The proposed legislated P100 national wage hike continues to be a heated issue as a group of informal sector workers has joined three business groups to resist its passage, saying the proposal will exclude a “supermajority” of workers from any wage increase and might even lead to them losing their jobs.

The Alliance of Workers in the Informal Economy/Sector (ALLWIES), together with the Employers Confederation of the Philippines (ECOP), Philippine Chamber of Commerce and Industry (PCCI), and Philippine Exporters Confederation, Inc. (PHILEXPORT), has issued a joint position statement warning that if the proposed wage hike is enacted into law, “more than eight out of 10 workers in the government and the informal sector will not receive any adjustment.”

This, the groups said, is because the wage hike proposal, contained in Senate Bill (SB) No. 2534, aims to adjust the minimum wage only for private sector employees in the formal sector.

As such, public sector or government employees as well as informal sector workers “will not benefit from the proposed adjustment, but they will suffer its ill effects,” said the statement dated February 26, 2024 and addressed to the House Committee on Labor and Employment.

“In fact, only the roughly 4 million workers receiving minimum wages will receive the P100/day wage increase, while the other employees in the formal sector will likely receive token wage distortion adjustments,” the joint release added.

This means only a relatively small number of minimum wage earners in the private sector will stand to benefit from the wage hike, while “a supermajority of our workers will not receive any adjustment in their current wages,” it further said.

The groups continued that instead of wage adjustments, the informal sector workers will “possibly experience job losses, reduced work hours, and a widening income gap between the two sectors.”

In their statement, the groups appealed to legislators and policymakers to carefully consider the potential negative impact of SB 2534 on the informal sector.

“We strongly suggest that there must be an all-of-government and an all-of- society approach to a) reduce the cost of putting food on the table; b) implement complementary measures to support informal businesses, such as providing access to financial services, skills training, and social protection programs. Failure to address these concerns could undermine the effectiveness of minimum wage policies and worsen inequalities within the economy,” cautioned the groups.

The position letter was signed by ALLWIES president Susanita Tesiorna, ECOP chairman Edgardo Lacson, PCCI president Enunina Mangio, and this author in his capacity as PHILEXPORT president.

Who is the informal sector?

The country’s informal sector is composed of roughly 80% of the total workforce. Informal workers are engaged in economic activities that are not government regulated or officially recognized and don’t have the same access to social protection, benefits, and labor rights as workers in the private and public sectors.

Majority of them are either self-employed or work in small family businesses or micro enterprises. They are typically street vendors, farmers, fisherfolk, home-based workers, domestic laborers, small-scale agricultural workers, and other forms of informal workers.

Informal workers face several challenges, including low wages, job insecurity, lack of access to healthcare and education, and vulnerability to exploitation.

The Senate has recently approved SB 2534, entitled “An Act Providing for 100 Pesos Daily Minimum Wage Increase for Employees and Workers in The Private Sector,” a legislative move that the protesting associations described as setting a “dangerous precedent.”

The statement noted that all 16 Regional Tripartite Wages and Productivity Boards (RTWPBs), which are mandated by law to do an annual review of minimum wages, have already granted another round of minimum wage increase for 2023.

Adverse effects

“In the absence of a public consultation with key stakeholders, as in Senate Bill No. 2534, we believe that the proposed measure would lead to devastating effects, particularly to the informal sector workers,” the groups warned.

These include higher inflation as manufacturers will raise the prices of goods “that will be bought by the supermajority that will not receive the wage adjustment that our legislators thought would help the sector they want to help.”

In addition, micro and small businesses and informal sector enterprises, which operate on thin profit margins, may be forced to reduce their workforce, lay off employees, shut down operations, or pass on these increased expenses to consumers. “This will evidently contribute not only to social injustice, but also to unemployment and inflationary pressures,” the organizations continued.

The said measure is in direct contravention to the “Trabaho Para sa Bayan Act,” which aims to address unemployment, underemployment, and other challenges in the labor market by improving the employability and competitiveness of Filipino workers.

The groups further noted that while minimum wage earners in the private sector benefit from tax exemptions and don’t have to pay local government unit (LGU) permits, informal sector workers must cover these taxes as well as multiple permit fees to LGUs.

Instead of hiring employees formally, some businesses will be forced to resort to informal employment arrangements to avoid complying with the higher minimum wage requirements. This growing “informalization” of labor can lead to lack of job security, inadequate benefits, and exploitation of workers, they added.

(The author is President of Philexport and is honorary chairman and president of the Employers Confederation of the Philippines.)