Economic Group Urges Suspension of P85 Wage Hike in Metro Manila

The Foundation for Economic Freedom (FEF), a prominent economic group in the Philippines, has urged the government to suspend the implementation of the P85 daily minimum wage hike in Metro Manila. The organization warned that this significant increase could trigger further inflation, price hikes, and a rise in unemployment. The wage increase, intended to support workers, was mandated by the Department of Labor and Employment through Wage Order 27, signed on July 9. However, the FEF expressed serious concern that the abrupt daily wage increase far outpaces productivity growth and inflation. This raises the risk of higher prices for basic commodities as businesses pass on increased labor costs to consumers. According to the FEF, the resulting rise in the cost of living could erode the purchasing power of poor households, offsetting the wage gains of employed Filipinos. The group also highlighted that businesses, particularly micro, small, and medium-sized enterprises (MSMEs) which constitute the vast majority of businesses in the country, are already struggling with weak consumer demand and rising global oil prices that have increased operating and logistics costs. Unlike large conglomerates, MSMEs operate on thin margins and lack the capital cushions to absorb a sudden spike in overhead costs. Forcing these businesses to shoulder higher labor costs under these volatile conditions could push many to the brink of insolvency, leading to widespread layoffs, reduced working hours, or even business closures. Furthermore, the FEF warned that the wage increase could discourage investments in labor-intensive industries such as manufacturing and agribusiness. The unpredictability in the regulatory environment, they stated, undermines the country's long-term industrial development and regional competitiveness. The group also pointed to threats to macroeconomic stability, noting that rising inflation may prompt tighter monetary policy even as economic growth remains weak. In the face of higher wages, rising costs driven by uncertainty surrounding the Middle East oil crisis, and higher interest rates, businesses are likely to incur losses or raise prices, fueling another round of the wage-price spiral.