By Luisa Maria Jacinta C. Jocson, Reporter
A P150 INCREASE in the daily minimum wage will likely stoke inflation, Finance Secretary Benjamin E. Diokno said.
“The implication of the P150 increase… will increase inflation by 1.4 percentage points. Who will benefit from this? Who will suffer?” Mr. Diokno said at a press briefing on Friday.
Senate President Juan Miguel F. Zubiri earlier said a committee had already “approved in principle” the measure seeking a P150 across-the-board wage hike for all private sector workers.
However, Mr. Diokno said policy makers must take into account the impact of a legislated wage hike on inflation, which remains elevated.
“With inflation this year is now estimated at 5.5%, what would happen if it’s up by 1.4 percentage points? Inflation could reach 6.9%. That’s the implication. So you have to explain to the policy makers what are the implications of a higher-than-expected wage increase,” he said.
Headline inflation slowed for a third straight month in April to 6.6% from 7.6% in March. However, inflation averaged 7.9% in the first four months of the year, still above the BSP’s 5.5% full-year forecast and the 2-4% target range.
The Finance chief also warned that a P150 wage increase may create more unemployment.
“We need to help those already in the daily force. A higher-than expected wage hike is going to work against those who are still looking for work,” he said.
Mr. Diokno said wage hike petitions should go through the Regional Tripartite Wages and Productivity Board. In June 2022, the National Capital Region’s wage board approved a P33 hike, bringing the minimum daily wage to P570.
“Even the International Monetary Fund recognized that our system with the regional wage board is a superior system than the nationally mandated (system). That is beneficial to us,” he added.
Calixto V. Chikiamco, Foundation for Economic Freedom (FEF) president, said that any wage hike will be inflationary.
“More so since the proposed wage hike will be legislated and nationwide. Employers will pass on the added costs to consumers by way of higher prices,” he said in a Viber message.
Mr. Chikiamco described the wage hike bill as “anti-poor” since it only covers workers in the formal sector, representing 16% of the labor force.
“It will cause employers to defer hiring and choose machines over labor,” he added.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said a legislated wage hike would lead to second-round inflation effects “as higher wages are passed on right away in terms of higher prices of goods and services in the economy.”
“This proposal is much larger than the wage hikes seen from June-July 2022. So, the proposal would have a bigger effect in terms of higher prices,” Mr. Ricafort said in a Viber message.
EL NIÑOMeanwhile, Mr. Diokno said that the anticipated El Niño weather event will not “severely” impact inflation.
“The forecast of El Niño is seen to be mild and will last until 2024. The effects on prices will not be severe,” he said.
The El Niño has an 80% probability of occurring in the next three months and will likely persist until the first quarter of 2024, according to the latest forecast of the state weather bureau. This would increase the likelihood of below-normal rainfall conditions, which could bring dry spells in some areas.
John Paolo R. Rivera, an economist at the Asian Institute of Management, said that an El Niño-induced dryspell will likely impact agricultural production which will hurt food supply.
“We already have experienced the impact of supply constraints on rice, onion prices. Inflation will not be severe if concrete policy interventions to boost agricultural production and make it a resilient industry are already in place,” he added.