Metro Manila Wage Hike to Push Through Despite Inflation Fears; BSP Monitors Impact

MANILA, Philippines — Despite fears of price increases and potential layoffs, Malacañang has confirmed that the P85 minimum wage hike in Metro Manila will proceed as scheduled. Presidential Communications Undersecretary Claire Castro stated that no suspension is in place and the Palace has not received any requests from the private sector to halt the implementation. The Department of Labor and Employment (DOLE) also confirmed the wage increase, with Labor Secretary Francis Tolentino calling it the biggest wage hike in the region's history. However, the Foundation for Economic Freedom (FEF) had previously urged the government to suspend the wage hike pending a review. FEF argued that the P85 increase far outpaces productivity growth and inflation, risking higher prices for basic commodities as businesses pass on increased labor costs to consumers. They also warned that businesses might reduce hiring or operating hours, making it harder for the unemployed to find jobs, and that micro, small, and medium enterprises (MSMEs), which form the majority of businesses, would bear the brunt. Conversely, labor groups like the Federation of Free Workers questioned FEF's opposition, while the Unity for Wage Increase Now labor alliance deemed the P85 hike grossly inadequate, demanding a P505 salary increase instead. The Bangko Sentral ng Pilipinas (BSP) is assessing the inflationary impact of the record P85 minimum wage increase in Metro Manila, as the adjustment was twice as large as initially anticipated. BSP Governor Eli Remolona Jr. expressed concern that the wage hike could add to second-round price pressures, especially with core inflation remaining elevated. He noted that while headline inflation eased to 6.4 percent in June, underlying price pressures persist, and the BSP expects inflation to return to its 2-4 percent target range within two years. Chinabank chief economist Domini Velasquez estimated that the wage hike could add approximately 0.19 percentage point to both headline and core inflation. She anticipates the strongest pass-through effects on food and beverage and restaurant services, which employ many minimum-wage workers and are significant in household spending. Velasquez suggested that this substantial adjustment might lead the BSP to raise its key policy rate again in August to help anchor inflation expectations. However, John Paolo Rivera, a senior research fellow at the Philippine Institute for Development Studies, believes the wage increase will likely have a manageable impact and will not be the primary driver of inflation. The P85 hike will be implemented in two tranches: P60 this month and an additional P25 in January 2027. Information Source: Philstar Nation