REQUIRING the private sector to pay its workers 14th-month pay will cause inflation to spike and the Philippines to lose its competitiveness against Southeast Asian peers, employers warned on Tuesday.
Employers Confederation of the Philippines (Ecop) President Sergio R. Ortiz-Luis Jr. said institutionalizing the grant of 14th- month pay to workers could injure the operations of micro, small and medium enterprises.
MSMEs will apparently be left with two options to shoulder higher labor cost: increase the prices of their products or reduce their work force.
“If you force that [14th-month pay] on them, they will either pass it on to buyers by raising prices—which is inflationary—to shoulder the additional cost, or they will lay off some of their workers to lessen business cost,” Ortiz-Luis said over the phone.
He argued that inflation is only beginning to temper this year after hitting a record high of 6.7 percent in September and October of last year. Ortiz-Luis said the government is in no position then to approve measures that could spike consumer prices.
“Large corporations can afford even more than a 14th-month pay, but what about our MSMEs? Most of them, particularly the small and micro firms, cannot. If you exempt them from the law, however, the large corporations might think they are being singled out,” Ortiz-Luis added.
In 2017 the Philippine Statistics Authority (PSA) reported there are a total of 924,721 business establishments in the Philippines, of which 99.56 percent, or 920,677, are MSMEs. They generated 4.92 million jobs that year as against the 2.9 million created by large enterprises.
‘Counterproductive’
PHILIPPINE Chamber of Commerce and Industry Chairman George T. Barcelon said mandating the payment of a 14th month is counterproductive to government efforts to make the Philippines competitive in the region.
“It is inflationary and detrimental to our competitiveness. We will only deprive our country of competitiveness against our peers in the region, especially on labor cost,” Barcelon said in a phone interview.
Last year a minimum-wage earner in the Philippines was paid between $169.99 and $287.24 monthly depending on the region where the worker is based, according to government data.
When the Philippine figures are pitted with Southeast Asian competitors, Indonesia provides a lower monthly minimum pay of $90.71 to $227.55, as well as Vietnam at $143.2 to $161.74. Malaysia is within the same range as the Philippines at $223.7 to $243.16, while Thailand’s labor cost is higher at $282.69 to $302.88.
“Businessmen are generally not in favor of that [14th-month pay] because of its potential negative impact on the economy and the investment climate,” Barcelon said.
He said there is no need for such measure, as many firms are supposedly giving out performance-based incentives to their workers on top of the mandatory 13th-month pay. Too much wage and incentives regulation could be restrictive for investors, Barcelon argued.
Further, he said there are a number of social services in place aimed at cushioning the impact of rising commodity prices on workers and their dependents, including the lowering of personal income-tax (PIT) rates under the Tax Reform for Acceleration and Inclusion (TRAIN) law, free tuition in state universities and colleges and the free train ride for students.
Although the TRAIN law reduced PIT rates, it applied excise taxes on fuel, sugar-sweetened beverages, coal, automobile, among others. It was largely blamed for the price surges last year that pushed inflation to a new record high.
“The government implemented a lot of huge reforms that cut down the expenses on taxes, education and transportation of our workers. That should be enough. All of those reforms are in remedy of their plight,” Barcelon said.
For think tank IBON Foundation, the government should study the proposed P750 national minimum wage if it really intends to give workers with a higher take home. IBON Foundation Executive Director Jose Enrique A. Africa said a P750 daily wage will reflect in the overtime and holiday pay of workers, which is not the case in the 14th-month pay.
“Any measure increasing the take-home pay of underpaid workers is always welcome, so the proposed mandatory 14th-month pay is, in that sense, an improvement,” Africa said in a statement.
But, he added, “the majority of workers who are paid the minimum wage or less would be better off with the proposed P750 national minimum wage. Their annual salary will be higher and will also count as part of their overtime pay, holiday pay and the like, which is not in the case of the 14th-month pay.”