While the proposed wage increase is meant to support workers, the Department of Finance (DOF) is concerned that it could lead to inflationary pressures and impose a heavier burden on small business owners.

Finance Secretary Ralph G. Recto said on Thursday, Feb. 15, that the proposed legislation for a P100-daily minimum wage increase for private sector workers is a reasonable response to the recent uptick in consumer prices.

“The legislated wage increase is well meaning. It’s understandable considering inflation has eaten up workers pay,” Recto told Manila Bulletin.

However, the finance chief is worried that it could potentially contribute to an increase in inflation, which has been on a downward trend in recent months and has remained within the government’s target range.

He also added that “It may be expensive for small entrepreneurs to pay higher wages.”

Micro, small, and medium-sized enterprises represent over 99 percent of business establishments and employ 63 percent of the country's workforce.

The Senate passed Senate Bill (SB) 2534 on its second reading last Wednesday, which mandates the daily wage hike that aims to benefit 4.2 million minimum income earners in the private sector.

Recto, however, suggested that rather than an across-the-board increase, it would be preferable for wage hike petitions to undergo review by the Regional Tripartite Wages and Productivity Board.

“It would be better to leave wage increases to regional wage boards, after all, you have different inflation rates and labor market conditions by region,” the finance chief stated.

The Senate initially proposed a P150 pay increase. But the committee on labor, employment, and human resources development adjusted the proposal and recommended a P100 daily wage hike.

The senators said they took into account that almost all regional wage boards had already mandated pay increases last year ranging from P30 to P90.

The DOF previously estimated that implementing a nationwide minimum wage increase of P150 would result in a 1.4 percentage point rise in inflation.

Recto, however, assured that he will thoroughly study the approved Senate proposal in light of the country's improving labor market.

“Unemployment and underemployment are on the way down with more jobs being generated in the formal / wage sector,” the finance chief said.

The unemployment rate dropped last December to its lowest level since 2005, reaching 3.1 percent compared to 4.3 percent a year ago. This figure was also lower than the 3.8 percent recorded in November 2023.

“But I will read the bill all over again. Maybe we can look for a compromise,” the finance chief assured.

Meanwhile, Recto said that the Marcos administration is willing to work with Congress to introduce a new salary standardization law for government workers.

To recall, the fourth and final phase of pay hikes for public servants under the 2019 Salary Standardization Law became effective last Jan. 1.

“Maybe, both executive and congress can work together to have a new salary standardization law for government employees and or provide an HMO [health maintenance organization] for them,” Recto said.

An HMO is a health insurance plan.