Wage increase proposal

On 14 February, the Senate approved on second reading a landmark measure mandating an acrossthe-board increase of P100 to the daily minimum wage of workers in the private sector.

If this measure becomes law, it would be the first time that a legislated pay hike would be implemented nationwide since the enactment in 1989 of Republic Act 6727, or the Wage Rationalization Act, which mandated that salaries be set on a regional basis by wage boards.

The Senate expects the measure to hurdle a third and final reading next week and has appealed to members of the House of Representatives to do their part and pass their counterpart of the wage hike measure.

This measure seems laudable from the viewpoint of the affected workers in the private sector. However, we should all remember that there are two sides to this equation, which are labor and employment.

Labor may simply be defined as the amount of physical, mental and social effort used to produce goods and services in an economy. This is from the side of the workers. On the other hand, employment may be defined as work for which one has been engaged and is paid for by an employer. This is from the side of the employers.

The primary argument advanced in favor of raising the minimum wage is that an increase in take home pay would improve the overall standard of living of minimum wage workers by providing them with a more appropriate income level to deal with inflation and the increasing cost of basic commodities.

Meantime, one intangible benefit that could translate to benefits for both employers and employees is improved employee morale resulting from higher wages.

Improved employee morale could easily translate to more tangible benefits, such as increased employee retention and reduced hiring and training costs. Employees who are more inclined to stay with a company could benefit their employers with the continued availability of the best skills and talents.

The boost to the economy is another potential advantage of increasing the minimum wage, as consumer spending typically increases along with wages. A higher minimum wage would put more money in the pockets of millions of workers — money that would then flow to businesses.

A not-so-apparent consequence of increasing the minimum wage is the typical reaction of employers and businesses to raise their prices which results in inflation. Raising the minimum wage would likely lead to wages and salaries rising across the board. This would increase operating expenses for companies, and they would then increase the prices of their products and services to cover the increased labor costs.

Increased prices unfortunately often mean a general increase in the cost of living that could essentially negate any benefits gained by workers having more money to bring home and spend.

Another projected problem resulting from an increased minimum wage is the potential of job losses and layoffs. Labor expenses are a major cost of doing business. Businesses may be forced to cut jobs to maintain profitability or even stop doing business altogether if they fail to keep up with increased costs.

While I am not against increasing the minimum wage, I do recognize that the proposed measure needs to be thoroughly studied first. The unintended problems may outweigh the intended benefits. If businesses cease operations, unemployment will increase and there will be a bigger problem to solve.

I hope that in passing this proposed measure, a middle ground is reached. One that will benefit the workers but at the same time consider the interests of employers and businesses.

“One intangible benefit that could translate to benefits for both employers and employees is improved employee morale resulting from higher wages.

“While

I am not against increasing the minimum wage, I do recognize that the proposed measure needs to be thoroughly studied first.