THE GOVERNMENT should focus more on measures that would reduce the impact of inflation on Filipinos, instead of implementing wage hikes that would likely force many businesses to pass on these costs to consumers, analysts said.
The minimum wage in the National Capital Region (NCR) increased by P40 starting Sunday (July 16), bringing the daily minimum wage to P610 for workers outside the agriculture sector and P573 for workers in the agriculture sector, service retail establishments with 15 or fewer workers, and manufacturing companies with less than 10 workers.
Foundation for Economic Freedom (FEF) President Calixto V. Chikiamco said that while the recent NCR wage order may not be large, it will likely compel small businesses to pass on the additional costs to consumers.
“The majority of workers, however, are not in the formal sector and won’t enjoy the mandated wage increase. Therefore, they will suffer from the increased prices as a result,” Mr. Chikiamco said in a Viber message.
“Instead of mandating wage increases, which only benefit a minority, the government should liberalize food importation to reduce food inflation, which will benefit the poor the most,” he added.
Headline inflation slowed for a fifth straight month in June to 5.4% from 6.1% in May, as food and transport costs eased. However, June marked the 15th straight month of inflation exceeding the Bangko Sentral ng Pilipinas’ 2-4% target band.
Year to date, inflation averaged 7.2%, still higher than the revised 5.4% forecast by the central bank.
While food inflation decelerated to 6.7% in June from 7.5% in May, data showed faster annual price increases were seen in rice, fish, and vegetables.
University of Asia and the Pacific (UA&P) Senior Economist Cid L. Terosa said the minimum wage hike will add about 0.06 to 0.1 percentage point to the average inflation for the next six months.
“Hence, the National Economic and Development Authority (NEDA) statement that the minimum wage increase is unlikely to drive inflation appears to have weight,” Mr. Terosa said in an e-mail.
Last week, the NEDA said the inflationary impact of the minimum wage increase would be minimal and is unlikely to push inflation above the BSP’s 2-4% target range.
According to Mr. Chikiamco, the central bank may have already factored in the modest wage increase in its inflation forecast this year.
The Philippine central bank sees inflation returning to the 2-4% target range by October. Full-year inflation is seen to average by 5.4% this year, before further slowing to 2.9% in 2024.
Meanwhile, Hansley A. Juliano, a political economy researcher studying at Nagoya University’s Graduate School of International Development in Japan, said wage hikes are supposed to boost workers’ purchasing power.
“When the value of money is going down, insisting on not raising wages is essentially reducing the worth of wages, especially those at minimum levels. To insist on not raising their wages is condemning them to below minimum living conditions,” he said in a Messenger chat.
He cited a June 26 blog by International Monetary Fund economists, which noted that rising corporate profits accounted for about half the increase in Europe’s inflation over the last two years as firms raised prices by more than the costs of imported energy.
“If anything, regulation should and always be directed towards seeing how corporate profits are subsequently reused/reinvested or divested via taxation,” Mr. Juliano said.
He added that overspending or overinvestment at the executive levels needs to be monitored and assessed, rather than attributing inflation to workers’ demands.
In the Philippines, several labor organizations have filed petitions seeking to increase the daily minimum wage in other regions. The regional wage boards of Central Luzon, Calabarzon, Western Visayas and Central Visayas will likely decide on pending petitions by September.
Under the Labor Code, wage boards must consider demands for higher living wages amid movements in inflation and changes in each region’s cost of living. — Keisha B. Ta-asan
