Labor Secretary Arturo Brion said an across-the-board legislated increase in salaries would have a "disastrous" effect on employment and the business climate, even if done on a staggered basis.
"The proposed P45 wage adjustment will put at risk the employment of 476,000, while 361,000 are bound to be displaced in the P40 increase and another 323,000 would get laid off in the last round of the salary hike," he said.
"If this eventually becomes a law, who could withstand this – only the big companies. What will happen to the micro, small and medium enterprises?"
Brion said 99.6 percent of commercial establishments in the country are small and medium enterprises that could not afford a P125 increase in pay for workers.
A legislated wage hike could also discourage collective bargaining and trade unionism since there is no more reason to go through the bargaining process, he added.
Brion said a legislated increase in pay would result in higher add-on-costs for employers as there are other wage-related benefits like 13th month pay, social security system and Pag-IBIG contributions.
"Due to said add-ons every peso wage increase translates to a P1.21 cash outlay for employers," he said. "Therefore, a P45 increase is actually P54.45 additional cost for employers."
Instead of a legislated wage hike that could benefit only a small portion of workers in the private sector, wage adjustments should be done through regional tripartite wages and productivity boards, Brion said.
At Malacañang, Executive Secretary Eduardo Ermita said yesterday the government stands firm that the issue on wage hikes must be left with the regional wage boards.
"Malacañang is very sensitive to such issues," he said.
"Malacañang is sensitive even in the declaration of holidays. That is the reason why whenever you ask me when such and such a date will be declared a holiday, I always tell you we have to consider the recommendation of the DOLE (Department of Labor and Employment) and also the business community."
However, Ermita could not say if President Arroyo would veto a bill seeking a P125 wage hike nationwide.
"I would not say that Malacañang is behind the legislated wage increase," he said. "All I know is that we are depending more on the existence of the regional wage boards."
The rationale behind the creation of the wage boards was precisely to determine in the regions the various factors that would justify the need for salary increases, he added.
The House of Representatives is not withdrawing its approval of the P125 wage hike bill in the face of strong opposition from businessmen.
It passed the bill before Congress went on a three-week Christmas recess on Dec. 16.
The bill aims to grant minimum wage earners a salary increase of P125 a day spread over three years: P45 in the first year, P40 in the second and another P40 in the third year, minus any amount that the regional wage boards have granted.
Senators are reportedly in favor of the House bill seeking to grant a P125 wage hike to workers.
Meanwhile, the Employers Confederation of the Philippines (ECOP) ruled out yesterday a possible compromise on the implementation of the P125 across-the-board legislated wage hike.
"An across-the-board legislated wage increase undermines the viability of most enterprises in the country, particularly the small and medium enterprises (SMEs) that are providing jobs and livelihood to millions of Filipinos," ECOP president Sergio Ortiz-Luis said.
ECOP chairman Miguel Varela said the efforts of the business community to keep the economy afloat would be "put to naught" due to the adverse implications of a legislated increase in pay.
"Its full implementation could reach as high as 1.2 trillion pesos based upon the total number of workers (12,262,000) in private establishments as of end-2005," he said.
Ortiz-Luis warned that should lawmakers insist on a legislated wage hike "more and more businesses would have no choice but to go underground." — With Aurea Calica