The PhP125 peso across-the-board legislated daily wage hike, although still up for final approval in the Senate, does raise some eyebrows. Politically, it would ensure the survival of people in Congress and the Senate, as this populist move would sit very well with the workers.
The additional labor cost is estimated to be around PhP1.2 trillion (for the 12 million or so workers in the country), however, staggered over a period of three years. But can private business really afford this much increase in their manpower cost in such a short time? I seriously doubt it.
Wages normally get adjusted every year to account for inflation. However, it is periodically adjusted upwards to reflect gains in productivity as well. Drastically increasing wages without matching increases in productivity can only be inflationary.
Why, because growth in money supply on account of the strong demand for money to pay for the additional wages, will only exceed output growth.
Naturally, big business groups are one in opposing the move, as this would prove to be counter-productive in the long-run and will even make Philippine industries less competitive.
This can be salvaged however, like implementing the increases in a staggered basis over a longer period, six to maybe eight years. The adjustments to production would at least be gradual, giving time for both owners and laborers to make this work.
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