Senate wage bill will not help most workers

THE Senate passed on third and final reading a bill proposing to increase the daily minimum wage by P100, the first legislated wage adjustment in decades. Senate Bill (SB) 2534 still needs approval from the House of Representatives and probably from the bicameral committee after that. Before then, though, lawmakers would hopefully realize that the bill is unlikely to benefit the bulk of the labor sector. Worse, there would be adverse economic consequences, according to warnings from different sectors.

Senate President Juan Miguel “Migz” Zubiri, the main proponent of the wage proposal, argues that workers, particularly those in the Visayas and Mindanao, are scraping by with less than a livable wage. But any minimum wage requirement does not apply to those in the gray economy or informal sector that accounts for more than 38 percent of the labor pool. That figure comes from the International Labor Organization (ILO), which cited data from the Labor Force Survey in the Philippines.

“This means nearly two out of five workers are less likely to have formal work arrangements and access to social protection and are more at risk during a crisis or shock,” the ILO explained on its website.

Despite the low pay and other risks, workers in the informal sector are left out of SB 2534 and similar proposals. In the Philippines, informal workers include small vendors or hawkers, self-employed workers who do not have employees, small transport operators like tricycle and pedicab drivers, temporary construction workers, small-scale miners, unpaid family helpers, home-based laborers, and many others.

Moreover, micro enterprises, which are firms that have fewer than 10 employees, are exempt from paying minimum wage. And in the Philippines, nearly 90.5 percent or more than a million enterprises registered with the Department of Trade and Industry (DTI) are micro.

Small and medium enterprises stand to suffer the most from the bill. Together, they account for about 10 percent of all registered firms or about 100,000 companies. Small firms have fewer than 100 workers, while medium-sized ones have fewer than 200. Those firms, along with the micro enterprises that might be disallowed exemptions from paying the minimum wage for some reason or another, will either stop hiring or reduce their workforce because of SB 2534.

MSMEs account for more than 60 percent of the labor force, the DTI said. That is a substantial number of people whose jobs would be at risk, not only according to several employers’ associations, but also to the Department of Labor and Employment.

Granted, large enterprises can absorb the minimum wage increase proposed by the Senate. But there are only 4,541 of them or 0.41 percent of all registered firms, the DTI said.

Besides, the ability to afford a hefty pay hike does not necessarily justify it. First, higher labor costs will discourage domestic and foreign investments. Additionally, legislated wage hikes counteract the intent of amending the 1987 Constitution to remove barriers to foreign investments. Higher labor costs will act as an imposing new barrier.

Poor targeting

As said in previous editorials, determining the minimum wage should be left to the Regional Tripartite Wages and Productivity Board. The labor groups are represented there, along with those from the government and private sector.

Legislated wage increases are not only populist in nature but also ineffective in helping the workers who need government assistance the most. Lawmakers should instead review the safety nets for workers and others in marginalized sectors, particularly agriculture and fisheries. Congress can also bolster other initiatives to improve the quality of jobs and help firms transition out of the gray economy.

Meanwhile, lawmakers should vote against bills that harm MSMEs because they also hurt the general economy. It would be better to craft laws that enhance the business climate, where there is healthy competition among firms for workers. Profitable firms can afford to pay higher wages. And growing enterprises are likely to hire more people.

In contrast, a legislated wage increase, like what the Senate proposes, is a blunt instrument that is likely to do more harm and good.