Raise wages, but ensure businesses can thrive


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A ₱200 daily wage increase proposal is now being tackled in the House of Representatives. This sounds good as it would provide economic relief to Filipinos struggling to make ends meet.


However, lawmakers must carefully weigh the needs of Filipino workers against the economic sustainability for businesses. While the proposed hike is a step in the right direction, aimed at alleviating the financial burdens of families, it also raises critical concerns about the long-term viability of businesses, particularly those in sectors already grappling with rising operational costs.


The ₱200 wage increase, if passed into law, will significantly improve the quality of life for millions of Filipino workers. As the cost of living continues to rise — exacerbated by inflation and high prices for basic commodities — Filipino families are finding it harder to make ends meet. A wage increase would provide immediate relief and strengthen purchasing power, stimulating economic growth. When workers earn more, they spend more, creating a ripple effect that benefits both businesses and the economy as a whole.


However, while the wage increase is a positive development, its potential negative consequences for businesses cannot be ignored. Business enterprises, big or small, which form the backbone of the country’s economy, may be vulnerable. Many of these companies are still recovering from the economic disruptions caused by the Covid-19 pandemic and may not have the financial capacity to absorb such a significant wage increase without resorting to cost-cutting measures.


For these businesses, the wage increase could lead to difficult decisions, including layoffs or even shutdowns, particularly in industries that operate on thin margins. In fact, there are already concerns that the wage hike could lead to retrenchments, as companies struggle to cover the higher labor costs while maintaining profitability. If the cost of doing business rises too quickly, there is a risk that businesses could close down, further exacerbating unemployment and potentially negating the benefits of a wage increase.


This would be a tragic irony — workers get a higher wage, but lose their jobs due to companies being unable to sustain their operations. The Philippines has long struggled with a high unemployment rate, and any measure that threatens job security must be carefully examined.


So, how can the government strike a balance between addressing the legitimate needs of workers and ensuring that businesses remain viable in the long term?


First, the government could consider a more gradual approach to wage increases, perhaps in the form of phased increments over a period of time. This would allow businesses to adjust and plan accordingly, reducing the shock to their operations while still giving workers the relief they need.


Second, policymakers should explore other avenues to support businesses, such as tax incentives, subsidies for labor-intensive sectors, and access to low-interest loans. 


Finally, the government must engage in a dialogue with both labor groups and business associations to find common ground and develop policies that benefit everyone. A healthy economy relies on the productivity of workers as much as the profitability of businesses. If one suffers, the other will inevitably feel the impact.


Taking these steps could help build a more inclusive, sustainable economy that benefits everyone.


There’s no doubt, the ₱200 wage hike is a much-needed step to improve the living standards of Filipino workers, but it must be implemented with caution, taking into consideration the broader economic impact. It doesn’t make sense to raise wages if the end result is massive retrenchment or at worst, a shutdown of businesses.