Raising the minimum wage by ₱200 would have “dangerous repercussions,” including hurting the Philippine economy, small business owners, and driving a spike in consumer price hikes, according to the Marcos administration’s economic managers.

This comes as the public has intensified their call for a ₱200 across-the-board minimum wage hike, which is now pending in the House of Representatives, while a ₱100 increase is proposed in the Senate bill.

According to the economic team, passing the bill could hurt the growth of the gross domestic product (GDP), noting that a ₱200 increase might slow growth by 1.6 percentage points, and a ₱100 hike by 0.5 percentage points. As a result, GDP would grow by 4.4 percent and 5.5 percent, respectively.

“Both scenarios are predicted to result in the economy missing the lower end of the GDP growth target range,” they said in a joint statement released on Wednesday, June 11. The government is targeting to grow the local economy by six percent to eight percent this year.

The economic team is composed of heads of the Department of Finance (DOF), Department of Trade and Industry (DTI), Department of Budget and Management (DBM), and Department of Economy, Planning and Development Authority.

A ₱200 wage hike could also push inflation up by around two percentage points, while a ₱100 increase may raise it by 0.7 points, they said.

They stressed that the “substantial minimum wage increase may lead to higher production costs, which could result in higher prices that may disproportionately affect low-income households.”

While the government has brought the average inflation for the first five months down to 1.9 percent, with headline inflation easing to five-and-a-half-year low in May, an across-the-board minimum wage hike could reverse this progress and trigger a resurgence in high inflation.

They added that wage increases that are not matched by productivity gains can add to inflationary pressures.

As wage is expected to result in inflated consumer prices, the economic managers said this will “result in the poorest of the poor, who are mostly in the informal sector and do not even make minimum wage, bearing the brunt of the impact of the wage increase.”

Micro, Small, and Medium Enterprises (MSMEs), which make up over 90 percent of all businesses in the country and largely depend on minimum wage workers, may also struggle to absorb the mandated wage hike—equivalent to ₱4,000 per month for a five-day work week or ₱4,800 for a six-day work week.

“To cope, some may increase prices of goods and/or services, reduce their workforce, or worse shut down operations altogether, affecting both employees and the broader economy,” they said.

As such, businesses “may be forced to either stop hiring or even lay off or retrench workers, resulting in unemployment.”

Employers may cut jobs, reduce hiring, or shorten workdays to manage higher production costs from the wage hike, potentially raising unemployment by 0.2 to 0.6 percentage points—or 105,000 to 300,000 job losses.

“Those who will lose their jobs will then shift to the informal sector, which puts them in a worse situation, unable to meet their basic needs and making them more vulnerable, ultimately worsening poverty incidence,” they noted.

Another possible outcome, they said, is that some employers may keep their workers but avoid complying with the wage hike by shifting them to the informal sector, leading to weaker labor protections and undermining minimum wage laws.

Ultimately, the economic managers pointed out the irony of the proposed unified wage hikes across all regions. They said this overlooks differences in cost of living, unemployment rates, and business conditions.

Therefore, the proposed bills could hit less developed regions harder, making it more difficult for them to attract investments and create jobs due to higher labor costs.

Instead of adopting this proposal, they recommended to the President that “the current system of adjusting wages through the Regional Tripartite Wages and Productivity Boards (RTWPBs) be maintained.”

They added that this should be paired with stronger enforcement of the minimum wage law, ensuring each region can better address workers’ changing needs, and with increased investments to generate more quality jobs.