Salary increase of more than P20/day inflationary — DBCC

Wage adjustments of more than P20 per day on the national average could create inflationary pressures that could trigger monetary action, the Development Budget Coordinating Committee (DBCC) warned yesterday.

Amid intensifying calls for a minimum daily wage increase, the DBCC said its 2004 assumptions factored in "some level of minimum wage adjustments" but only up to eight percent on the average, translating to an increase of about P20.

The minimum daily wage is adjusted by individual regional wage boards, but a top DBCC official said the Cabinet committee was closely monitoring the national average which was set at eight percent.

According to the source, the emerging proposals for the minimum wage adjustment ranged between P50 to P75 in Metro Manila equivalent to 17.85 percent and 26.78 percent of the minimum wage in the region of P280 a day.

"But that’s only in Metro Manila," the official said. "It’s possible to average that out on the national level since the push for wage adjustments in regions outside Metro Manila is normally not that great."

The official said the wage hike is likely to happen after the May elections once the new administration takes over. "There is that usual euphoria right after the elections," the official said.

The official explained that at eight percent minimum wage adjustment, the DBCC would be able to stay within its inflation target of four to five percent for 2004.

Beyond this, however, the official said the adjustment of the minimum wage could create inflationary pressures that in turn could force the hand of the Bangko Sentral ng Pilipinas (BSP).

According to BSP Governor Rafael Carlos Buenaventura, on the other hand, the impact of any wage increase was not likely to be felt until next year.

"Like what we’re always saying, higher inflation may require monetary action," Buenaventura said, although he declined to indicate what type of monetary action would be considered by the Monetary Board.

The MB last touched its interest rates in July when it increased the policy rates by 25 basis points. Since then, it has been resorting to adjustments in its liquidity reserve requirements while leaving policy rates unchanged.