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Proceed with caution

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The state socioeconomic planning agency warns that micro, small, and medium enterprises (MSMEs), which historically account for over 99 percent of businesses nationwide, might not be able to afford the proposed P100 across the board increase in daily minimum wage for private workers.

Undersecretary Rosemarie Edillon of the National Economic and Development Authority said that based on their analysis, the pay increase being pushed by the Senate could strain the balance sheet of MSMEs.

She adds that even the savings generated by MSMEs from the Duterte-era tax reform law which lowered the corporate income tax rate would not be enough to shoulder the added costs of implementing a salary hike.

“We saw [that] for the micro, small, and medium [enterprises], they can’t afford it. The savings from CREATE will not be enough to cover the additional wage increase,” Edillon said.

“For the large [companies], they can afford it, but only if it covers only the minimum wage,” she added.

A bill mandating an increase of P100 in the daily minimum wage of private sector workers was approved by the Senate on third and final reading last week. Senate Bill No. 2534 under Committee Report No. 190 garnered 20 affirmative votes, zero negative, and zero abstentions. Labor groups are already urging the lower house to file a counterpart legislation.

However, groups like the Foundation for Economic Freedom (FEF), a public advocacy organization, are opposing the measure, which they said would “turbocharge inflation” and force the Bangko Sentral ng Pilipinas to further hike borrowing costs that are already elevated. FEF also warned that MSMEs that could not afford the wage increase may resort to job cuts just to stay afloat.

Wage increases are normally determined by national and regional wage boards, and if the legislature dabbles in such a function, it would be best if all factors were thoroughly considered, as the impacts of such a decision could be potentially far reaching. While nobody would disagree that that average Filipino worker certainly needs a higher daily wage, there are multiple factors that have to be given due consideration. Increasing the daily wage by a sizable margin may sound like a simple solution, but it can be quite complicated.

Hopefully those who thought of it, with the best of intentions, know what they are getting the country into.*

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