Sergio Ortiz Luis. Jr., new president of the Employers Confederation of the Philippines (ECOP) said forcing companies to increase the daily pay of workers would wreak havoc on the business community and on the country’s economy in general.
"A legislated salary increase for all private sector workers which is not productivity-based, would cause a chain reaction of disastrous proportions," Ortiz Luis said.
Since cost of labor is one of the factors of production, Ortiz Luis said a mandated wage increase would make it costlier to produce the same quantity of output and prompt manufacturers to pass on the increased cost to the market.
"Companies which could not pass on the increased cost because of the competition offered by low-cost imports, will simply have to retrench or close shop," he pointed out
Ortiz Luis said some manufacturers may resort to automation which is more cost-efficient and productive in the long run but can also result in high unemployment in the country.
Under House Bill No. 345, all employers in the private sector — whether agricultural or non-agricultural, regardless of capitalization and number of employees — are mandated to pay their workers an across-the-board P125 increase a day to be paid in the following manner: an additional P45 a day retroactive in 2006; an additional P40 a day in 2007; and likewise an additional P40 a day in 2008.
The proposed measure is now awaiting final reading and approval of Congress.
According to Ortiz Luis, if implemented, the proposal will result in further deterioration of the productivity and the competitiveness of the Philippine economy in the world market.
A legislated wage increase, he added, will exacerbate the inequity between the 5.7 million employed in the formal sector and the more than 28 million workers who will not enjoy the increase because of the resulting double-digit inflation.