Yearly minimum wage setting discourages investments - ECOP

MANILA, Philippines - The yearly setting of the minimum wage discourages businessmen from investing in the country, the Employers Confederation of the Philippines (ECOP) said.

In an interview, ECOP president Edgardo Lacson said that the yearly increase in the minimum wage makes labor cost in the Philippines not competitive when compared to our neighboring countries.

In fact, Lacson said that the minimum wage in the Philippines is among the highest in Asia. “There should be less intervention from the government. There should be a movement towards the free market.”

Lacson said that only those employed in the formal sector are benefited from the yearly increase. He estimated that the formal labor sector is only 16 percent of the population. This means that majority are unemployed or who are classified under the informal sector.

 “The formal sector is getting smaller every year. Every time there is an increase in the wages there is a migration from the formal sector to the informal sector,” Lacson noted.

Lacson said that they are proposing a two tiered minimum wage. It should be market oriented and market driven. He said that the national index minimum wage should take into account the productivity level of each industry.

He said that there should be a floor wage but then the productivity of the firms in the industry must also be considered in setting the wage. “We should add the productivity element and not make the purchasing power of people the sole basis for setting up minimum wage.”

Likewise, he said that politics play a major role in the giving of increases. For instance, in the latest round of increases, it should have only gone up by P18 based on the inflation rate. However, the wage board granted a P22 increase because of politics and other matters that have no relation to the business.

 He said the minimum wage must be set per sector in order to make it more friendly to both the employers and the employees. He said that if the industry is failing then setting a higher minimum wage might lead to lay offs. Corollary to this, if the industry is booming, then it can afford to pay higher wages to its people.

 He said they are willing to pilot this program on some industries. He cited the shipping industry as a possible pilot industry.

 Lacson said the unemployment rate now is three percent while the underemployed is seven percent.