FIFTEEN business organizations in the Visayas have expressed concern over Senate bills proposing a wage increase, raising caution that it will hurt recovering micro, small and medium enterprises (MSMEs), discourage investments and distort wage rates across the country’s regions.

While the groups recognized the rights and welfare of workers, wage adjustments will not address the plight of the labor sector, they said.

The joint position paper specifically rejected legislated and across-the board wage hikes including “Senate Bill 2002 or Across-the-Board Wage Increase Act of 2023.”

“Increasing wages without addressing the root cause will only exacerbate the problem by increasing production costs without increasing productivity and consequently, pushing higher the prices of goods and services into the cycle that results with hardship and increased cost of living,” the groups’ joint statement reads.

According to national reports, the Senate aims to pass the P150 wage hike bill this month.

The Partido Manggagawa Cebu Chapter said businesses can afford to comply with the proposed P150 across-the-board wage hike.

“Bakak na ilang gisulti nga dili niya kaya. If dili gyod nila kaya, then mofile silag exemption. Panahon nga mohatag na pud sila sa mangagawa,” Dennis Derige, the party’s spokesperson, said in a phone interview on Tuesday, June 13, 2023.

(They are lying when they say they can’t afford it. If they truly can’t afford it, they can file for an exemption. It’s time for them to start giving back to the workers).

The bill filed by Senate President Juan Miguel Zubiri calls for a P150 daily across-the-board increase in the salary rates of employees and workers in the private sector whether agricultural or non-agricultural, regardless of capitalization and number of employees.

The senator pitched the bill as a relief measure in the face of the rising cost of goods and services.

At present, the National Capital Region has the highest daily nominal wage rate, at P570 (non-agriculture), while the lowest is at P316 (non-agriculture), for the Bangsamoro Autonomous Region in Muslim Mindanao.

The joint position paper was signed by heads of the Philippine Chamber of Commerce and Industry (PCCI)-Visayas, Cebu Chamber of Commerce and Industry, Mandaue Chamber of Commerce and Industry, Mactan Export Processing Zone Chamber of Exporters and Manufacturers Inc., Japanese Chamber of Commerce and Industry of Cebu Inc., People Management Association of the Philippines, Philippine Retailers Association-Cebu Chapter, Philippine Exporters Confederation-Cebu, Cebu Furniture Industries Foundation Inc. and the Hotel, Resort and Restaurant Association of Cebu Inc. together with the other business membership organizations in the Visayas, namely Bohol Chamber of Commerce and Industry, Negros Oriental Chamber of Commerce and Industry, Siquijor Chamber of Commerce and Industry, PCCI- Panglao Chamber of Commerce and Industry, and the Bohol Association of Hotels, Resorts and Restaurants.

The groups also adopted the position of the National Wages and Productivity Commission in questioning the constitutionality of the proposed across-the-board wage increase.

“We believe that the proposed legislated increase infringes the mandated role of the Regional Tripartite Wages and Productivity Board to determine minimum wage increases and is excessive, oppressive and confiscatory,” the groups said.

Mobilize reps

Partido Manggagawa is urging the representatives of Cebu’s 11 congressional districts to help pass SB 2002.

Derige said they are mobilizing efforts so that all Cebu districts will approve the bill once tackled in the House of Representatives.

“Anhi man gyod na magtigi sa Kongreso. Kung mosugot lang tanan natong mga districto, seguradong dakong tabang ni sa pagpasa sa balaod,” he said.

(This will truly be decided in Congress. If all our districts agree, it will certainly greatly contribute to the passage of the law.)

Specific reasons

The Visayas-based business groups said implementing a wage increase without considering the country’s comparative disadvantage would worsen its international position, hampering the country’s ability to attract investors that would generate much-needed employment and livelihood opportunities.

“Current investors such as smaller companies may not be able to survive while the bigger companies (especially multinational) may seek other options/country to transfer business where labor cost is still low compared in the Philippines,” they said.

To allay fears that a wage hike increase would drive foreign investments away, Zubiri in the past showed the minimum wages of neighboring Association of Southeast Asian Nation members.

He cited Indonesia as having a minimum daily wage equivalent to P842; Malaysia, P854; and Singapore, P2,486. Only Vietnam has a lower minimum wage, equivalent to P511 a day, but the senator emphasized that its cost of living, under the communist Party of Vietnam, is lower compared to the Philippines.

Job indicators

Moreover, while there has been a reported decrease in unemployment in the Philippines, the groups underscored that “unemployment rate alone is an insufficient indicator of the overall working conditions.”

