Legislated wage hike bucked

MANILA  –The Foundation for Economic Freedom (FEF) opposes the proposed law on a P150-a-day wage hike, saying salary increases should be left to regional wage boards as across-the-board hikes do not take into consideration the varying local and industry conditions.

The FEF said in a statement that despite an overt benefit to workers, a blanket increase in workers’ earnings would help worsen the rate of increase in the prices of goods and services and would instead hurt poor people the most.

The think tank was particularly referring to the proposed Across-the-Board Wage Increase Act or Senate Bill No. 2002.

“The proposed wage hike will also benefit only 16 percent of the workforce in the formal sector on paper, but not the huge sector of informal workers,” the group said.

“Moreover, the majority of MSMEs (micro, small and medium-sized enterprises), who account for more than 90 percent of employment, are still healing the wounds from the pandemic and may not be able to afford a legislated wage hike,” it added.

Money in circulation

In times of high inflation, economists refer to wage hikes as a “second-round” effect. This means that as regulators grant consumers’ wish for more income to catch up with higher prices of goods and services, this actually worsens inflation because the greater amount of money in circulation pushes prices further.

The FEF also said legislated and across-the-board wage hikes do not take into account the  conditions and cost of living in various regions and the varying productivity of the workforce in different industries.

“We suggest that wage setting should not be legislated but follow the established practice of wage determination by Regional Wage Boards,” FEF said.

The group added that, in order to increase the purchasing power of wage workers, the government should address food inflation by liberalizing food importation and increasing agricultural production through farmland consolidation.

FEF said the government should also focus more on job creation rather than raising minimum wages to benefit the unemployed and underemployed who constitute about 20 percent of the Philippines’ workforce.

Top advisers

FEF counts among its members top economists, former and present Cabinet secretaries and undersecretaries, leading figures in the academe, respected columnists and opinion makers, and prominent members in the business and finance community.

Some of them are former World Bank resident representative Thomas Allen, National Scientist Raul Fabella, former Prime Minister Cesar E.A. Virata and former Socioeconomic Planning Secretary Gerardo Sicat who serve in the FEF board of advisers.

There are also former Finance Secretary Roberto de Ocampo, former Finance Undersecretary Romeo Bernardo and investment banker Simon Paterno, who are on the board of trustees.

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