Employers expressed strong doubt that the targeted year-end inflation rate of four percent can still be achieved, saying a 5.6 percent rate is more likely given the rising cost of prices in the local market.
Sergio Ortiz-Luis Jr., president of the Employers Confederation of the Philippines (ECOP), issued his projection during the “Pandesal Forum” on Friday, Sept. 15, which gathered business leaders from other business groups such as the Philippine Chamber of Commerce and Industry (PCCI) and the Federation of Filipino Chinese Chambers of Commerce and Industry Inc. (FFCCCII), to discuss their opposition on the pending wage hike bill in the Senate.
“Yung inflation target natin na four percent sana by end of the year di na mangyayari yun baka 5.6 percent siguro. Next year, yung target natin na 2-4 percent di na rin mangyayari,” (The four percent inflation target by end of the year is no longer achievable, but 5.6 percent is more likely. The 2-4 percent target for next year is not also achievable),” said Ortiz-Luis.
The government has an inflation target range of two percent to four percent for this year until 2025. By the end of 2023, the inflation-targeting central bank forecasts an average inflation rate of 5.6 percent. For next year and in 2025, the inflation forecast is 3.4 percent and 3.3 percent respectively, both within the target band of two percent to four percent.
Ortiz-Luis said the country’s inflation rate could further worsen if the planned P150 daily wage hike at the Senate is approved.
He added that if the legislated wage hike is approved and implemented, it could result in an additional two percent increase in the prices of commodities.
“How will our farmers, fisherfolks, vendors and drivers survive, the farmers have so much problem as it is already,” he said.
Ortiz-Luis reiterated that any mandated wage hike will only result in salary increase for the formal sector, which is 16 percent only of the 50 million total labor force in the country. But the majority 84 percent informal sector will not benefit as they don’t have employers, like the farmers, fisherfolks, drivers, vendors, among others.
The disparity in income will grow wider between the formal and informal sector. Also to be considered, he said, is that majority of the formal sector have salaries higher than the legislated minimum wage.
If salaries go up, companies will just pass on the cost on their products with end consumers paying for the higher prices.
Ortiz-Luis added that the micro enterprises, which account for 80 percent of the micro, small and medium enterprises (MSMEs) sector, may not be able to survive under a new round of salary increases. Their choices are to lay-off workers or close shop. He further reminded that half of the micro enterprises closed during the pandemic and many still remained closed.
“They are just watching, and one thing they keep a close watch is the salary rate,” he said.
Good thing, he said, there are many new entrants in the MSME sector, but the salary hike could dampen such enthusiasm.
According to the Philippine Statistics Authority, MSMEs comprised 99.5 percent of all registered business establishments in 2019. They generate 62.4 percent of the country's total employment, contribute 36 percent of gross value added, and account for 25 percent of total exports.
He pointed out that the MSME sector is the biggest hope for job creation in the country, but if salary is further raised many of them may not be able to stay afloat.