Philippine companies are tackling the wage growth conundrum

By means of Kyle Aristophere T. Atienza, News reporter And Chloe Mari A. Hufana

ALEXANDER V. SUYAT, 36, trained as a security guard in 2016 after working as a janitor for years, thinks he can earn more to support his wife and two children.

He earns P610 ($10.59) for an eight-hour work shift — the minimum wage in the Philippine capital — and he is hopeful that Congress’ proposed P150 wage increase will soon become law.

“My salary goes to many things: food and school for my children,” he said Business in Filipino during a break. “Many say the P150 is too small, but I’ll take it because it’s better than nothing.”

Mr. Suyat’s wife works as a saleswoman at a nearby shopping center, and their income, which they try to increase by working overtime, is just enough to make the family ends meet. “Prices are so high now, it’s so hard to save, even if you have a steady job.”

As the couple’s income lags, the cost of living continues to rise. Philippine inflation accelerated for the second straight month in March as rice prices continued to rise. According to the local statistics office, inflation accelerated to 3.7% from 3.4% in February.

The economy grew 5.5% last year and is expected to grow 6-7% this year, still among the fastest in the region.

Despite that strong growth, wages have remained flat and workers are pressuring the government of President Ferdinand R. Marcos Jr. to raise wages across the country despite rising prices.

Daily minimum wages in the Philippines, which vary by region, averaged P354.32 between 1989 and 2024, reaching a record high of P610 in Metro Manila last year and a record low of P89 35 years ago, according to Trading Economics. Labor department data.

The minimum wage in the southern Philippine region of Bangsamoro – the poorest in the country – ranged from P316 to P361.

“An increase of P150 is welcome and provides some relief for workers and their families, but will not even bring wages back to levels seen after the last statutory wage increase in 1989,” said Jose Enrique “Sonny” A. Africa, executive director of think tank Stichting IBON, according to a Viber message.

“The P370-plus wage increases since 1989 have not been enough to keep paceFand the real value of the minimum wage in all regions is worth less now than it was 35 years ago,” he added.

The country’s largest labor organization said El Niño weather conditions and climate change “justify a wage increase, especially in sectors most vulnerable to these changes.”

“Workers in agriculture, construction and other outdoor industries face increased health risks and disruptions to their work due to extreme weather conditions,” Jose Sonny G. Matula, president of the Federation of Free Workers, said in a Viber message.

The Philippines adjusts wages through its wage commissions, but slow and meager increases against the backdrop of rising costs of living have prompted lawmakers under the Marcos administration to legislate wage hikes.

Separate bills have been introduced in the House of Representatives that aim to increase the wages of private sector workers by 150 to 750 euros. Filed, as well as another mandating an entry-level wage of P33,000 per month for government employees.

Senators have meanwhile approved a bill that will increase the daily minimum wage in the private sector by £100 on second reading.

Government economic managers have warned of the consequences of legislating wage increases. National Economic and Development Authority Secretary Arsenio M. Balisacan said last month that the Senate bill could reduce economic output by 0.5 percentage points, which could spur economic growth.Fand worsen unemployment.

The Philippine Chamber of Commerce and Industry (PCCI), the country’s largest business group, said the legislated wage increase would make it harder for companies to recover from the coronavirus pandemic and reverse business traffic.Fidentity.

“There were already positive signals from the business community and confidence gradually increased after the pandemic,” PCCI President George T. Barcelon said by phone. He added that geopolitical tensions remain highFInflation and the depreciation of the peso have dampened that optimism.

‘Hardly a dent’
Mr. Barcelon said lawmakers should factor a looming energy crisis into the entire wage hike debate, as the country’s only indigenous source of natural gas is depleted by 2027.

“We propose that the discussion on wage increases be left to the regional tripartite wage and productivity councils, so that all stakeholders are represented to balance the needs of workers, the capabilities of companies and the diverse conditions across industries and regions,” says Ebb Hinchliffe. , said Executive Director of the American Chamber of Commerce of the Philippines, Inc. in a Viber message.

Christopher James Nelson, executive director and trustee of the British Chamber of Commerce, noted that while they understand the predicament of workers, ultimatelyFThe consequences of wage increases could come back to bite them.

“We understand workers’ concerns, but inflation is a macroeconomic issue,” he said in a telephone interview. “A wage increase in itself will have added valueFlationary impact, which will again have consequences for employees.”

Mr. Nelson kept saying highlyFThis also prevents the Philippine central bank from lowering its benchmark interest rates, effectively raising corporate borrowing costs.

“Wage increases will not be inflationary if companies are not so rigid about the profits they want to make,” Mr Africa said. “There are many factors that cause inflation, such as the recent supply chain disruptions, commodity price fluctuations, currency depreciation and other external shocks. Excessive concern about wage increases actually only puts the burden of making corporate profits on the shoulders of workers.”

A statutory wage increase would hardly make a dent in corporate profits as salaries account for just 11% of their expenditure, Mr Africa said, citing IBON’s research into a recent state-led annual survey of 38,000 companies of all sizes. sectors.

“An overall wage increase of P100 averages only 7.1% of profits for all business sizes and 7.5% for micro, small and medium enterprises (MSME), while a P150 increase amounts to only 11% for all companies and 11.3%. for SMEs,” he said.

“Even an increase of P690 to increase the average wage to the current living family wage of P1,207 is equivalent to only 49% of the pro-Fit applies to all companies,” he added.

Economic managers and the business community have warned that a statutory wage increase is especially importantFfect MSMEs, which represent more than 99% of businesses in the country.

Mr Africa and Mr Matula said significantly increasing workers’ wages would increase their purchasing power, boosting economic activity and delivering benefits.Fsmall businesses.

“Wage increases are an opportunity for economic growth rather than a challenge,” Mr Matula said. “They mean greater purchasing power for employees, who are also consumers. This is likely to benefit businesses, especially SMEs.”

He said a P100 wage increase, which amounts to a 16% increase based on the current minimum wage in Metro Manila, is not only manageable but also crucial for economic growth. “The P150 wage proposal represents 24.59% of the current P610 daily minimum wage in the National Capital Region, which meansFclearly lower than the 39.1% increase in 1989.”

Jenet I. Dacumos, a single mother of three who works as a janitor at a mall in Manila, is pessimistic about a statutory wage increase.

“I feel like our president doesn’t empathize with the poor, so I don’t expect that to happen,” she said Business as she rested during her shift. “Food prices are driving me crazy. How can they expect us to live on P610 every day? I still need a racket.”