Gov’t prepares non-cash labor benefits

MANILA, Philippines – The government plans to offer workers a package of non-cash benefits, including expanded social and health insurance, to head off a large wage rise as it tries to manage inflation pressures and public anger at rising costs.

Regional wage boards will hold public hearings starting May 2 before deciding on an increase. Unions want a rise of P75-P125 in the daily minimum wage, which in Manila ranges between P367 and P404 depending on the industry.

The Bangko Sentral ng Pilipinas has factored in a wage rise of 25 pesos into its forecast for inflation, which it already expects to be near the top of its 3-5 percent target band this year.

Ciriaco Lagunzad, head of the government’s National Wages and Productivity Commission, said the central bank’s position would be considered by the wage boards.

”There is a possible inflation impact if the increase are too high, and the central bank had said if the increase is more than P25, there might be an inflation effect,” he said.

The central bank raised interest rates in March, and many analysts think it could lift them again at the next review on May 5. The central bank has said it was ready to act to manage inflation expectations.

Annual inflation was 4.3 percent in March, unchanged from February. But the February rate was a nine-month high, and the inflation rate has risen from 2.8 percent in October.

”I would like to think if the inflation rate continues to increase, they will come out with some form of income augmentation plan, at least to restore impact of inflation on the purchasing power,” Labor and Employment Secretary Rosalinda Baldoz told Reuters after the launch of a labor and employment plan.

Baldoz said her agency has recommended the government announce a package of non-cash benefits, technical training and soft loans for micro-businesses on Labor Day on May 1.

She said about 98 percent of 700,000 companies in the country were small and medium-sized enterprises that would struggle to pay a P125 across-the-board wage increase, favoring the current mechanism where regional boards take into account local economic conditions.

The government has drafted a six-year labor and employment plan to lower unemployment from 7.4 percent in 2010 to 6.8-7.2 percent by 2016 by creating one million jobs each year, including in sectors such as tourism, business process outsourcing and infrastructure and construction. (Reuters)