PCCI urges lawmakers to defer wage hike decision to regional boards

The Philippine Chamber of Commerce and Industry is asking lawmakers to leave the determination of wage increases to the regional wage boards (RWBs) following the recent approval by the House of Representatives granting a P200 daily minimum wage hike for workers.

This was even though President Ferdinand Marcos Jr. last week reiterated the need for a thorough study on the proposed daily across-the-board wage increase for private sector workers, citing its potential impact on businesses, particularly micro, small, and medium enterprises (MSMEs).

“We view the legislation of a minimum wage hike with much concern,” PCCI President Enunina Mangio said in a statement on Monday, pointing out that the existence of the tripartite RWBs (comprised of business, labor, and government) was created and designed to set region-specific rates based on the local cost of living.
“A blanket national minimum wage does not take into account the differences in the cost of living across regions as well as the unique needs of businesses based on specific industry, location, and type of labor they need.  Cities have higher costs of living than rural areas.  Legislating a single wage for all areas can harm businesses in lower-cost regions and remove the flexibility of the RWBs to set wages that are aligned with the situation in the local areas.  This could lead to business inefficiency and stagnation,” Mangio stated.

The PCCI leader noted that while the wage hike may seem like a step toward improving the livelihood of workers, it leads to higher labor costs, especially for MSMEs, and consequently higher costs of goods and services.

“MSMEs are already operating on tight margins.  The mandated wage hike will force these small enterprises to shoulder higher payroll expenses.  For some businesses, particularly those in low-margin industries like retail, hospitality, and agri-food, the wage increase forces them to pass on the cost to consumers,” Mangio added.

Moreover, she said the inflationary effect could further erode purchasing power, negating the wage increase’s intended benefit and reducing jobs in the market.

“Making everyday items more expensive will simply offset the benefits of a higher wage, especially for workers in the low-income brackets.  But the inflationary effect will bear down more on workers in the informal sector who are not bound by the minimum wage law,” Mangio reiterated.
Moreover, she said there is also the risk of micro-enterprises in the formal sector shifting some of their operations to the informal sector to cut costs, further undermining efforts to expand the country’s formal economy and jobs in the labor market, contributing to job insecurity.

Quoting government statistics, Mangio said approximately 25-30 percent of the total employed workforce in the country (around 10 to 12 million workers) are in the formal sector.

On the other hand, the informal sector accounts for about 40-50 percent of the total employed population (or 15 to 20 million workers).

The PCCI chief disclosed that a legislated minimum wage hike not only exacerbates the already rising cost of goods and unemployment but also fails to provide long-term solutions for productivity and competitiveness.

“Instead of legislating wages, our wage policy should have a comprehensive approach that balances the needs of workers with the capacity of businesses and ensures that MSMEs continue to thrive while still providing fair wages.  For wage policy to be meaningful, it should prioritize economic growth and stability, business productivity, secure and quality jobs, and real purchasing power for workers,” Mangio said.

The House Committee on Labor and Employment approved the measure on Thursday last week, and lawmakers have urged Marcos to certify it as urgent.

However, the President stressed the importance of reviewing its legal and economic implications before making any decision.