Exporters buck proposed P125 minimum wage hike

By Richmond Mercurio (The Philippine Star), October 3, 2016 – 12:00am

MANILA, Philippines – Exporters are opposing the proposed nationwide P125 minimum wage increase as it would affect economic growth and the country’s trade competitiveness.

In a position paper, Philippine Exporters Confederation Inc. president Sergio Ortiz Luis Jr. said cost of production of goods and services would increase as a result of the massive across-the-board daily wage increase which he noted is “not productivity-based.”

Ortiz-Luis said companies could not just simply pass on the increased cost of goods to the market mainly because of the competition offered by low-cost imports and smuggled goods.

“In the process, companies which are unable to recover the increased cost of production would have no other choice but either to retrench or worse, close shop, or simply go underground, rather than risk severe penal sanctions,” he said.

Ortiz-Luis said small and medium enterprises would also be directly and adversely affected, considering that most SMEs could barely cope with the periodic wage adjustments.

He also expects the wage adjustment to further reduce the “already small” formal sector and expand the informal or unorganized sector.

It would also result to disastrous consequence on competitiveness, growth and quality employment, the export group official said.

“It may have positive effects only on the formal sector which employs only 15 percent of the labor force. However, its adverse impact on the economy is far-reaching, considering that the formal sector is estimated to produce about 60 percent of gross value-added,” he said.

According to Philexport, the country’s labor wage would be one of the highest across ASEAN should the proposed salary hike be implemented.

Ortiz-Luis said the country should learn from China which is experiencing an economic slowdown partly due to rising labor costs.

“Wages in China’s east coast have soared almost six-fold in seven years and many factories have shut down as a result. Its labor-intensive industries are moving to countries such as Bangladesh and Vietnam,” he said.

Ortiz-Luis is proposing instead for amendment and modernization of the Labor Code, specifically to allow workers and companies to freely negotiate wages.

He said the country could also create special economic zones where labor-intensive industries could be set up, exempt from the mandatory implementation of legal minimum wages.

“Labor-intensive industries like garments and light manufacturing had been avoiding the Philippines because of the high minimum wages. These prospective investors instead choose to locate in Vietnam and Indonesia,” he said.