Some businesses may go underground, ECOP warns

Published by rudy Date posted on May 11, 2011

MANILA, Philippines—The P22-increase in the cost of living allowance of minimum wage earners may cause some small and medium businesses to fold up or explore other options to stay afloat, the Employers Confederation of the Philippines (ECOP) said Tuesday.

ECOP president Edgardo Lacson said employers had no choice but to comply with the order of the National Capital Region’s wage board.

“The order was way above what we wanted, which was P13.35 a day. … Those who can afford it can just comply with the order, while those who can’t afford it will have to seek other options,” he said in a telephone interview.

Lacson said employers could seek an exemption, “which is very difficult due to the number of requirements.”

“Or they can move to the informal sector. What we’ve noticed is that every time there is a wage hike order, some businesses go underground and move to the informal sector,” he said.

Citing government data, Lacson said only 16 percent of businesses were part of the formal sector—down from 26 percent a few years ago.

Permanent impact

With the new order to hike the cost of living allowance by P22 a day, more businesses may be forced to go underground, he said.

He added that this was bad for the country because businesses in the informal sector did not have to comply with labor standards.

“Whether a cost of living allowance or wage hike, it’s all the same because the impact is permanent. This oil price crisis, on the other hand, is an aberration. It’s temporary. The solution today may become the problem tomorrow. We’re discouraging upstarts or new businesses, which generate the most jobs. We’re discouraging the formation of new businesses,” he said.

Lacson said the minimum wage scheme was instituted to protect new graduates and unskilled workers.

Changed landscape

“Now, the landscape has changed. Our minimum wage level, at P404 a day, is already too high. That makes us noncompetitive with our neighbors. Also, very few countries in Asia have a minimum wage mechanism,” he said.

Of the 38 million people in the Philippine workforce, only 2 million are minimum wage earners, according to Lacson.

And among businesses, the small and medium enterprises are the ones most affected by wage board orders because they are the ones that employ minimum wage earners, he said.

What the government has to do is to revise and amend antiquated labor laws, Lacson said.

“They need to make our labor laws attuned to the times and the global setting,” he said. “It has to be recognized that we’re a free market, and a free market is ruthless. We’re also in a labor-surplus economy. With higher supply comes lower prices.” –Abigail L. Ho, Philippine Daily Inquirer

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