Moderate wage hike won’t affect employment, prices — study

ALBAY –  Backed by firm-level data and national price trends, recent research finds no evidence that moderate minimum wage hikes in the Philippines will hurt employment or fuel inflation.

Two quantitative studies from University of the Philippines’ (UP) School of Labor and Industrial Relations show that the economy can absorb moderate wage hikes without triggering job losses or inflation. Both were key concerns raised in debates over House Bill 11376 that proposed a P200 ($4) daily wage hike nationwide.

The first study used data from the 2013–2017 Annual Survey of Philippine Business and Industry (ASPBI) and applied a Difference-in-Differences (DiD) approach to compare employment changes in regions that implemented minimum wage hikes versus those that did not.

The second study analyzed the relationship between real wages and inflation using Vector Autoregression (VAR) with quarterly wage and Consumer Price Index (CPI) data from 2003 to 2020. This method tracked how changes in real wages influenced price levels over time.

Its findings suggest that past moderate wage increases pose no major risk to jobs or inflation rates, although the study doesn’t directly assess the impact of the P200 wage hike. 

Can a P200 wage hike be considered as moderate?

While a 31% increase in Metro Manila’s minimum wage may seem bold by today’s standards, it’s far from unprecedented. The study cites the last legislated wage hike in 1989, which was even higher at 40 percent, and notes that the economy absorbed it without causing a crisis. This emphasizes the study’s broader point: a fair wage hike helps restore workers’ rightful share in national growth.

“Workers have not shared in the fruits of their labor,” the study points out, with real wages remaining largely stagnant despite steady productivity growth since 2001. It adds that any inflationary effects of higher wage growth could be offset by rising productivity.

UP Professor Benjamin Velasco, one of the study’s authors, noted in a Facebook post that employers and policymakers are using a small group of workers to deny the broader workforce the benefits of the P200 legislated wage hike.

“[Although] microenterprises make up 90% of all firms, they employ only 30% of the workforce. These include carinderias, barber shops, and small tailor shops—businesses that are already exempt from paying the minimum wage. This means that a wage hike would benefit the remaining 70% of workers—the overwhelming majority,” he said.

Moreover, Velasco emphasized that MSMEs are a diverse group, with small and medium firms generally having enough capital to absorb the impact. While higher wages may reduce income for some microenterprises, they could still benefit from stronger consumer demand driven by the middle class, he added. 

In Bicol (one of the regions with the lowest real wages in the country) private school teacher Elma (not her real name) told Bulatlat she supports the proposed P200 wage hike due to the rising cost of basic goods. 

As of May, the region’s real wage, which reflects the true value of its P415 minimum wage after adjusting for 2.2% inflation, stands at just P312, according to BusinessMirror.Her husband, also a minimum-wage earner in Albay, works for a telecommunications company where he receives a rice allowance and a cash incentive for meeting quotas. Still, she said the increase would be a big help for their family of six, with three children still in school and one about to graduate from college. (RTS, RBV)

The post Moderate wage hike won’t affect employment, prices — study appeared first on Bulatlat.