The Logic Behind a Legislated Wage Hike

Jan. 16, 2007

Defending a legislated wage increase is not just merely a result of ones bleeding heart for the impoverished but has compelling empirical data that are interpreted in a way that seriously considers the rights and welfare of workers.


Those who are against a legislated wage increase government officials, employers and neoliberal economists are now on a propaganda offensive as they paint a grim scenario of, among others, widespread closure of establishments and economic slowdown if workers would have their way.

Nevertheless, they are right in saying that, in finally passing House Bill No. 345 seeking a P125 ($2.55, based on an exchange rate of P49.015 per US dollar) nationwide, across-the-board wage increase for private sector workers, majority of members of the House of Representatives are just simply trying to redeem themselves from the negative publicity brought about by their attempt to railroad the changing of the 1987 Constitution.

This face-saving gesture becomes more apparent as pro-administration legislators refuse to defend the need for a substantial wage increase, choosing to remain silent and just let organized labor groups engage their detractors in a debate and, for that matter, take the issue to the streets.

Even if the P125 ($2.55) wage bill is now pending in the Senate, it is unlikely that this will be enacted into law because of the news that President Gloria Macapagal-Arroyo would use her veto power if ever it is passed by Congress. Executive Secretary Eduardo Ermita and Presidential Adviser for Political Affairs Gabriel Claudio were quoted as saying that Malacaang agrees with the arguments of the countrys economic managers and business groups regarding the P125 ($2.55) legislated wage increase.

It may be recalled that business groups like the Employers Confederation of the Philippines (ECOP) and the Makati Business Club (MBC) said that an increase in the daily wage, especially at this time, is inflationary and would trigger mass layoffs as well as force many companies to close shop.

For his part, National Economic and Development Authority (NEDA) Director General Romulo Neri said that a wage hike will only result in the loss of over a million jobs and a two-percentage point increase in the countrys inflation rate. He added that if the Senate had its way of giving a one-time increase of even just P100 ($2.04) in the daily minimum wage as opposed to HB 345 that grants P125 ($2.55) in three tranches: P45 ($0.92) in 2007, P40 ($0.82) in 2008 and 2009 the growth rate of the gross domestic product for 2007 will drop to 2.5 percent, way below the current projection of 5.7 percent.

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