Salary increase. Image from database

MANILA, Philippines – While the proposed P100 daily wage increase sounds good, top economists in the House of Representatives have warned that such a proposal could hurt micro, small and medium enterprises (MSMEs), which comprise a large portion of businesses in the country.

Marikina 2nd District Rep. Stella Quimbo, Albay 2nd District Rep. Joey Salceda, and Vice President Rep. David Suarez explained in a press conference on Monday that MSMEs may not be able to support the distribution of minimum wages around P700 – if a Senate bill seeking a daily wage increase of P100 is approved and signed into law.

Salceda said it would be good if the policy could only be applied to large companies, but MSMEs would be harmed if it were implemented.

“For the big (companies), if only we could separate the big companies, that would be possible, if it hits the MSMEs, they will all die. Because they can’t handle it, they really can’t handle it, as if 99% of our companies are MSMEs,” Salceda said.

(If we can do this just for big companies, fine, but it would hit MSMEs, eh, everything would die. They can't handle it, since 99 percent of our companies are MSMEs.)

“Why are there MSMEs who cannot pay P600 per day (salary), ah? So instead of having at least P400, they're going to cut it just so they can pay P700, because obviously we're at P600 now, right?” he said.

(Because some MSMEs can't handle P600 per day [salary]? So instead of having employees, instead of employees being paid the minimum wage, employers can fire workers just so they can meet the P700. [per day].)

Quimbo, an economics professor at the University of the Philippines, explained that this wage increase could be inflationary as companies would only shift the burden of increasing workers' wages to the cost of the services or goods they offer.

“If we increase the minimum wage, that means this is for all companies, what do you think will happen? What companies will do is pass on the salary increase to the price. So let's hope it's inflationary. Therefore, we will have inflation that pushes up costs”, said Quimbo.

(If we raise our minimum wage, that means this is for all businesses, so what do you think happens? Businesses would pass wages into the price of goods. That's why we might expect it to be inflationary. So we would have a cost-push inflation.)

“So you will temporarily satisfy our workers who are also consumers, right? So, eventually, the increase in their salaries will also be absorbed by the increase in the price of goods,” he added.

(So ​​eventually your salary increases would be eaten up by the higher cost of goods.)

Suarez, for his part, said small stores would be forced to lay off one of their employees just to implement the pay increase or, worse, close stores because they can't meet the higher wages.

“I have been advocating for the DOLE (Department of Labor and Employment) budget for five years and this has been a perennial issue. And I think Joey (Salceda)'s answer gets right to the point, we have a mechanism to address minimum wage […] and everyone is working,” he said.

“Like your business is repairing cell phones, you have four workers. 'When you increase all salaries, you either reduce the number of workers or close. So, I mean, it looks good, it feels good, but when it gets there, it might not be very good,” he added.

(For example, you have a cell phone repair business. You have four employees. But when you raise their salaries, you either reduce your workforce or close the store. So, I mean, it looks good, it feels good, But once that gets there, it might not be very cool.)

Last February 7, Senate Bill No. 2534, which proposes a P100 daily increase in the minimum wage for private sector workers, was forwarded to the Senate plenary.

Senate committee on labor, employment and human resource development chairman Senator Jinggoy Estrada said raising wages would help Filipinos cope with the burden of high commodity prices.

Salceda said he believes it is necessary to raise wages, but there must be a way for the increases to be implemented without hurting small businesses. According to Quimbo, the answer may lie in changing the economic charter (cha-cha) – the Chamber's defense of changing the economic provisions of the 1987 Constitution.

“Ako, I am really supportive of the salary increases. Except for a reason, 99% of our businesses are MSMEs, so would you want to kill them? So that’s the only problem, we need to increase, a more expansive macroeconomic environment and that can only happen—” Salceda said.

“With tea-tea. With economical cha-cha”, Quimbo joked.

READ: Zubiri on approval of RBH 6: Senate will not succumb to deadline pressure

“(No), with foreign investments,” Salceda replied, laughing.

READ: Chamber does not rush Senate into RBH 6, Cha-cha

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The Chamber has been pushing for economic changes to the 1987 Constitution, which they believe would usher in foreign investment. The Senate is currently tackling its own version of Both Chambers Resolution (RBH) No. 6 – a resolution calling for amendments, which was approved by the House in March 2023.