FEF: P100 minimum wage hike would turbocharge inflation

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The Foundation for Economic Freedom Inc. (FEF) over the weekend expressed its opposition to a measure pushed in the Senate seeking to hike the minimum wage of private sector workers by P100, saying this would “turbocharge” inflation.

In a statement released Sunday, the FEF said the proposed wage increase would push companies to charge higher prices, driving a wage-price spiral that would then lower the purchasing power of the public.

“We are not against wage increases but we urge the Senate not to tamper with the existing mechanism of regional wage boards to adjust wages if needed,” the statement read.

“Regional wage boards take into account the interests of both employers and workers and the different cost and employment situations of various regions,” it added.

The statement came after the Senate last weekend approved on second reading Senate Bill 2534 or “An Act Providing for a 100 Pesos Daily Minimum Wage Increase for Employees and Workers in the Private Sector.”

The FEF said the wage hikes could accelerate inflation further and force the Bangko Sentral ng Pilipinas (BSP) to hike interest rates, causing companies to cut down on investments and lower employment.

The central bank’s benchmark rate is currently at a 16-year-high of 6.5% to tame inflation. Higher rates generally slow the growth of the money supply, as it increases the cost of credit.

Inflation clocked in at 2.8% in January, slower than the 8.7% print in January 2023, and the slowest since October 2020’s 2.3%. The BSP expects it to average 6.0% this year.

“Instead of a nationally legislated wage increase, we urge the government to liberalize food imports by reducing the tariffs on rice from 35% to 10% and abolishing or vastly expanding the import quotas for corn, chicken, pork, and fish,” the FEF said.

“Liberalizing food imports will see an immediate fall in the price of food, thereby increasing the purchasing power of all Filipinos, whether formally or informally employed and whether senior citizens or babies,” it added.

The Employers Confederation of the Philippines (ECOP) also sounded the alarm over the proposal last week, arguing that it would be a “catastrophe” and would compel companies to increase the cost of their products or reduce manpower.

For its part, the Regional Tripartite Wages and Productivity Boards issued orders for increases in the minimum wages of employees in Northern Mindanao, the Zamboanga Peninsula, Cagayan Valley, Central Mindanao, and Central Visayas, among others. — DVM, GMA Integrated News

This article FEF: P100 minimum wage hike would turbocharge inflation was originally published in GMA News Online.