P16k national minimum wage within the capacity of employers to give, will only mean average 17.1% cut in profits

Research group IBON said that granting a substantial wage hike is not inflationary if small and large employers absorb an insignificant cut in their profits and not pass the slightly higher labor cost to consumers.

IBON is reacting to a statement by the Department of Labor and Employment that a higher wage increase will result in price increases. This was after labor groups criticized the recent decision of the Regional Tripartite Wages and Productivity Board granting a very low Php15-increase in the minimum wage in Metro Manila.

Labor groups are calling for a Php16,000 national minimum wage, which according to IBON is within the capacity of employers to give and will only mean an average 17.1% cut in their profits. Latest government data shows that establishments in the country with total employment of 20 and over had combined profits of Php1.57 trillion and 4 million workers. Granting this minimum wage will only cost establishments an additional Php66,738 per year (assuming 13 months of pay) for every employee. According to IBON, the total cost of the proposed wage hike is just Php268 billion, which when deducted from their total profits will still leave them with a very huge Php1.30 trillion in profits.

IBON reiterated that the wage increase will not be inflationary if employers accept this slight decrease in their profits. It also pointed out that higher labor costs are not the reason for accelerating inflation, noting that the prices of basic goods and services have been skyrocketing even without any wage increase.

The research group emphasized the importance of higher wages in the economy as among the most effective means to improve workers’ welfare and make growth truly inclusive. A substantial wage increase will not only provide immediate relief for workers and their families, but will also spur domestic demand in the economy. (end)