Wage hike tunnel vision

“In looking at the wage bills, legislators should take off their blinders and look at the big picture and past our borders where companies are laying off workers left and right.

“Amid the layoffs abroad, the number of unemployed Filipinos in 2022 dropped by 1.04 million to 2.99 million, compared to the 3.96 million jobless Filipinos in 2021.

The Senate is expected to pass before adjourning sine die in June a P150-a-day, across-the-board wage hike after a bill mandating just that was approved “in principle” by its labor panel.

That bill had been simmering before a technical working group, being cooked to make it palatable to employers, especially to micro, small, and medium enterprises that employ 5.4 million Filipinos.

The few but noisy militants in the labor sector have derided the Senate panel’s wage bill and its counterpart House measure as too paltry against the skyrocketing prices of goods and services.

Businesses had always been opposed to the shotgun approach of legislating wage hikes because a bearable imposition on one company may just be what would tip another enterprise to going into the precipice and seizing operations.

In the latter example, workers, due to the actions of politicians pandering to what they think would earn them “pogi” points in the next election, could suddenly find themselves without jobs.

It is for this reason that business groups like the Employers’ Confederation of the Philippines had been steadfast in keeping the status quo of raising salaries through the regional wage boards.

The boards oversee relatively smaller regions and as such can listen to affected parties, both from the labor and employer sides, thereby coming up with increases acceptable to both.

As things stand relative to Congress’ clear intent to ram the P150/day wage hike maybe in time for the President’s second State of the Nation Address in July, there are two sides.

The first backs the measure to address the rising cost of living, while the second group had been arguing that it is inflationary, or that it will lead to further increases in the prices of goods and services.

Theoretically, wage hikes could be inflationary because they can lead to an increase in the demand for goods and services. When workers buy more goods and services, the sudden or artificial increase in demand can put upward pressure on prices.

In addition, wage hikes can also lead to an increase in the cost of production as businesses may have to pass on higher wage costs to consumers in the form of higher prices. Abrupt legislated wage hikes may, however, not impact inflation in a robust economy where businesses may be able to absorb the higher costs of labor without passing them on to consumers.

But in an economy like ours that is just now getting out of the pandemic, wage hikes may further increase prices as businesses may be less able to absorb the higher costs of labor and instead pass them on to consumers.

In both types of economies, legislated wage hikes are one-size-fits-all solutions that could be bearable to some businesses but catastrophic to others, leading to some companies letting go of their workers.

In looking at the wage bills, legislators should take off their blinders and look at the big picture and past our borders where companies are laying off workers left and right.

In the United States alone, in the technology and digital sector which supposedly made a killing during the pandemic due to the lockdowns and mobility restrictions, layoffs are leaving a bloody mess.

This month, Amazon announced the layoff of 16,000 from a combination of factors like diminishing revenue stream and increased competition. Google’s parent company Alphabet earlier announced dropping 12,000 employees.

The list goes on and on with Microsoft also giving 10,158 workers the pink slip, and Facebook’s Meta paring down its labor pool by 10,000.

Amid the layoffs abroad, the number of unemployed Filipinos in 2022 dropped by 1.04 million to 2.99 million, compared to the 3.96 million jobless Filipinos in 2021. Those numbers represent an unemployment rate of 6.4 percent in 2022 from 8.8 percent in 2021.

The decline in unemployment can be attributed to the Philippine economic recovery from the Covid-19 pandemic with gross domestic product increases that had been the envy of our Asian neighbors. This is something that President Ferdinand

Marcos Jr. has not failed to point out in his many trips abroad to lure in foreign capital and investments.

More than raising wages, the bigger challenge for the country is to further reduce unemployment by, among other things, addressing the mismatch between the skills of the unemployed with the skills required by the available jobs.

Jobs generation is one aspect of the economy that lawmakers should focus on, one that would really impact the quality of life of Filipinos, and maybe even make the many Filipinos working abroad decide to come home since there are jobs for them locally.