Marcos econ team warns PHP200 wage hike risks inflation, MSMEs, GDP

The Marcos administration's economic managers have warned against proposed PHP200 and PHP100 legislated wage hikes, citing potential negative impacts on inflation, small businesses, and overall economic growth.

Officials stated that a PHP200 increase in wages could raise inflation by about 2 percentage points, while a PHP100 increase may add 0.7 percentage point, leading to higher production costs for companies and affecting low-income households.

The managers highlighted concerns for micro, small and medium enterprises (MSMEs), noting these businesses account for over 90 percent of all business enterprises in the country and may struggle with mandated wage increases per worker, potentially harming their operations.

They also cautioned that such hikes could result in a substantial downward pressure on GDP by 1.6 percentage points for PHP200 increase and 0.5 percentage point for PHP100 increase, making it difficult to meet the lower end of the GDP growth target range.

Moreover, the economic team warned about the potential for increased unemployment rates ranging from an additional 0.2 percentage points for a PHP100 wage increase up to 0.6 percentage points for a PHP200 increase, translating into around 105,000 to 300,000 persons possibly losing their jobs.

Some senators are asking the House of Representatives to adopt the P100 wage hike bill it had passed in February 2024 as a substitute for the P200 wage hike bill recently approved.

The economic managers urged the government to retain the current system of adjusting wages through Regional Tripartite Wages and Productivity Boards (RTWPBs) while strengthening the implementation of the minimum wage law to ensure inclusivity and fairer wage distribution.