The Confederation of Wearables Exporters of the Philippines (CONWEP), the largest wearables sector group in the country, categorically said they cannot afford any wage hike and instead urged government to reactivate the inflation subsidy to workers implemented during the pandemic period to ensure continued employment of its workers, but warned they may be able to retain only 20-30 percent of its current 160,000 direct workers if the planned P100 daily wage hike gets implemented.
CONWEP made this position clear in a letter to Malacanang on Feb. 26 and similar letters submitted to the Senate, House of Representatives, secretaries of the Department of Trade and Industry and Department of Labor and Employment (DOLE) as legislators pushed for P100 increase in daily minimum wage at the Senate and P350 at the House.
“We stand to lose more with wage increase of any amount,” said Maritess Jocson-Agoncillo, executive director of CONWEP, during an online press conference Tuesday, Feb. 27.
Instead of a mandated wage hike, CONWEP would like the government to reactivate the monthly wage protection subsidy against inflation to workers of P600 to P1,000 over a period of two years. This direct subsidy to workers was implemented by DOLE during the pandemic period.
CONWEP is asking to reimpose the subsidy or the job protection program by DOLE for two years or until 2026 for their workers as they qualify as a “distressed” industry.
Agoncillo explained that the wearables sector is in “dire strait” even adding that its investors and buyers relayed their comments that implementing a wage hike just a few months after the last minimum salary increase took effect could be the “final nail on the coffin”.
CONWEP said that even without a wage hike, the sector is seen shedding at least 21,900 workers this year.
According to Agoncillo, a major brand has stopped sourcing of sportswear from two factories since last year and shifted to Vietnam, resulting in more than 9,000 workers losing their jobs.
With a mandated wage hike, Agoncillo said they fear that only 20 percent to 30 percent would be left out of its current 160,000 direct workers. More brands are also expected to shift sourcing.
The Senate proposal for a P100 daily wage hike would price the Philippines out of competition as it would raise the current daily wage rate of $6.7-$11 or monthly average of $173-$287 as against Vietnam’s $5.45-$7.84 or monthly salary of $141.58-$203.87. Indonesia has an average daily wage rate of $4.8-$12.15 while Laos has average daily rate of $2.5-$3.15 and Myanmar with $2.28-$2.276.
“Our margin to export is only 2-4 percent and our biggest costs are labor and logistics,” she said adding that labor accounts for 35 percent and logistics 15 percent for every t-shirt produced locally. The cost does not include materials or textile because the domestic garment industry is just simply cut and trim operations only.
Wearable exports are also expected to decline by 11 percent this year to over $1.204 billion from $1.353 billion last year, which was also 19 percent lower than the 2022 exports of $1.668 billion.
Aside from reduced sourcing from foreign brands, Agoncillo explained that the Philippines has lost competitiveness in its garment exports because it has no bilateral free trade agreement (FTA) or preferential trade deals with the EU and the US unlike other ASEAN countries in the region which have forged bilateral FTAs or sectoral preferential trade with major trading partner.
“We are not strategically interesting anymore as we have no more GSP privileges and FTA with the EU and US,” she said.