The country’s economic team cautioned that higher inflation and unemployment rates could result if the P200 minimum wage hike for private-sector workers nationwide becomes law.

In a paper submitted to President Ferdinand Marcos Jr. on Wednesday, the economic team stated that the wage proposal from the House of Representatives could lead to a two percentage point increase in inflation.

“This will result in the poorest of the poor, who are mostly in the informal sector and do not even make minimum wage, bearing the brunt of the impact of the wage increase,” the economic team said.

The team added that businesses, primarily the micro, small and medium enterprises (MSMEs), will be forced to downsize their workforce to cope with higher operating costs.

“MSMEs, which considerably rely on minimum wage earners, may not be able to absorb the mandated wage increase per worker, which translates to P4,000 a month given a 5-day work week or P4,800 a month for a 6-day work week,” the economic team said.

The team said this could result in approximately 105,000 to 300,000 jobless Filipinos.

Prices may rise

“To cope, some firms may increase prices of goods or services, reduce their workforce, or worse, shut down operations altogether, affecting both employees and the broader economy,” the economic team said.

Given these likely consequences, economic managers project the overall economy to contract by 1.6 percentage points.

Thus, the economic team recommended to lawmakers and Marcos that they allow the Regional Tripartite Wages and Productivity Boards to assess the living conditions in individual regions, thereby preventing higher poverty incidences.

“It was therefore recommended to the President that the current system of adjusting wages through the RTWPBs be maintained,” the economic managers said.

“Regional minimum wage setting better reflects local economies, avoids purchasing power disparities, and supports fairer wage distribution,” they added.

The country’s economic managers include Special Assistant to the President for Investment and Economic Affairs Frederick Go, Finance Secretary Ralph Recto, and Department of Economic Planning and Development Secretary Arsenio Balisacan.

Other members of the economic team include Department of Budget and Management Secretary Amenah Pangandaman and Department of Trade and Industry Secretary Ma. Cristina Roque, and Bangko Sentral ng Pilipinas Governor Eli Remolona Jr.