The P200 daily minimum wage hike bill recently approved on third and final reading by the House of Representatives is not the panacea to rising prices or the dwindling purchasing power of our paychecks.
From the surface, it seems like a great idea especially from the standpoint of a minimum wage earner. But if you think it through, you will realize that while it seems like the perfect solution, it is not.
When wages are raised, do you think it will increase the money in your pocket? Of course, you’ll probably say. But here’s the more important question, with more money in your pocket, do you think you will be able to buy more goods and services?
This time, you won’t be able to answer this question as quickly. Because the truth is that more money in your pocket doesn’t necessarily mean you’ll be able to buy more goods and services. You see, the prices of goods and services can also increase.
This is why increasing the minimum wage will not necessarily solve the problems of the minimum wage earner.
When the minimum wage is raised across the board without regard for the business climate, not to mention, the many other factors that drive the economy, it will simply kill small, micro and medium-sized businesses. To raise the cost of doing business will only drive those who survived the pandemic, an early death.
But it will also give false hope to minimum wage earners.
When business owners are faced with prohibitive costs of doing business like unreasonably high labor costs, they will either shut down or continue operations but pass on the labor costs to the consumers through higher prices in goods and services.
Ultimately, consumers, including minimum wage earners, will bear the brunt of the minimum wage hike because businesses, in order to survive, will be compelled to pass on these costs to them through higher prices of goods and services.
How do you cope with higher prices? You either increase your income or reduce your expenses.
Instead of raising wages, government can lower the cost of goods. I once lived in a country where the minimum wage was very similar to ours but the food was incredibly dirt-cheap. No one could go hungry. That’s what government should do.
With sufficient government subsidy and support, basic commodities can be sold at lower prices. Instead of raising wages, why not lower food prices? The same can be done with services. Why are utility costs so high? Government can step in and lower the cost of living for everyone.
I am never opposed to raising wages because everyone should have a chance to thrive but to mandate a national wage hike across the board without regard for geography, industry, skills or qualifications, is unreasonable.
Labor and business should work together. Government should sit in the middle. No business owner is opposed to paying high wages, that is, if they get what they are paying for. But the reality is that every business has in its payroll many unproductive and problematic employees.
There exist unfair labor practices. But there also exist abusive employee practices. Government should be fair to both sides.
I, personally believe, that the minimum wage law should be overhauled. It should be customized according to industry, not just geography. But it should also take into account, employee credentials.
Instead of mandating an across-the-board increase in minimum wage, government should provide tax incentives to encourage investment, generate jobs and create purchasing power in the economy. This is the longer but more sustainable route to financial stability.