By Ruth Abbey Gita-Carlos
MANILA – The economic managers of President Ferdinand R. Marcos Jr. have warned of the “dangerous” repercussions of the proposed across-the-board minimum wage hike in the private sector, saying the plan could hurt the economy, raise inflation, and affect employment.
In a joint position paper submitted to the President, the country’s economic team said the proposal would yield a negative impact on the Philippine economy, noting a “substantial downward pressure” on gross domestic product (GDP) by 1.6 percentage points and 0.5 percentage point, respectively, for PHP200 and PHP100 increases.
“Both scenarios are predicted to result in the economy missing the lower end of the GDP growth target range,” they said.
Marcos’ economic managers also cautioned that a PHP200 wage increase could raise inflation by approximately 2 percentage points, while a PHP100 hike may add 0.7 percentage point, leading to higher production costs which could result in higher prices “that may disproportionately affect low-income households.”
They also stressed that wage adjustments, if not commensurate with improvements in productivity, can exacerbate price pressures.
“Thus, while the government has already achieved bringing year-to-date average inflation down to just 1.9 percent, as the country’s headline inflation rate further slowed to 1.3 percent in May 2025, an across-the-board minimum wage hike may reverse this progress and make high inflation rates reappear,” they said.
“A wage hike will inevitably result in higher prices in the goods sold by enterprises who will have to accommodate the wage increase. This will result in the poorest of the poor, who are mostly in the informal sector and do not even make minimum wage, bearing the brunt of the impact of the wage increase.”
The economic team said regional disparities will also widen, considering that a uniform wage increase across all regions does not consider differences in cost of living and other socioeconomic factors, such as regional unemployment conditions and business climate.
They emphasized that less developed regions may face “greater difficulty” in attracting investments and generating employment due to increased labor costs.
They also warned that enterprises may be forced to either stop hiring or even retrench workers, resulting in unemployment, adding that this would ultimately worsen poverty incidence.
They raised the possibility of having a higher unemployment rate of about 0.2 percentage points for the PHP100 increase to 0.6 percentage points for the PHP200 increase, translating to around 105,000 to 300,000 persons potentially losing their jobs.
“Employers—whether employing a lot or a few—will have to factor in the additional cost of production due to the wage hike, and may either stop hiring workers; lay off or retrench employees; or at least reduce work days,” the economic managers said.
“Another scenario is that employers may likely simply not follow the required increase, keeping their employees but shifting them to the informal market as they work below minimum wage, weakening labor market institutions, and giving rise to less protection for minimum wage earners.”
The economic team said the micro, small and medium enterprises (MSMEs), which constitute over 90 percent of all business enterprises in the country, may struggle in adopting the proposed salary increase for minimum wage earners, which translates to PHP4,000 a month for a five-day work week or PHP4,800 a month for a six-day work week.
“To cope, some may increase prices of goods and/or services, reduce their workforce, or worse shut down operations altogether, affecting both employees and the broader economy.”
They asked Marcos to retain the current system of adjusting wages through the Regional Tripartite Wages and Productivity Boards (RTWPBs), while strengthening the implementation of the minimum wage law with a focus on enabling all regions to respond to the evolving needs of the workers, as well as on increasing investments that would create more quality jobs.
“Regional minimum wage setting better reflects local economies, avoids purchasing power disparities, and supports fairer wage distribution,” they said. “It also ensures inclusivity in the decision-making process, with the use of the tripartite wage-setting that takes into consideration the side of the government and employers aside from workers, as endorsed by the International Labor Organization (ILO).”
The joint position paper was signed by Special Assistant to the President for Investment and Economic Affairs Secretary Frederick Go, Finance Secretary Ralph Recto, DEPDEV Secretary Arsenio Balisacan and Budget Secretary Amenah Pangandaman.
Trade Secretary Ma. Cristina Roque and Bangko Sentral ng Pilipinas Governor Eli Remolona also signed the document. (PNA)
