On June 4, the House of Representatives approved a P200 nationwide wage hike, with a 171-1-0 vote, pipping the Senate-approved P100 proposed hike.
If passed, that will be a huge deal because minimum wage hikes are typically a lot smaller than P200, and are decided at the level of regions, based on the negotiations between members of the regional wage boards, which is composed of representatives from government, workers, and businesses.
As far as the country’s workers are concerned, a significant hike in the daily wage is always a good thing for them, as they are among the most poorly paid laborers in the world. However, if the legislated wage hike was studied as thoroughly as it should have been, there is the possibility that it could be a factor in small and micro businesses having to either scale down operations, lay off workers, or shut their doors.
As much as it would be nice to have the confidence of the HOR that all small businesses in the country are capable of absorbing a major wage increase, the situation on the ground doesn’t seem to be as optimistic as our populist lawmakers are. Some businesses may be able to survive without doing anything in response, but it looks like a good majority will have to raise prices or scale down their labor costs by reducing the number of employees to the bare minimum. As for those that have already been struggling to survive before the wage increase, they might be left with no other choice but to close down.
Of course, they could be right, and after the wage increase is followed by the commensurate and unavoidable price increases, we could all end up living in a much better world. But given the declining quality of brain power in public office these days, it is difficult to be as optimistic as they are that everything will turn out all right.
After the drastic rise of prices a couple of years ago, inflation has just recently slowed down. While that’s a good thing, it does not mean that prices have gone or are going down. It just means that they are not going up as fast as they were when it was really bad in 2022-23. Everything is still way more expensive than it was, and we are still struggling with making the adjustments to our lifestyles. Perhaps that is why they think a P200 wage increase will help?
The trouble with raising the minimum wage so drastically is that it will surely raise prices again. How can it not be inflationary when the cost of labor is a big percentage in running a business in this country?
Is the thinking of our government is that at least this time, the Filipino worker gets an extra P200 per day to deal with the next round of self-inflicted inflation? What about those in the informal sector who don’t get a minimum wage? What about those who lose their jobs because their struggling employers can’t afford the wage increase? Does the government have a plan for them too or do we simply tell them to go find a job, since the minimum wage has already been made much higher?
The P200 wage hike proposal was passed almost unanimously in Congress. If it makes it to President Ferdinand Marcos Jr., how can he not sign it into law without looking like the bad guy? PBBM will need a damn good reason to veto the bill if his economic team comes up with the data and analysis that says he shouldn’t.
However, if they do go ahead with it, then it would be interesting to see how the business environment reacts. At that point, we can only hope that we somehow get all of the benefits and none of the blowback. Hopefully, businesses can take the P200/worker/day hit and still make it work, the workers earn better, inflation doesn’t spiral, and the quality of life improves. If it turns out that there are consequences, then we should be prepared to deal with those too, because our “representatives” will only take credit for the good stuff and leave it to us to deal with our problems, simply trusting in the good old legendary “Filipino resiliency” to see us through.
The issue of raising the minimum wage to a decent level may sound like a simple issue, but it is actually quite complicated and a decree raising it significantly cannot be the only solution. It should be part of a comprehensive and well-thought out program that involves the input of experts and economists, more than just politicos whose main priority is to look and smell good among voters. If the goal is to raise the standard of living in this country, our government officials have to do more than just gamble on dramatically raising the minimum wage, because whatever it is that needs to be done has to be sustainable and according to a comprehensive long term plan, not just a minimum wager in the hope that we strike it rich.*
