MANILA, Philippines – Debates are on for lawmakers as a bill seeking to mandate a P100 across-the-board minimum wage hike for private sector workers reaches the Senate plenary. 

Senator Jinggoy Estrada, who chairs the upper chamber’s labor committee, sponsored the bill on Wednesday, February 7, noting it would benefit 4.2 million minimum wage earners, both in agriculture and non-agriculture industries.

Over in the House, economist-lawmakers Marikina 2nd District Representative Stella Quimbo and Albay 2nd District Representative Joey Salceda pushed back, saying the proposal may hurt micro, small, and medium enterprises (MSMEs).

Even Labor Secretary Bienvenido Laguesma, whose mandate puts workers’ welfare first, had similar sentiments, saying that the department needed to study the proposal further. P100 sounded small, he said, but it could jeopardize MSMEs.

“Kailangan namin silang mabigyan ng paggabay at tulong nang sa ganon magpatuloy po ang kanilang operasyon at matalikha pa, kung hindi man mapanatili ang bilang ng mga manggagawa nang sa kasalukuyan at nandodoon po sa kanilang poder,” said Laguesma on Thursday, February 8.

(We need to give [MSMEs] guidance and assistance so that they can continue operations and retain the workers who are under their care.)

Is P100 too much for the Philippine economy? Some say it will cost a lot, while labor groups and a nongovernmental organization (NGO) say raising wages can spur economic growth, too.

Minimum wages at present

The last legislated national wage hike in the Philippines was in 1989, when the Wage Rationalization Act ordered a P25 wage hike from the national P64 minimum wage.

In that law, Regional Tripartite Wages and Productivity Boards (RTWPBs) were given the power to set minimum wages per region. This is the system the Department of Labor and Employment (DOLE) uses to this day, with the highest minimum wages consistently reported in the capital region.

At present, Metro Manila’s minimum wage is P610 a day, but Estrada said that this is eroded by inflation. The real value of minimum wage, the senator said, fell to P514.50 in July 2023, and further decreased to P504 in October that year – a scenario replicated across all regions.

The IBON Foundation reported that as of January 2024, a family of five in Metro Manila needs P1,193 a day or P25,946 a month to live decently. The NGO lists the highest family living wage in the Bangsamoro Autonomous Region in Muslim Mindanao, at P2,026 a day, compared to the actual daily minimum of P306 to P341 in the region.

Over the past year, a number of regions had increased minimum wages, even without petitions. Laguesma said that these efforts from the regional wage boards in recent years have been able to “balance” giving workers higher pay while considering businesses’ capacities to operate. 

The proof, he said, was the highest employment level the country has seen in two decades.

According to the latest Labor Force Survey from the Philippine Statistics Authority (PSA), the country’s employment rate in December 2023 reached 96.9% – around 50.52 million employed Filipinos.

Majority of these employed Filipinos are wage and salary workers, at 62.7%.

Laguesma did not take a definite stance on legislating a national minimum wage increase, and neither did he say that one system was better than the other. Deferring to Congress, the secretary said that they would be there to give “technical inputs,” and implement the law should it be passed.

Examples he gave of these technical inputs would be information about how the wage hike could affect different economic factors.

“Gusto po naming makita ano’ng magiging posibleng epekto nito sa ating employment level, sa inflation rate, sa GDP (gross domestic product), at doon po sa pagpapatuloy ng operasyon ng mga kumpanya, lalo na po ‘yung mga maliliit,” he said.

(We want to see what would be the possible effects of this wage hike towards employment levels, inflation rates, the GDP, and the operations of companies, especially the small ones.)

Laguesma also pointed to how employers will address wage distortion, when non-minimum earners become indirectly affected by minimum wage increases. For instance, he said, a minimum wage earner in Metro Manila earns P610, while their supervisor may earn P640. If the bill is passed, the minimum wage earner will earn P710, while the one-up continues to earn P640.

“‘Yung mga ganoon na realidad sa workplace, siyempre pinag-uukulan namin ng pansin yun (We also have to pay attention to those kinds of realities in the workplace),” he said.

It’s a chicken and egg situation – proponents say higher wages are needed to cope with inflation, but those opposed to it say raising wages will cause inflation.

In an interview with the ABS-CBN News Channel, Employers Confederation of the Philippines president Sergio Ortiz-Luis Jr. said firms may have to raise prices of goods to keep up with paying their employees.

