Foreign investors buck across-the-board wage hike

MANILA, Philippines - The Joint Foreign Chambers of the Philippines (JFC) is opposing petitions for an across-the-board wage increase in Metro Manila, saying it could lead to layoffs and make the country less attractive for new investments.

In a letter to Regional Tripartite Wages and Productivity Board chairman for the National Capital Region Alex Avila dated Aug. 1, the JFC said “a wage increase at this time could result in layoffs, especially among MSMEs (micro, small and medium enterprises).”

While many of JFC’s members are large companies and conglomerates that pay more than the minimum wage, the group said that an upward adjustment in the current minimum wage would have an impact on a large number of businesses, particularly MSMEs, which would have to streamline their operations and pass on the cost to consumers.

The group noted that higher minimum wage could force the MSMEs resort to layoffs, which would place workers in the informal sector without having benefits or any form of safety net.

Apart from layoffs, “a wage increase will imperil the increased interest in the country as an investment destination.”

The group explained that since manufacturing firms are relocating from China, Japan and Thailand, there are opportunities for the Philippines to attract these foreign companies. But a wage increase could prevent the country from getting these new investments as rising labor costs in the past have resulted in the closure of factories here.

According to the National Wages and Productivity Commission, the Philippines has the highest minimum wage in Southeast Asia. Metro Manila’s minimum wage of $10.74 per day is above Myanmar’s $0.52, Cambodia’s $2.03, Vietnam’s $3.15, Indonesia’s $7.46, China’s $8.08, Thailand’s $9.75 and Malaysia’s $9.75.

The JFC also said the wage hike would only benefit a few people. Roughly 2.4 million minimum wage workers or 5.8 percent of the workforce of 41 million Filipinos in the formal sector would benefit from the adjustment, but the inflationary consequence of the wage hike would affect all workers.

“The real problem in the labor sector is unemployment and underemployment – a total of over three million unemployed and some 12 million underemployed,“ JFC stressed.