P125 wage increase likely to discourage investors – economist

The proposed P125 legislated daily wage hike will likely discourage investors from putting up businesses in the country, a school-based economist said yesterday.

Peter Lee U, dean of the University of Asia and the Pacific’s School of Economics, said the minimum wage hike would pull up the cost of labor in the Philippines, which is already more expensive when compared to neighboring countries like Thailand.

The National Competitive Council (NCC) said   Bangkok has a minimum daily wage of between $3.47-$4.37 while Manila has $6.17. With House Bill 345 advocating the wage increase, the Philippine daily wage would further increase by as much as to 38.4 percent or a total of $8.65 per day.

"Labor cost is significant for businessmen. It was one of the things that they look at before investing," the economist explained. "We are already very expensive."

As such, he warned that regulators must be very careful in implementing the legislated increase in wages.

Instead, he suggested that the increase be implemented on a case-to-case basis. "It should be based on each individual company and whether or not the firm can afford the increase," he said, adding that the matter should be studied carefully.

Earlier, the NCC was created to oppose the wage hike and detail its ill effects to the economy. It concurred with the National Economic and Development Authority’s (NEDA) estimate that about 1.16 million jobs would be lost if the wage hike is pursued.

According to the council, the proposed wage hike would trim down the growth forecast of between 5.7 percent and six percent in the next three years to just between 4.3 percent and 4.9 percent.

 "Mandating a minimum national wage increase would worsen the country’s competitiveness as an imbalance is created between the decent wage needed by labor and the improved competitiveness of the country to generate more jobs," the group said.

 "We also share the Employers Confederation of the Philippines and the Philippine Chamber of Commerce and Industry’s position that (the wage hike) would accelerate the marginalization of the formal sector and the expansion of the informal sector or the so-called underground economy," it added.

The NCC is made up of government and private sector representatives. Trade and Industry Secretary Peter B. Favila represents the government as co-chairman while Cesar Bautista, a former Trade and Industry Secretary himself, sits as the private sector counterpart.