The country’s business community on Wednesday warned the government against approving an across-the- board P10,000 hike in the monthly pay of public school teachers, as this will result in fiscal deficit ballooning to 4 percent—the highest in nearly two decades.
Business groups appealed to the government to be prudent in implementing pay hike for educators. They said giving in to the demand for an immediate P10,000- per-month increase will take a toll on the country’s fiscal standing, as well as on inflation, GDP growth and credit ratings.
“On the macroeconomic impact on the fiscal sector, the P150 billion annual cost of the salary increase is roughly 1 percent of GDP,” business groups said in a statement.
“To appreciate the magnitude of this, we note that the entire annual budget for the conditional cash transfer program—which benefits 4.3 million households and promises to break intergenerational poverty—will cost less than half of this. The difficult to pass Tax Reform for Acceleration and Inclusion [TRAIN law] raised less than half of this,” they added.
Business groups reminded the government it has no clear funding source for an across the board P10,000 increase in the monthly salaries of public-school teachers.
“As such, it will raise the national government annual fiscal deficit from 3 percent to 4 percent of GDP. The last time our fiscal deficit to GDP breached 4 percent was in 2002 and 2003, driving the country’s credit rating down by two rungs,” business groups warned.
“This led to higher borrowing cost to both government and private sectors, and lower investments,” they argued.
The business community reminded the government that economic collapses are results of fiscal imprudence brought about by unmanaged salary increases and poorly targeted subsidies. It cited the crisis faced by Venezuela, which is suffering from hyperinflation due to political and economic turmoil.
“We, thus, commend the efforts of the secretaries of finance, education and budget to improve the pay of our public-school teachers while preserving the country’s economic gains,” business groups said.
“And we fully endorse the proposal of fiscal and education authorities for moderated adjustments in pay which are phased, reflect recent salary adjustments made, benchmarked to the market and other civil service employee comparators, count the benefits of TRAIN law on their take home pay, and are matched by new revenue. This should allow approach to the sought for P10,000 salary increase over time,” they added.
Public-school teachers are demanding President Duterte to make good his campaign promise to increase their pay.
The joint statement was signed by the Action for Economic Reforms, Financial Executives Institute of the Philippines, Foundation for Economic Freedom and the Makati Business Club. It was also inked by the Management Association of the Philippines and the Philippine Business for Education.
Image credits: Roy Domingo