EXPORTERS strongly opposed the proposed P125 minimum wage increase nationwide, saying its will cut economic growth and lead to mass layoffs.
In a position paper, Sergio Ortiz Luis Jr., president of the Philippine Exporters Confederation Inc. (PhilExport), said a wage hike will directly affect small and medium enterprises (SMEs) because many of them will no be able to implement it.
He noted that the cost of production of goods and services will increase resulting in higher prices.
Ortiz-Luis said companies could not just simply pass on the increased cost of goods to the market because of the competition offered by cheap imported products and smuggled goods.
“In the process, companies which are unable to recover the increased cost of production would have no other choice but either to retrench or worse, close shop, or simply go underground, rather than risk severe penal sanctions,” he said.
Ortiz Luis said any wage adjustment will reduce the already small formal sector and expand the informal or unorganized sector, “with disastrous consequence on competitiveness, growth and quality employment.”
“. . . It may have positive effects only on the formal sector which employs only 15 percent of the labor force. However, its adverse impact on the economy is far-reaching, considering that the formal sector is estimated to produce about 60 percent of gross value-added,” he added.
The export group further said the proposed P125 salary hike is implemented, the country’s labor wage, particularly at the National Capital Region (NCR), will be one of the highest in Asia.
Ortiz-Luis noted that the country can learn from China which is experiencing an economic slowdown partly due to rising labor costs.
“Wages in China’s east coast have soared almost six-fold in seven years and many factories have shut down as a result. Its labor-intensive industries are moving to countries such as Bangladesh and Vietnam,” he added.
Ortiz-Luis proposed instead the amendment and modernization of the Labor Code to allow workers and companies to freely negotiate wages.
He said the country can create special economic zones where labor-intensive industries could be set up, exempted from the mandatory implementation of legal minimum wages.
“Labor-intensive industries like garments and light manufacturing had been avoiding the Philippines because of the high minimum wages. These prospective investors instead choose to locate in Vietnam and Indonesia,” Ortiz-Luis said.
Meanwhile, the Cebu business community, composed mainly of micro, small and medium enterprises (MSMEs), also sought a moratorium on wage increase.
In a joint manifesto, the group said it recognized the government’s “pro-poor” initiative to adjust wages in order to rationalize the wage structure and alleviate the plight of the vulnerable section of the labor force.
However, the Cebu business community pointed out that prevailing concerns on environmental, peace and security had adversely affected domestic business operations.
“Whereas, the government’s plan for a mandated across-the-board wage increase has struck fear in the hearts of Cebu business as it is bound to result in further closures, unemployment, price inflation, loan defaults, loss of investment/s and the further losses of the stock exchange as well as the value of the Philippine peso,” it said.