Bangko Sentral chief clarifies stand on wage hike issue

MANILA, Philippines—The Bangko Sentral ng Pilipinas said it was not opposing a P25 increase in the minimum daily pay as perceived by some labor groups.

The BSP clarified that a P25 pay adjustment was what it used as an assumption in estimating its inflation forecasts for this year and in 2012.

Latest projections by the central bank said that inflation could reach as much as 5 percent this year, the ceiling set by the government, and below 4 percent in 2012, taking into account various assumptions, including a wage increase of P25 a day.

Under the government’s official economic targets, inflation should be kept at 3-5 percent this year and next. Such a target points to a level of price increases that is manageable for consumers and businesses and is still supportive of economic growth.

Using the central bank’s estimates as basis, a wage increase of more than P25 a day could push inflation this year to a level in excess of the 5-percent ceiling set by the government if all other factors affecting inflation, such as prices of food and oil among others, actually stay at assumed levels.

The BSP, mandated to keep inflation within moderate levels, said it was not opposed to a wage increase of more than P25 a day, explaining that all it was saying was that its estimates pointed to a potentially higher-than-targeted inflation if wages were to be raised beyond the P25 assumption.

“What we are saying is that P25 is what we used as an assumption [in estimating our inflation projections]; we did not say the wage hike should be actually that amount,” BSP Governor Amando Tetangco Jr. said.

He said the BSP did not have the authority to determine wage increases, but simply provided inputs asked by the regional wage boards.

Nonetheless, the central bank agrees that a very high increase in wages without a corresponding increase in productivity would be disadvantageous to the economy.

“Very high wage [increase] will be counterproductive,” BSP Deputy Governor Diwa Guinigundo said, adding that the amount of increase, to be determined by the wage boards, should strike a balance between the interests of workers and employers.

Economists said an increase in wages, since it raises purchasing power, tended to push demand of consumers for goods and services. The increase in demand should be matched by an increase in supply, thus the need for higher productivity as well, to avoid a steep increase in prices. –Michelle Remo, Philippine Daily Inquirer