P125 wage hike to turn off investors, shut down local businesses—employers

MANILA, Philippines—The Employers Confederation of the Philippines (ECOP) said on Wednesday, the P125-a-day across-the-board legislated wage hike being pushed by the House committee on labor would only “raise false hopes for workers, unduly alarm prospective foreign investors, and might turn off local businesses to force them to hold off expansion plans and new ventures.”

ECOP President Edgardo Lacson, in a statement, said the pending wage hike bill would further worsen the income disparity between workers in the formal sector and those in the informal sector.

The proposed legislated wage increase, he added, would benefit only 16.26 percent of wage and salary workers in the formal sector, or around 5.7 million workers, to the exclusion of the vast majority outside the formal sector or the self-employed who accounted for 77.63 percent, or about 27.2 million; homeworkers; jeepney, tricycle and pedicab drivers; those employed in family-operated farm or businesses; unpaid family workers; and household workers.

Lacson said employers have time and again cautioned lawmakers that the P125 across-the-board wage hike would be an “economic tsunami” that would wipe out establishments, whether big or small, along its path and would leave businesses with no choice but to let go of their workers or, worse, shut down.

“An across-the-board pay adjustment via legislation would all the more hurt micro and small establishments as such staggering amount of wage increase would compel them to close shop to the detriment of workers,” he said.

Using the methodology of the labor department’s Bureau of Labor and Employment Statistics in computing labor cost, Lacson pointed out that it would cost enterprises operating in the formal sector an additional amount of about P3 billion a year to implement the P125 across-the-board daily wage increase.

The brunt of the massive increase amounting to around P165 billion annually, or 56 percent of the total, would be borne by the micro and small establishments, Lacson added, noting that such amount would not be productivity-based and thus, would cause inflationary spiral.

“This, in effect, would compel businesses to pass on the resulting price increases in the cost of goods to the market and consumers,” he said.

The ECOP leader also quoted an impact analysis from the National Economic and Development Authority requested by the group, which stated: “The national economy behaves in a manner that any change in the cost of labor will affect the decision of workers to join the labor market, at the same time influence decisions of profit maximizing business owners. Together these will have an impact on the prices of commodities produced by business and consumed by workers and ultimately on real gross domestic product growth.”

At the same time, Lacson expressed ECOP’s strong opposition to the petition filed by the Mendoza faction of the Trade Union Congress of the Philippines (TUCP) for a P90 across-the board daily wage increase for all workers.

Lacson argued that the TUCP’s petition ran counter to the enunciated policy of the labor department – with the support of employers and organized labor in the Tripartite Industrial Peace Council – on the two-tiered wage system. The first tier consists of the floor wage that serves as a safety net and the second tier on pay increases that are productivity-based.

In addition, Lacson cited the Rules on Minimum Wage-Fixing under Republic Act No. 6727, otherwise known as the Wage Rationalization, which also created the various regional tripartite wages and productivity boards (RTWPBs) where wage petitions could not be entertained until after a period of 12 months.

The last wage order in the National Capital Region on May 26, 2011, granted a P22 a day increase in the cost-of-living allowance to all private-sector minimum-wage earners in Metro Manila.

Lacson also recalled a ruling by the Supreme Court on Feb. 6, 2007, under G.R. No. 144322 (Metropolitan Bank v. National Wage and Productivity Commission and RTWPB-Region II), which states that the RTWPBs are not been vested with the power to grant across-the-board wage increase.