Employers fret over wage hike

THE central bank on Tuesday indicated the P22 wage hike decreed by the Metro Manila regional wage and productivity board for the metropolis would not have as great an impact as feared on inflation, but the modest rate has grimly disturbed employers. Malacañang Palace indicated the rise is reasonable under existing conditions, when business recovery remains fragile.

But employees, the apparent beneficiaries, are also disturbed since what small victory they had with regard to high prices may turn into a nightmare as employers on Tuesday floated the possibility of widespread job losses and even closure of companies that cannot afford the new round of wage hikes, which is expected to be replicated in other regions.

“With this new wage hike and [if] you are a company that is losing, the consequence is you lay off workers, implement cost-cutting measures like rotation of personnel, and ultimately shut down completely,” said Edgardo Lacson, president of the Employers Confederation of the Philippines, a day after the Metro Manila wage board issued its order.

This level of increase is not expected to push up inflation. “Our forecast inflation will not be revised
because the regional wage board in the National Capital Region allowed the rate to adjust by only P22 per day,” said Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr.

The policymaking Monetary Board, therefore, need not revisit the year’s inflation targets that range from 3.5 percent to 5.5 percent, and the BSP surmises the average should fall at 4.74 percent.

Lacson said other regional wage boards are expected to follow the P22 hike in Metro Manila—bringing the Metro daily wage to P404 from P382—that will take effect 15 days after publication and can no longer be appealed. Petitions for wage increase had already been filed in 16 out of the 17 regions.

“Metro Manila is the trigger. So after NCR [National Capital Region], it usually cascades to other regions. Right now it is only NCR, but it is safe to assume that other regions will follow,” added Lacson.

The problem with this, he said, is the timing. “Even the Bangko Sentral [ng Pilipinas] said it is not yet the time to implement the exit plans for the crisis. So this round of wage hikes is ill-timed. It will wipe out all our gains and even set us back.”

But even National Economic and Development Authority (Neda) Acting Director General Augusto B. Santos agreed the increase will not be inflationary. “I don’t think it’s inflationary, in fact it’s low. It’s really a compromise between labor demands and what the employers can afford. I think it’s a happy compromise.”

Leaders of business groups such as the Employers Confederation of the Philippines, through honorary chairman Sergio Ortiz-Luis, initially expressed apprehension the regional wage boards would permit adjustments at levels forcing many employers to close shop.

Ortiz-Luis also noted the wage adjustment for workers in the NCR has impact on only around 17 percent of the labor force.

Lacson insisted, however, the P22 rise is way beyond the capacity of most employers in Metro Manila. The erosion of the present minimum wage of P382, he added, is only 3 percent, or about P10 per day.

“We have to consider the income-tax exemption granted by law two years ago for minimum-wage earners amounting to P23 for single head of the family and P61 for married individual. Even without a wage increase, the tax benefit is more than enough to cover the P10 erosion in salary,” he said.

Also, Lacson said only 2.8 million minimum-wage earners will benefit from this wage order versus the 46 million workers in the informal sector, such as drivers, manicurists, golf caddies and self-employed individuals who are always left out by government wage orders.

Another problem, Lacson said, is its ripple effect on the salary of a company’s entire work force, from the laborers to the managerial level, and although companies are not bound to grant the demand of higher-ranked employees, businesses would not risk a scenario that will leave them demoralized from their daily pay being already almost the same as the minimum-wage earners.

That, Lacson said, is the “reality on the ground.” –(Max V. de Leon / Reporter with J. Vallecera, R. Mercene), Businessworld