P125 wage hike to wreak havoc on economy

Business
Employers Confederation of the Philippines (ECOP) has voiced grave concern over the tremendous adverse and destructive consequences of the P125 across-the-board wage hike approved on third and final reading by the House of Representatives.

ECOP President-elect Sergio Ortiz-Luis, Jr. said such magnitude of an across-the-board legislated wage adjustment would wreak havoc on the country's fragile economy.

Ortiz-Luis said a legislated salary increase for all private sector workers which is not productivity-based, would cause a chain reaction of disastrous proportions, such as:

Unprecedented spiraling cost-push inflation.

The cost of labor is one of the factors of production. If the cost of labor is unduly raised by mandated wage increases, then it would cost more to produce the same quantity of output and the increased cost is then passed on to the market. Companies which could not pass on the increased cost because of the competition offered by low-cost imports, will simply have to retrench or close shop;

Massive job losses and unemployment.

As it is, the Philippines is experiencing the phenomenon of jobless-growth. Official statistics show that the only time that the economy was able to create more jobs than the 699,000 new jobs were created; and

Minimal use of labor-intensive operations or technology in industry which will find it more cost efficient and productive in the long run to resort to automation, capital-intensive technology and the deployment of a small but highly-skilled workforce.

Expressing employers' vehement opposition to the legislated wage hike, Ortiz-Luis pointed out that there is no market economy in the world that would arbitrarily compel all enterprises, whether big or small, to grant an "excessive and unsustainable across-the-board pay increase to all their employees from the lowest rank to the top executives in complete disregard whatsoever to its effect on the viability of the individual enterprise and to the sanctity of collective bargaining agreements (CBAs)." Even micro enterprises registered under the Barangay Micro Business Establishments (BMBE) law would be compelled to pay under its provisions, he added.

Under the Congress-approved House Bill No. 345, all employers in the private sector - whether agricultural or non-agricultural, regardless of capitalization and number of employees - are mandated to pay their workers an across-the-board P125 increase a day to be paid in the following manner: an additional P45 a day retroactive in 2006; an additional P40 a day in 2007; and likewise an additional P40 a day in 2008.

According to ECOP Chairman Miguel B. Varela, a legislated wage increase would worsen the wage-competitiveness of the Philippines in the region. As it is, the Philippines has already the highest minimum wage rates or entry level for unskilled workers as adjusted to productivity in the region.

In as much as the massive wage increase is not productivity-based, it would cause the further deterioration of the productivity and competitiveness of the Philippine economy in the world market. It is sad to say that in the past decade, Philippine labor productivity has progressively declined or remained stagnant as compared to neighboring countries, Varela pointed out.

Ortiz-Luis noted that the wage hike bill is "anti-labor and anti-poor" as well considering that it violates the Constitution and Section 2 of Republic Act (RA) 6727, otherwise known as the Wage Rationalization Act. Under Section 2 of RA 6727, the State is mandated to promote collective bargaining as the primary mode of setting wages and other terms and conditions of employment.

In addition, he said a legislated wage adjustment would further exacerbate the inequity between the 5.7 million employed in the formal sector and rest of the labor force of more than 28 million who will not enjoy the increase but whose marginal income, if any, will be further eroded by the double digit inflation caused by the increase. (PNA)



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