The P85 minimum wage hike in the National Capital Region (NCR) may add to already elevated headline inflation, Bank of the Philippine Islands Lead Economist Emilio Neri Jr. said.

In a recent commentary, Neri said the higher wages would raise labor costs, which could lead to greater pass-through and second-round effects on inflation.

“The approved NCR wage hike, once implemented, would add to domestic inflation pressures by raising labor costs, particularly in labor-intensive services. Beyond the direct impact on prices, potential second-round effects could make inflation more persistent as businesses pass higher labor costs through to consumers,” he said.

The Regional Tripartite Wages and Productivity Board–NCR (RTWPB-NCR) approved Wage Order No. NCR-27 on 23 June 2026, granting Metro Manila minimum-wage workers an P85 daily increase, the largest single wage adjustment in the region.

Increase in two tranches

The order, published on 9 July, provides for the increase in two tranches: P60 starting 25 July, followed by another P25 on 20 January 2027. For non-agricultural workers, the first tranche raises the daily minimum wage from P695 to P755, while covered agricultural, small retail/service and small manufacturing establishments will see their minimum wage rise from P658 to P718.

Neri said the higher labor costs could add to inflationary pressures alongside the energy emergency, which the government has identified as a major driver of the sharp acceleration in headline inflation, as well as weather disturbances such as the monsoon season and Super El Niño.

Adverse weather a key concern

“Adverse weather remains a key concern, with habagat-driven monsoon rains and flooding raising the risk of further crop damage just as food supply conditions were beginning to stabilize. Elevated domestic fertilizer prices could further add to farm input costs as the planting season gets underway in the coming months,” he said.

“Meanwhile, oil prices remain volatile as US-Iran talks swing between de-escalation and renewed tensions, while rising producer prices in China add another channel for imported cost pressures.”

Risk analytics firm PSA Intelligence likewise flagged in its own report that the wage hike could add 0.4 percentage point to headline inflation.

“Minimum wage hikes in Metro Manila may further pressure employers to optimize labor costs, potentially impacting low-wage job sectors,” it said.

Implementation, however, has been blocked by Pasig Regional Trial Court Branch 152. On 30 July, the court issued a temporary restraining order after two construction firms challenged the wage order, arguing that employers’ capacity to pay had not been adequately considered.

On 13 August, the court subsequently issued a preliminary injunction, continuing the suspension as it resolves the companies’ petition. The RTC said it still needs to weigh workers’ interests against businesses’ constitutional right to reasonable returns and growth.

Meanwhile, the Department of Labor and Employment is defending the wage order, saying the wage-setting process complied with the Labor Code.