passed on to consumers; some firms may have profit margins that are high enough to absorb the costs,” Dacanay said.

The regional tripartite wage and productivity board of the NCR has approved a P40 wage hike for all minimum wage earners in Metro Manila, bringing the minimum wage from P570 to P610 a day effective July 16.

Despite headline inflation in the Philippines easing of late, Dacanay said times are still difficult and risks to inflation getting sticky are high.

The Bangko Sentral ng Pilipinas (BSP) believes inflation already peaked at a 14-year high of 8.7 percent in January and is likely to return within the two to four percent target range by October or November this year.

The headline inflation averaged 7.5 percent from January to May, still way above the central bank’s two to four percent target and 5.4 percent projection for this year. Inflation cooled for the fourth straight month to 6.1 percent in May from 6.6 percent in April.

Last June 22, the BSP’s Monetary Board decided to lower its inflation forecast to 5.4 percent from 5.5 percent this year but raised next year’s projection to 2.9 percent from 2.8 percent.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the wage hike would lead to pass-on or second-round inflation effects or higher prices of goods and services.

He noted that the seven percent hike in wages in Metro Manila and impending increase in other regions in the coming months could translate to higher prices of goods and services.

Disappointed

Labor groups yesterday expressed disappointment with the P40 increase in the minimum wage in Metro Manila and said they will be pushing for the enactment of the P150 across the board wage increase filed before the Senate and House of Representatives.

“We are disappointed as the order not only came late but also because it was not the workers but primarily the side of business that was considered in this decision,” Partido ng Manggagawa chairman Rene Magtubo said in a statement.

Federation of Free Workers president Sonny Matula said that even with the recent development, the struggle for a fair, living wage is far from over.

Kilusang Mayo Uno secretary-general Jerome Adonis also decried the P40 increase in minimum wage in NCR, saying it is not even enough to buy a kilo of rice.

Meanwhile, Trade Union Congress of the Philippines vice president Luis Corral said the “paltry P40 increase in the NCR daily minimum wage amounts to almost nothing. It is not even half of the P88 already lost to inflation from the purchasing power of the current P570 NCR daily minimum wage.”

Not enough

Lawmakers yesterday lamented that the P40 wage increase for Metro Manila workers was not enough.

“That’s a wonderful development for our workers. Although it’s not enough,” Senate President Juan Miguel Zubiri said.

Senate Majority Leader Joel Villanueva agreed that the new Metro Manila minimum wage “is only half of the required living wage” according to IBON Foundation.

Senate labor and employment committee chairman Jinggoy Estrada considered the increase as a “welcome development,” although the “seven percent raise in the daily minimum wage may not be sufficient to achieve a living wage in the NCR.”

Senate Minority Leader Aquilino Pimentel III urged other regional wage boards in the country to follow suit so that the minimum pay can also get a hike in the provinces. “What about the provinces? Today’s minimum wage rates across the country are unacceptable,” he said.

Sen. Grace Poe described the P40 wage hike as “woefully inadequate.”

In Congress, Kabataan party-list Rep. Raoul Manuel said the “measly wage hikes are just policy perfume to appease the public if the same government instigates a tsunami of price hikes through various goods and services in the coming months.”

For his part, AGRI party-list Rep. Wilbert Lee lauded the wage adjustment in NCR as he called on other regional wage boards to follow suit. He, however, underscored that apart from raising salary, the government should also give priority to job generation. — Rhodina Villanueva, Marc Jayson Cayabyab, Sheila Crisostomo

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