The Israel-Iran war is now five days old, and the immediate impact is a crude oil price hike. From an average of $61-$62 per barrel from early April to early June 2025, West Texas Intermediate (WTI) crude quickly jumped to $68-$73 per barrel from June 13 onwards. The war looks like it will last for several weeks or months, so elevated world oil prices will be with us.
I checked data on the previous wars in the Middle East, the oil price hikes that followed, and the inflation rates of G7 countries and selected Asian nations at the time. China and Vietnam do not have inflation data from the 1970s so I removed them from the list.
Four periods that had oil price shocks are covered: 1.) 1974, mainly as a result of the big Yom Kippur war in October 1973, which saw Israel fighting against Egypt and Syria; 2.) 1979-1980, mainly a result of the Iran civil war, and political instability in Saudi Arabia and Syria; 3.) 1999-2000, mainly due to the Palestinian intifada vs Israel, civil wars in Indonesia, Liberia, and Yugoslavia, the First Russo-Chechen War, and the India-Pakistan war; and, 4.), 2011, which saw civil wars in Libya (when Khadaffy was toppled), Syria, Lebanon, and the Iraq insurgency.
All G7 countries experienced high inflation during those four periods except Canada in 1979-1980, and Japan in 2000 and 2011. The Philippines and other Asian nations also experienced higher inflation on those periods except in 2000 (see Table 1).
So, if the current price of $68-$73 per barrel remains for several weeks and months, the Philippines’ inflation rate can quickly jump from 1.4% in April and 1.3% in May, to 1.8-2.5% in June-July onwards. The economic team should prepare contingency measures for this possibility.
LEGISLATED WAGE HIKE AND THE ECONOMIC TEAMSee these recent reports in BusinessWorld: “House approves P200 wage hike bill” (June 5), “Labor condemns failure of minimum wage bill despite willingness to compromise on P100 hike” (June 12), “Economic managers warn wage hike bill to slash GDP growth” (June 12).
I say “bravo” to the government’s economic team — Cabinet Secretaries Frederick Go, Ralph Recto, Arsenio Balisacan, Amenah Pangandaman, and Ma. Cristina Roque — for taking a clear position about the dangers of legislated wage hike, instead of going through the regional wage negotiations.
I checked recent data on wages in Asia and GDP growth over the past three years, and the simple comparison yielded a not-surprising result: economies with high wages — above $2,500/month at purchasing power parity (PPP) values — grew slowly, from 0.7% to 3.4%, while economies with lower wages — below $2,500/month — had higher average growth, from 4.5% to 7.8% with the exception of Thailand (see Table 2).
Here are six facts about wages and employment that socialist-leaning activists do not or cannot comprehend.
1. Employment in private enterprises is a private contract between employees and employers, not between employees and government or NGOs, media, and academics.
2. Wage is a function of productivity, not the number of kids a worker has, and not the number of legislators and NGOs making noise about wage intervention.
3. Productivity varies within the same corporation, so workers doing similar jobs in the same corporation have varying wages and benefits.
4. The most degrading experience for people is not being hired at all, and not being “exploited” by employers; so the real minimum wage is zero, not P600/day or so.
5. The most liberating environment for workers is having plenty of jobs available, including ease of hiring themselves and creating jobs for their friends via entrepreneurship.
6. “Easy to hire and easy to fire” is consistent with expanding jobs opportunities; “hard to fire” leads to hard to hire unless workers are highly productive and can use machines and robots to replace other workers.
The Philippines’ wage-setting at the regional wage boards and tripartite meetings among government, employers, and labor unions is itself a violation of wage as a function of productivity but it is a good compromise.
Congress has erred in attempting to legislate a big wage hike nationwide and ignoring the role of productivity as a determinant of wage adjustments. But Congress has redeemed itself by not passing the bill for bicameral approval and ratification.
The economic team is correct in opposing a legislated wage hike; the detractors and socialist-leaning activists are wrong. My unsolicited advice to the latter — they should try being entrepreneurs themselves and very likely they will behave and reason out as the current employers are.
Bienvenido S. Oplas, Jr. is the president of Bienvenido S. Oplas, Jr. Research Consultancy Services, and Minimal Government Thinkers. He is an international fellow of the Tholos Foundation.
