Creba backs wage increase but urges reforms first

The Chamber of Real Estate and Builders Associations (CREBA) urged the government yesterday to immediately institute two win-win reform measures before granting the labor sector’s clamor for a minimum wage increase.

In a statement, Manuel M. Serrano, CREBA board chairman said:

"A minimum wage hike is long overdue. With the current levels and the spiraling prices of basic necessities, a family of three with a single breadwinner can survive only under sub-human conditions.

"However, if wages are increased without first instituting ameliorative measures for the business sector, industries will not survive – and consequently, labor will suffer a worse fate – because businesses are similarly reeling from the prohibitive cost of all production inputs on one hand, and depressed markets on the other.

"For three years now, CREBA has been advocating that the minimum daily wages be hiked by P500, subject only to two conditions:

"1. That productivity standards are first raised to reasonable levels and thereafter, wage levels must be strictly based on the attainment of these standards; and

"2. That Congress legislates an interest rate ceiling of nine-percent tax free, and effects the wage hike after a reasonable transition period.

"A nine-percent interest rate on bank loans will subsequently lower production costs and thus enable the business sector not only to absorb wage hikes, but also to stabilize if not actually reduce the prices of goods and services.

"It will also preclude sudden interest rate spikes which invariably drive businesses – and the entire economy – into a tailspin at the slightest sign of some temporary economic or political aberration.

"The combined impact of the wage hike and stabilized prices will in turn raise purchasing power and effective demand, thus providing the necessary spark to revitalize business activity across the entire economic spectrum, and propel the economy towards recovery and robust growth.

"The reduction in production costs due to reduced interest rates will also enhance the global competitiveness of the country’s producers, particularly the export sector, even as it would result in a higher level of housing and construction activity, which would in turn spark business opportunities for six other industries dependent thereon.

"The banking system itself will gain rather than lose from an interest rate cap, since a re-energized and more robust business sector will mean greater demand for loans and less prospects of non-performing loans, even as the increase in consumer purchasing power will also result in hiked savings.

"And after all, a nine-percent tax-free interest rate effectively translates to a 12-percent yield, which is still much higher than worldwide levels.

"Even government itself will benefit through reduction of its domestic debt service burden on one hand, and increased revenues from expanded business activity throughout the entire economy, on the other.

"A legislated interest rates ceiling is neither radical, novel nor experimental. It is simply a restoration of the previous Anti-Usury Law, which for decades had driven our economy to heights of economic growth.

"It was when interest rats were deregulated and allowed to rise to exorbitant levels that our economy started suffering major reverses – from which it has not recovered to this day – and mass abject poverty has become endemic.

"Needless to say, business enterprises which do not borrow, and as such do not avail of the benefits of the interest rate cap, must be entitled to exemption from the wage hike requirement."