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Business groups: Wage hike bid may discourage investors

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Major business groups in the Philippines said the proposal for a wage hike becomes a “sure threat” against efforts of the country to attract more investors.

Eight major business groups penned a letter dated May 17, 2023 to Senator Jinggoy E. Estrada who chairs the Senate Committee on Labor, Employment and Human Resources to express their concern on the wage hike proposal.

The signatories of the said letter are: George T. Barcelon, President of the Philippine Chamber of Commerce and Industry (PCCI); Edgardo G. Lacson, Chairman of Employers of Confederation of the Philippines; Sergio Ortiz-Luis Jr., President of the Philippine Exporters Confederation Inc. (Philexport); Cecilio K. Pedro, President of Federation of Filipino-Chinese Chambers of Commerce and Industry (FFCCCII); Jack Madrid, President of IT and Business Process Association of the Philippines (IBPAP); Arthur M. Lopez, President of Philippine Hotel Owners (PHOA);  Robert M. Young, President of Foreign Buyers Association of the Philippines (FOBAP) and Nelson M. Mendoza, President of United Portusers Confederation of the Phils. Inc.

The groups noted that the Philippines already has one of the highest minimum wages among members of the Association of Southeast Asian Nations (Asean).

In fact, they said the matrix published by the National Wages and Productivity Commission (NWPC) of the Department of Labor and Employment (DOLE) indicated that as of August 31, 2022, the Philippines’s $10.14 daily minimum wage rate is second to Malaysia’s $11.16.

“That prices of goods in the Philippines are higher compared with these counterpart economies may in fact already be a direct effect of the higher minimum wages in our country,” they said.

“This proposal then becomes a sure threat against efforts to invite more investors when the [Corporate Recovery and Tax Incentives for Enterprises] CREATE and other investment-related laws were passed,” the letter read.

The business groups said they share the concern of Estrada, who heads the labor committee in the Senate as well as the authors of the bills on how the effects of inflation “have continued to dampen the purchasing capacity of Filipinos.”

However, they said in the letter, “Only a small percentage of the total work force—16 percent of about 8 million in the formal sector out of the 50 million in total number of Filipino workers—will be able to benefit from this proposal.”

If greenlit, the business groups said this wage hike may appear to provide “short-term relief to a ‘happy’ few.” But, they noted, “We also should not ignore that the rising inflation has also negatively impacted businesses.”

For one, 98 percent of local businessses are micro, small and medium enterprises (MSMEs) that bore the brunt of the pandemic and most of which may still be closed to this day, the groups said.

“It is likewise worthwhile noting that these MSMEs are also the employers of the same Filipinos whom these bills are aiming to help. If the proposal for increased wages is approved, these employers may have to further increase the prices of their products, reduce the number of their workers, or simply close down,” they said.

The groups also noted that large firms, which are capable of paying the wage increase, only make up less than 2 percent of all Philippine companies.

Describing it as an “even grimmer scenario,” the business groups said a “staggering” 84 percent, who are workers in the informal sector, will see this as an “unhappy” bill, as they are not expected to feel any gain because most of them work on their own with no employer.

“This 84 percent represents around 42 million workers that include farmers, fishermen, market vendors, jeepney drivers, tricycle drivers, and home-based small entrepreneurs that comprise the silent majority whose situation will worsen with the bill’s passage, as they have to pay higher for their purchases once businesses start to increase prices,” the joint statement of the business groups read.

Moreover, the groups said that these people are the ones who will then start “trooping” to government offices to ask for “ayuda” when this burden becomes unbearable already.

With this, the business groups pointed out that “it will then be relevant for them to also be invited and heard in the wage hike hearings as among the stakeholders.”

The business groups also laid out their recommendations, among which is for the Senate Committee on Labor, Employment and Human Resources to consider tapping the assistance of government agencies, particularly those in the Economic Cluster such as the Departments of Trade and Industry and Labor and Employment and the National Economic and Development Authority who, they said, “can handle the pencil pushing.”

Further, the business community prodded the regional tripartite wage board as its mandate in this area “becomes even stronger and credible.”

“For this reason, the business community feels more comfortable that they continue playing this role backed up by years of relevant and on-the-ground information,” the business groups said.

“Needless to say, such an issue truly needs more time and accurate information to help ensure that efforts are truly responsive to the common good. Towards this end, we welcome the creation of the TWG where the informal sector and agencies mentioned above can also provide inputs,” they added.

Currently, two bills filed by senators propose a P150 daily across-the-board wage increase.

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