The group noted job losses in sectors such as agriculture and manufacturing as well as the increase in the employment of part-time workers, who can be categorized as visibly underemployed.

“Forcing an arbitrary wage increase will further undermine the quality of jobs being generated,” the groups explained.

The country’s April unemployment rate dropped to 4.5 percent from 5.7 percent in the same month last year. Jobless Filipinos stood at 2.26 million, a decline of 506,200 from the 2.76 million unemployed persons in April 2022.

Distortion

The groups added that enacting a national legislated wage hike would distort wage rates across different regions.

They argued that the supply and demand for labor vary significantly across regions, making it inappropriate to impose a one-size-fits-all labor solution to a labor-related issue.

They noted that “the standard of living in each region should be the defining factor in determining wage rates, and setting wages should be the responsibility of regional wage boards that can consider local economic conditions and evidence-based dynamics needed for an equitable and fair location-specific judgment.”

The groups also said companies do not apply an across the-board increase if there is a minimum wage increase. Rather, they implement the distortion formula to manage the compression of salaries for tenured employees.

“A performance and productivity-based wage compensation ensures deserving workers are given their due share of the fruits of their labor.”

Higher inflation

In addition, implementing a wage increase without addressing the root causes of inflation would have serious implications for the economy.

The groups warned it would lead to higher inflation, which would result in higher interest rates and increased costs of living for all.

“Such a move can be considered an ‘economic suicide,’ as increasing wages to combat high commodity prices perpetuates a vicious cycle that harms the economy and the vulnerable population.”

Wage adjustments could also create a ripple effect, resulting in increased costs of producing goods and services.

“As companies raise employee wages, they will be forced to pass on the additional charges to their goods and services to continue operation. Absorbing these additional costs could potentially lead to headcount reduction or layoffs and business resizing,” the groups said.

“The P150 would really hurt the companies’ financial security and can lead to business establishment closures, further exacerbating unemployment rates and loss of income. The companies still recovering from the pandemic will find it more difficult and challenging to recover – a situation many MSMEs find themselves in after the pandemic,” the group emphasized.

Businesses grew

But Derige said businesses including SMEs are able to afford the increase because businesses grew steadily in the past year.

“Mobalik ra man gihapon ni sa atong mga negosyante kay kung ang atong mga tawo naay kwarta ikapalit, mopalit man gyod na sila. Modaghan ra gihapon ang negosyo,” he said.

(This will still go back to our business owners because if our people have money to spend, they will indeed spend it, and businesses will continue to grow.)

As for micro businesses that really cannot afford the wage hike, Derige said the law affords exemptions and anyway, these businesses employ only a few people at a time.

Appeal to gov’t leaders

Instead of an across-the-board wage hike, an industry-driven wage hike is more realistic, according to the groups.

“The government should consider creating a regional industry wage board that will consider the economic situation of each company, large, medium or small, and the wherewithal and resources in line with respective performance. Or support a Collective Bargaining Agreement type of solution per sector,” they said.

The groups also called for the government to prioritize expanding economic activity and attracting investments to complement labor and local productivity.

“By attracting foreign and domestic direct investments, we can create more job openings and stimulate economic growth,” they said.

The government must also proactively address inflationary pressures, particularly regarding the prices of basic goods and services, high utility costs (especially power and water), fuel prices, and the importation of goods.

They also underscored the importance of boosting the agricultural value chain and developing new farming and fishing technologies to improve productivity and reduce dependency on imports.

Give back

Aside from an already cooling inflation rate regime and an improved business climate, Zubiri’s strong stance to file a P150 wage hike stemmed from his desire to give Filipinos decent wage amid the high cost of living. The wage hike should cover the cost of food, water, fuel, electricity, clothing, transportation, rent, communications and other personal needs.

The inflation rate slowing for a fourth straight month in May to 6.1 percent, from 6.6 percent in April, 7.6 percent in March and 8.6 percent in February.

Zubiri also underscored that since most businesses have recovered from the losses, it is now their turn to give back to their workers through a wage hike.

He reminded businesses of the pro-business policies the Senate passed in the past years.

In 2021, Congress passed the Corporate Recovery and Tax Incentives for Enterprises Act (Create), which brought down the corporate income tax from 30 percent to 25 percent.

He also detailed how the Senate blocked the Department of Finance’s proposal to double the dividends tax, after the passage of Create.

SB 2002, introduced by Zubiri last March 14, is still pending in the committee on labor and employment level. The bill is supported by senators Loren Legarda, Maria Lourdes Nancy Binay and Christopher Lawrence Go.