Legislated wage hike poses economic risks
LAWMAKERS are again pushing bills to increase wages, measures that can adversely impact the economy. At the House of Representatives, the so-called Makabayan bloc proposed to raise the salary of public school teachers to P50,000. And at the Senate, a committee had approved on second reading an initiative to increase the minimum wage by P100.
Legislated wage increases are risky, if not perilous, ideas. Such populist initiatives are effective in scoring publicity points for their proponents. But they can also do more harm than good.
First, examine the House proposal to raise teachers’ salaries. The main issue there is that it applies only to public school teachers. If approved, the measure will compromise the private school system, which is already struggling to keep up with the previously mandated pay hikes given to public school teachers. Not surprisingly, teachers are transferring from private schools to public ones, where they get higher pay.
Losing good teachers weakens the capability of private schools, which is a concern because they help bear the costs of educating Filipino learners. Note that the 1987 Constitution recognizes the complementary role of the public and private educational sectors. Without that partnership, public schools will have worse overcrowding issues and will be harder-pressed to provide quality education, given their limited resources.
Not enough policymakers appreciate that private school owners spend their capital on a public good. Without private investments, the government would have to shoulder the entire costs of the educational system. As such, lawmakers should help private schools, partly to ease the burden on public institutions.
Certainly, teachers contribute much to society. Lawmakers who want to reward them for that should craft bills that benefit all teachers, not just those in public schools. Besides raising salaries, Congress can also consider increasing subsidies to private school teachers to match the proposal for those in public schools, tax breaks for all teaching personnel to boost their take-home pay, and other nonwage benefits.
Minimum wage
Over at the Upper Chamber, Senate President Juan Miguel “Migz” Zubiri is rallying support for the so-called P100 wage hike bill. He points out that people are making do with low wages, adding that the minimum salary in the Visayas and Mindanao is just P360 a day.
As expected, the bill drew a sharp reaction from employers, who warned that the measure would be inflationary and could drive away prospective foreign investors because of the resulting higher labor costs. Also, employers point out that the responsibility of setting the minimum wage belongs to the Regional Tripartite Wages and Productivity Board, where the labor sector is represented along with the government and private industries.
Referring to the Senate bill, Sergio Luis-Ortiz Jr., president of the Employers Confederation of the Philippines, said: “Even the Department of Labor and Employment is against it, all academicians, everyone is against that.” He added that “[h]ere in the Philippines, this is a perfect example of the arbitrariness that scares investors.”
Ironically, lawmakers from both chambers are entertaining proposals to amend the economic provisions in the Constitution to attract more investors. Legislated wage hikes counteract that. Politicians should scuttle their populist bills and refrain from interfering with economic forces, particularly the law of supply and demand for labor.
If senators want to help workers, they should instead enhance the safety nets for laborers. For example, they can look at targeted subsidies for those in economically marginalized sectors, like agriculture and fisheries. Lawmakers may even review the conditional cash transfer program to see if it is adequate or if the number of beneficiaries should be increased.
Better yet, the senators and others in government should concentrate on crafting laws and policies designed to improve the investment climate in the Philippines. Look at the business process outsourcing sector, for instance. Firms there pay significantly higher wages because of the competition for competent or qualified call center agents and other professionals in that field. Some companies even offer signing bonuses and other perks.
Of course, not all sectors can be like that. But the point is there are better ways to help struggling workers.