The wage hike conundrum

At a small food kiosk near our place, I had a chance to talk to the owner who told me he was actively looking for a new spot because his lease is higher than prevailing market prices – more expensive by roughly P400 per square meter.

That, plus the cost of looming wage increases, makes doing business difficult for small entrepreneurs like him.

I am sure our MSMEs find the P85 daily wage hike too high.

But first, let me state that I strongly support an increase in wages. I know it is very much needed, especially in these difficult times when people are desperate for help. Just about everything is skyrocketing – food, fuel, tuition, rent, electricity, water, association dues, tolls, transport fares and many more.

And just in – inflation in July remains elevated at 6.2 percent, although slower than the 6.4 percent inflation rate in June and the 6.8 percent rate seen in May.

I very much feel the impact of the rising cost of living in the country and as part of the labor force, I am one with our workers in calling for a wage increase.

But covering the economy for some time now, I am also well aware that the P85 wage increase is something that would be too challenging for small businesses. I know how hard it is to run a business, especially with all the fees and taxes. I used to own a bookstore but had to close my shop because my greedy landlord opted to increase my lease – unreasonably high.

Populist

For sure, an P85 increase is yet another populist measure by the Marcos administration. Perhaps newly appointed Labor Secretary Francis Tolentino wanted to score some “pogi points.” Well, those points are just way too costly for micro businesses.

The conglomerates, for sure, would be able to afford an increase of P85 but for MSMEs which make up 99 percent of the economy, it will be too much.

I recently had a chat with George Barcelon, chairman emeritus of the Philippine Chamber of Commerce and Industry, about the wage hike and he said that as a businessman, he is amenable to a P60 wage increase, delivered in two tranches – P30, P30.

But the P85, he said, would indeed be too high for small businesses.

A million new graduates

It would also affect employment in the country. We all know it’s graduation season now with at least another one million people added to the workforce.

How will they be able to find jobs if there aren’t enough gainful opportunities because of challenges such as a wage increase?

Barcelon, however, stressed that he understands the situation. He said it is inevitable that wages should increase. It’s just a matter of arriving at an agreeable rate.

“We understand the situation and we should all try to help,” he said.

Similarly, Management Association of the Philippines president Donald Lim recognizes the need to help workers cope with rising living costs.

For him, however, the real solution is improving productivity to boost workers’ incomes.

“Wage increases by themselves are not a long-term solution. Lasting improvements in workers’ incomes must come from higher productivity, stronger economic growth and better quality jobs,” he said.

The focus, he said, should now be on helping both workers and businesses by improving the ease of doing business, lowering logistics and energy costs, investing in skills and technology and creating an environment where wage growth is driven by productivity rather than mandated increases alone.

A Pasig City Regional Trial Court issued a temporary restraining order last month which suspended the wage hike until Aug. 13, 2026. The P85 increase was structured in two tranches, P60 on July 25 and P25 on Jan. 20, 2027.

MAP’s Lim said while businesses will respect and comply with the new wage order, many MSMEs will face additional cost pressures that could affect hiring, expansion and pricing decisions.

These business groups of course will always advocate for their interests, but in the case of the wage hike, they are correct in saying that the country’s small businesses will be severely affected.

Federation of Philippine Industries chair Elizabeth Lee said manufacturers are already grappling with elevated energy and logistics costs, tighter financing and global trade uncertainty.

“For MSMEs, which make up the bulk of the sector, the cumulative effect of these factors – not the wage order alone – is what will determine their capacity to sustain jobs and stay competitive,” Lee said.

Perhaps what the government can do is to exempt some MSMEs from the P85 increase and recognize that a one-size-fits-all hike could hurt the very workers it seeks to help.

MSMEs clearly operate on much thinner margins than large corporations.

They may be unable to absorb higher labor costs or pass these costs on to consumers, which, in turn, may backfire on the business.

In case you haven’t noticed, there are fewer diners in restaurants now. The servings are smaller and some ingredients have been replaced with cheaper alternatives.

As for non-food businesses, some have closed shop or are “under renovation.”

In these usual haunts of the middle class, one feels that vibe again we felt during the pandemic – somber and uncertain.

And yet, just as we did during the pandemic, Filipinos – small entrepreneurs and workers alike – just keep going, trying to survive even while the government remains seemingly oblivious to the realities on the ground.

*      *      *

Email: [email protected]. Follow her on X 
@eyesgonzales. Column archives at EyesWideOpen on FB.