Economic managers warn wage hike bill to slash GDP growth

CONGRESS adjourned session on Wednesday without giving the final approval for the proposal to hike the minimum daily wage by P100-P200, after economic managers warned of its “dangerous repercussions” on the Philippine economy.

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“We express our strong reservations on the proposed legislated wage hikes as these may undermine our recent gains and result in adverse economic and social impact,” economic managers said in a letter addressed to Senate President Francis G. Escudero and House Speaker Ferdinand Martin G. Romualdez.

The joint position paper was signed by Special Assistant to the President for Investment and Economic Affairs Frederick D. Go, Finance Secretary Ralph G. Recto, Economic Planning Secretary Arsenio M. Balisacan, Budget Secretary Amenah F. Pangandaman, Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. and Trade Secretary Ma. Cristina A. Roque.

Estimates by the Department of Economy, Planning, and Development showed that a P100 or P200 increase in the daily regional minimum wage “could exert downward pressure on gross domestic product (GDP), increase inflation and result in job losses.”

“Estimates show that the across-the-board wage hike will exert substantial downward pressure on GDP by 1.6 ppts (percentage points) for a P200 hike and 0.5 ppt for a hike of P100. Both scenarios are predicted to result in the economy missing the lower end of the GDP growth target range,” the economic managers said.

Economic managers are targeting 6-8% GDP growth this year.

The wage hike could also stoke inflation, which has recently been on a downtrend.

“A P200 increase in wages could raise inflation by approximately 2 ppts, while a P100 hike may add 0.7 ppt. The substantial minimum wage increase may lead to higher production costs, which could result in higher prices that may disproportionately affect low-income households,” economic managers said.