1 month ago
14
February 3, 2025 | 7:02pm
MANILA, Philippines — If minimum wage workers earn P200 more daily, can businesses handle them?
Some businesses fear it will weaken their “competitiveness” and eventually drive up the cost of goods and services or cut down jobs to compensate for added expenses.
On the other hand, an increase in minimum wage would ideally help Filipino workers cope with inflation, or how fast the price of goods and services increase. In other words, it seeks to assist families in offsetting additional household expenses.
The argument is circular, with some assuming that wage increases fuel inflation, while others argue that they are necessary to keep up with it.
This was pointed out by Rep. Arlene Brosas (Gabriela Women’s Party-List), one of the proponents of the proposed P200 legislative wage hike.
RELATED: House panel endorses P200 wage hike for private sector workers
“Basic economics shows that wages follow prices, not the other way around,” she said in a statement. “The proposed P200 increase will barely help workers catch up with the rising cost of living.”
Leveraging profits to support wage growth
Economic think tank IBON Foundation explained that the issue lies in employers' reluctance to share a portion of their profits. The idea behind increasing the price of goods and services is to maintain a consistent level of profit, if not boost it.
“Taking businesses as a whole, there is no negative effect if only employers were willing to part with a small share of their profits,” IBON Executive Director Sonny Africa told Philstar.com.
The concept of “competitiveness” may also be misconstrued, as it should focus on “increasing worker productivity through better training and improving their health.”
“There's something fundamentally wrong, counterproductive and retrogressive whenever ‘competitiveness’ is understood as keeping wages low because this is putting the burden of profitability on workers,” he said.
Brosas also mentioned that the loss of competitiveness is unlikely, as work productivity has risen despite minimal changes in the minimum wage.
What does the data say?
According to IBON’s analysis, work productivity rose by 88% since 1989. This is measured by how much economic value each employed Filipino creates — or the gross domestic product divided by the number of employed people.
Despite this, Africa said the average real minimum wage has dropped by 23% over the same period when adjusted for inflation, meaning workers can afford less today than they could in the past.
Citing Philippine Statistics Authority (PSA) data, Brosas said the second quarter of 2024 saw a 4.6% increase in labor productivity compared to the same period in 2023.
Other than work productivity, computing for the wage hike also considers the employer’s capacity to pay, Africa said.
Based on PSA’s 2022 Annual Survey of Philippine Business and Industry (ASPBI), which examines employment, revenue and expenses across industries, employee compensation made up only 10.59% of total business expenses.
This translates to P2.172 trillion in wages out of a total expenditure of P20.516 trillion in 2022.
With total revenue at P23.573 trillion, businesses posted a profit of P3.057 trillion. IBON estimates that a P200 across-the-board wage hike for salary earners and minimum wage workers would cost an additional P369.8 billion — just about 11.8% of total profits based on the same data.
Africa noted that these figures are “broad averages,” meaning smaller establishments would likely allocate a larger share of their profits for a P200 wage hike compared to larger firms.
Other ways to increase wages
However, he added that the government could provide support to smaller businesses that may struggle to afford the increase, ensuring it doesn’t come at the expense of those barely breaking even.
To drive economic growth, Africa explained that increasing workers' disposable income would create a “multiplier effect,” as workers typically spend a larger share of their income locally compared to employers.
President Ferdinand Marcos Jr. also expressed concerns over the proposed legislative wage hike, saying that it requires further study, but also acknowledged that wage increases are possible.
RELATED: Marcos: P200 wage hike may hurt businesses, fuel inflation, needs review
The current minimum wage for non-agricultural workers in Metro Manila is P645 per day, about 47.2% short of the P1,223 living wage for a family of five.
Minimum wages are much lower in other regions, as they are set by the Regional Tripartite Wages and Productivity Board.
If a legislative wage hike is approved, it will be the first in about 35 years since the last one was enacted.
