Legislated wage hikes seen potentially boosting economy by putting money in workers’ pockets

LEGISLATED wage hikes hold the potential for fueling an economic expansion by spurring the purchasing power of workers, analysts said, disputing a senior economic manager’s warning that raising salaries by Congressional action could make the economy less competitive.

David Michael M. San Juan, a professor at De La Salle University and convener of Professionals for a Progressive Economy, said in an e-mail that “By improving the purchasing power of workers through a legislated wage hike, more jobs will be created as money is spent on more goods and services.”

National Economic and Development Authority Secretary Arsenio M. Balisacan told the House of Representatives on Tuesday that “forcing” wages to rise via legislation will damage the Philippines’ competitiveness.

“If wages are forced to increase by legislation, wages (will rise) not because the demand for labor is high,” with repercussions for competitiveness, Mr. Balisacan said.

Mr. San Juan called this view of competitiveness a “race-to-the-bottom set-up where countries are said to compete for investments by keeping wages low.” He noted that low wages does not make a country competitive.

Mr. Balisacan said he prefers that wages rise by expanding economic activity, particularly through investment.

Jose Enrique A. Africa, executive director of think tank IBON Foundation, said via Viber that “wages should instead be determined by what workers need to live decently especially given the reality that employers really have the capacity to pay much more than they do.”

Mr. Africa said that workers are the “people who most of all create value in the economy and for whom the economy is for, so to speak of ‘the economy’ as something different from their conditions and welfare is insensitive and unfair.”

Mr. San Juan added that companies are reporting record profits; a wage hike would help with the redistribution of wealth.

The richest 2% of Filipinos hold wealth of P20-25 trillion, equivalent to the combined wealth of the poorest 80%, IBON research head Rosario Guzman said at the think tank’s Birdtalk forum in January.

“The marginal propensity to consume of low-income groups is many times higher than for high income groups so the boost to aggregate demand and spurring economic activity should not be underestimated,” Mr. Africa said.

During the House briefing, Mr. Balisacan told lawmakers that “forced” wage increase through legislation are “more harmful to the economy.”

Mr. Africa said economic managers must move away from the mindset that wages are “just another commodity” whose level depends on market forces or employers’ willingness to pay.

“The Philippines has a long history of legislating wage hikes since the 1950s spanning various minimum wage laws, wage orders, executive orders, presidential decrees, and even Republic Acts,” he said.

IBON Foundation estimated that a family of five needs P1,119 daily to survive.

Mr. San Juan noted that President Ferdinand R. Marcos, Jr. himself made a campaign promise to increase workers’ wages.

“The administration has been vocal in saying that our economy has already recovered. Hence, wages should be hiked,” he added. — Beatriz Marie D. Cruz