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Wage hikes need not cause higher prices — IBON

July 20, 2018

by IBON Media

Research group IBON said that substantially raising the minimum wage of Filipino workers need not lead to price hikes, contrary to the recent claims of National Economic and Development Authority (NEDA) Secretary Ernesto Pernia.

IBON said that wage hikes should be taken from profits instead of being considered a cost of production passed on to consumers through higher prices. The group added that legislating a decent minimum wage is possible since the economy and corporations make more than enough profits to support workers and their families.

Latest data from the 2015 Annual Survey of Philippine Business and Industry (ASPBI) indicate that 216,995 establishments of all employment sizes have Php15.1 trillion in total profits and 5.8 million employees. Raising the Php378.71 average daily basic pay (ADBP) of workers to, say, Php750, will only transfer 28.6% of these profits. Applying this to bigger establishments (with 200 workers and over) that account for Php1.2 trillion in profits and 2 million employees just transfers 18% of profits, said the group.

IBON said that wage hikes will not necessarily result in higher prices if employers accept a small cut in their profits. And while large corporations can more easily fund a substantial wage increase than can micro, small, and medium enterprises, government can assist the latter. This can be in the form of irrigation facilities, farm-to-market roads, improving production and storage facilities especially in agriculture, giving tax breaks and incentives, marketing support, and local integration of supply chains, among others.

A substantial wage hike is also possible because the wealth workers produce for the economy and companies is more than they are paid, said the group. Latest official data show that labor productivity is practically at Php1,317.52 per day in 2015 while the ADBP of Php378.71 during the same period only comprised 29% of this value. Increasing Filipino workers’ incomes will also increase their consumption capacity, stimulating demand for goods and services in the domestic market.

IBON said that the government and corporations should not use the threat of price hikes to deny Filipino workers a substantial and decent national minimum wage. Not only is increasing worker’s wages doable and just; it is also necessary to cope with the rising cost of living that is being aggravated by the Duterte administration’s continued implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) Law. ###