THE Philippine Institute for Development Studies found the minimum wage policy as detrimental to the growth of the labor sector in the country.
In his study, “Effects of minimum wage on the Philippine economy,” Leonardo Lanzona Jr. concluded that the minimum wage policy reduces employment.
The study also found that minimum wages caused firms to reduce their production workers.
“Because of this, it is difficult for small firms to mature into larger-scale firms. In the process, the production and the demand for production workers decline. Because small-scale firms have started to decline, larger firms are able to acquire more production workers, presumably at starting wages lower than what experience workers would have received in smaller firms. These firms are not able to rehire all the laid-off workers, and the poorer workers who may need cash in the short term may find these arrangements inferior to their previous jobs,” the research added.
Moreover, “…firms are reluctant to hire younger, less educated, and female production workers. To minimize costs, increasing training for these younger and less educated production workers may not longer be an option as minimum wages rise.”
“These findings may have serious consequences in the way the Labor Code affects production efficiency, as well as social protection. There is thus a need to coordinate these policy areas in a way that reinforces one another,” the study said.
Dr. Aniceto Orbeta, senior researcher of the government attached agency, meanwhile, stressed it is not the immediate intent of PIDS to recommend government to scrap the minimum wage policy.
But the real challenge, Orbeta said, is how the government will address the gap in the labor sector as a means to lift the lives of many marginalized Filipinos.
“Truth is, we have small and medium enterprises which badly need workers but are hampered by the minimum wage policy afraid of its legal impediments while we also have workers who are willing to work under the minimum wage but are not being hired,” Orbeta said during a recent press conference.
“We are pushing for decent wages in that what we can’t provide for in terms of daily wage, government could make up for it through shouldering the health insurance of the employee and their pension contributions,” he said.
The researcher also suggested for government to study lengthening the probationary period of an employee.
“Presently, policy dictates that an employee who has been with the company for six months must already be regularized. We are looking into lengthening this period to give employers the chance to really get to know its employee and see if he is indeed fit to work in the company,” Orbeta said.
This policy, according to Orbeta, also contributes to the fast turnover of employment in some companies.
These are only some of the challenges government needs to address to be able to promote jobs for inclusive growth.
PIDS is the lead government agency in policy research needed to craft effective plans and policies for the country’s development.