JFC on minimum wage increase: it will present more cons in the long run than pros

The Joint Foreign Chamber of the Philippines (JFC) is not in favor of the “across-the-board wage increase” in Manila, in reference to the petitions for minimum wage hike in the National Capital Region (NCR).

In a statement on Tuesday, the JFC said that if a minimum wage increase at present would be granted, it would not yield to benefits, but instead would negatively affect the sectors in the long run.

“We believe that such measures will have unintended adverse consequences that in the long run can adversely affect the very sector that they wish to benefit,” the JFC said.

This is in reaction to the separate petition of the workers filed through the Trade Union Congress of the Philippines (TUCP) to have increases of P83 and P85 in the daily wages of Metro laborers.

The JFC said that they are not against minimum wage increase. But they are only concerned with wages being competitive but not to the point of losing jobs for the workers as investors tend to “avoid the Philippines in favor of other countries with lower labor costs” and that the local market is selling “more imported than locally made products.”

First point they raised: “A wage increase at this time could result in lay-offs, especially among MSMEs [micro, small and medium enterprises].”

The chamber argued that the sudden increase in labor wages can lead to lay-offs as investors and MSMEs cannot handle the additional costs that they will pass on to consumers that will result in price increase. They said that if the increase happened, businesses can resort to lay-offs, sudden inflation, and the dispatch of laborers to the informal sector as their employers or businesses in the formal sector do not have the capability to grant them the increase, or even let them have “lower compensation.”

The JFC also said that “a wage increase will imperil the increased interest in the country as an investment destination” because there are other country destinations that has potentials in business but with lower labor costs.

According to the National Wages and Productivity Commission (NWPC), the Philippines has the highest minimum wage rates in the Association of Southeast Asian Nations (Asean) with $10.74 per day minimum wage, in comparison to Indonesia with $7.46, China with $8.08, Thailand with $9.75, Malaysia with $9.75, Vietnam with $3.15 and Cambodia with $2.03.

With the country having the most expensive minimum wage, the Philippines is ironically leading in unemployment in Asean. The Philippines incurred 7 percent unemployment rate in 2012, while the country’s neighbors have lower unemployment rates by far—Indonesia with 6.5 percent unemployment rate, Thailand with 0.7 percent, Malaysia with 3 percent and Vietnam with 3.6 percent.

The chamber pressed that sudden surge in labor cost would equate to closing of factories and establishments, which the country should avoid as the Philippines is attracting foreign companies to relocate their manufacturing units in the country.

They also raised that the adjustment would only benefit “6 percent of the total workforce” in which the 94 percent will negatively affect the other labor sector as only 2.4 million Filipinos are minimum wage earners, compared to the rest of the 38.6 million Filipinos earning higher rates that would be affected greatly with the adjustment.

Cost of living allowance in the country continues to rise, totaling to P52 per day that is “enough to cover inflation for the two years from May 2011 to May 2013.”

“The key to improving the plight of our workers is to increase their employability and competitiveness. We believe that ultimately, compensation should be tied to productivity as determined by enterprise-level conditions,” the JFC said.

“Wages should not be political in nature, legislated, and without regard for the nuances of the industries and individual enterprises that drive the Philippine economy,” the chamber added. KRISTYN NIKA M. LAZO, Manila Times