THE Philippines is bound to further lose its competitiveness against its Southeast Asian neighbors with the approval of a P25 wage hike for workers based in the country’s capital, employers warned on Monday.
In a document sent to the BusinessMirror, the Employers Confederation of the Philippines (Ecop) said increasing the minimum wage—whatever the amount may be—will distort the country’s profile to investors. This could further imperil the Philippines’s investment reputation following its dismal showing in competitiveness rankings, such as the World Bank’s ease of doing business survey.
“Periodic increase in minimum wage will affect the image of the country as an investment destination. Unreasonably and unpredictably high labor cost is a disincentive to investment, both foreign and local,” the document read.
“Among our [Southeast Asian] neighbors, the Philippines already has the highest minimum wage rate, with the exception of Singapore, Thailand and Brunei [Darussalam], whose economies are far better than the Philippines. [This will] impact on the ease and cost of doing business,” it added.
The Ecop warned this could result in the Philippines further slipping in competitiveness rankings deemed crucial in maintaining good standing with investors. In the World Bank’s 2019 report on ease of doing business, the country plunged 11 notches to 124th among 190 economies due to its low ratings on getting credit, starting a business and enforcing contracts.
“The impact of the minimum wage increase might cause the Philippines to slip in the competitiveness ranking,” Ecop said.
It added “businesses will have a limited way to expand operations and reach a bigger market.” As a consequence, the opportunity to generate more employment is put at risk, Ecop added.
The business group also claimed only a small portion of the labor force will gain from an increase in minimum wage. It said only 2 million, or 5 percent, of the more than 40 million workers in the country are minimum-wage earners.
The Ecop reported the number of minimum- wage earners in Metro Manila stands at 952,485. A wage hike will only make it difficult for firms to absorb the millions of unemployed and underemployed waiting for opportunities to open, it added.
It recommended the government to explore other options and approaches in mitigating the effect on workers of surging prices of basic goods other than raising wages. One of which, it put forward, is the lifting of the excise tax on fuel under the Tax Reform for Acceleration and Inclusion law.
“The government should not pass on the burden of protecting the welfare of workers to employers alone,” Ecop said.
“We must be able to attract more investments and promote enterprise growth and development to create more opportunities for the economy and address the persistent problem of poverty. We must give way for holistic approaches rather than stopgap measures, such as periodic wage adjustments,” it concluded.
Apart from the World Bank’s report, the Philippines also fell nine places to 50th among 63 economies in the IMD World Competitiveness Rankings 2018. However, the survey owed
the decline not on the country’s labor cost, but on slowdowns in tourism and employment, worsening of public finances and concerns on education.
In contrast, the Philippines jumped 12 notches to 56th among 140 economies in the Global Competitiveness Index 4.0 of the World Economic Forum. The country performed best in market size (32nd) and labor market (36th) in this survey.