He also raised concerns about the 84% of the labor force who are farmers, fisherfolk, drivers, market vendors, and the like, who will have to deal with the possible rise in prices.

“How about the others… those 84% with no employers? They will suffer the inflation,” he said.

In the December 2023 survey, there were a reported 13.84 million self-employed Filipinos. Meanwhile, the 2018 Informal Sector Survey accounts for 15.68 million workers employed in the informal sector – which means that the millions of workers who will not benefit from the minimum wage increases may have to cope with the possible inflation warned by opposing forces.

In minimum wages, another concern that may arise is enforcement. In the House plenary hearing for the DOLE’s 2024 budget in September 2023, Quezon 2nd District Representative David Suarez, who sponsored the DOLE’s budget on the floor, reported that the compliance rate of employers in paying minimum wages is 93.78%.

While this may be deemed high compliance, Suarez noted this only covers the 23,420 “industries” that around 1,200 labor inspectors visited, out of 102,000 large, medium, and small industries.

Businesses certified as Barangay Micro Business Establishments, and are also certified exempted from income tax exemption from the Bureau of Internal Revenue, are exempted from paying minimum wages.

Considering investments

The foreign trips of President Ferdinand Marcos Jr., while drawing flak as critics describe them as excessive, have brought home $72.18 billion or nearly P4 trillion in foreign investments, according to the Department of Trade and Industry.

More than 90% of the touted investments are just pledges, according to Rappler resident economist JC Punongbayan. One of the reasons actual investments are not arriving early, he said, is policy uncertainty.

Laguesma also pointed to possible effects on investments as one of the things the DOLE needed to study in assessing a national wage hike. Investors are looking for security, he said.

“They did not put in investments as charitable institutions – they also want to earn and take advantage of the opportunities our country is offering. They need predictable, sustainable, consistent, and stable policies, not ones where the rules are changed in the middle of the game,” he said in a mix of Filipino and English.

Workers who get paid more, spend more

On the other side of the debate, IBON Foundation executive director Sonny Africa said a wage hike can lead to economic activity since workers who earn more will spend it, unlike business owners who may keep what would be the increases as profits to be saved. 

“Low-income wage workers tend to spend most of what they earn because they are starting from low levels of consumption – as opposed to profits which are often saved and accumulated, and so have indirect multiplier effects at best,” he told Rappler on Monday, February 12. This same idea is also in a House bill authored by the Makabayan bloc seeking a P750 across-the-board wage increase.

If minimum wage earners’ salaries are increased, Africa and the Makabayan lawmakers said these earnings will be spent locally and on MSMEs, which include informal enterprises in their communities, spurring local economic activity and job generation.

Africa said it is “simply untrue” that businesses cannot handle meaningful wage hikes. For businesses to pay their minimum earners P100 more, IBON computed from the PSA’s 2021 Annual Survey of Philippine Business and Industry data that large and medium firms will only have to take a 6.7% cut in their profits, small firms a 7.6% cut, and micro firms a 7.9% cut. 

“It’s perplexing for the economic team and especially the labor department to speak about workers and their wages as if they are a burden to the economy. It’s people who most of all create value in the economy and for whom the economy is for so to speak of ‘the economy’ as something different from their conditions and welfare is insensitive and unfair,” he said.

Sonny Matula, national president of Federation of Free Workers, said the correlations between wage hikes and job losses or business closures are “largely speculative.”

“We subscribe to the theory that additional income in the hands of workers, who are also consumers, rather than causing inflation, contributes positively to the economy by creating jobs and stimulating economic growth,” Matula told Rappler on Friday, February 9.

He noted that the double or triple income in December 2023, for instance, did not cause high inflation in January 2024. On the contrary, inflation eased for the fourth straight month in January.

Partido Manggagawa national chair and Marikina city councilor Rene Magtubo also pointed out that wage hikes work for the benefit of the economy – citing the same “proof” Laguesma noted in the regional increases leading to high employment.

“Labor Secretary Laguesma is singing the same old song with employers about economic difficulties once workers are granted a substantial wage hike. But they are singing out of tune as their doomsday scenario is refuted by economic indicators. Inflation and unemployment subsided since regional wages were increased in the latter half of 2023,” said Magtubo.

Matula said that workers are advocating for a legislated, non-discriminatory daily wage hike nationwide, with the aim of attaining the state’s responsibility to provide workers a living wage. – Rappler.com