P125  WAGE  HIKE  TO  TRIGGER  RUNAWAY  INFLATION

MANILA,
JUNE 6, 2006 (STAR) By Des Ferriols - Monetary and economic officials said yesterday that the P125 legislated wage increase approved by the House of Representatives would adversely affect the economy if passed into law, triggering runaway inflation and resulting in higher unemployment.

The House approved the wage hike amid calls by Malacañang to leave the decision to local wage boards instead of granting an across-the-board increase.

Socioeconomic Planning Secretary Romulo Neri, who also sits as a member of the Monetary Board, claimed the proposed legislated wage hike would result in massive unemployment.

"The wage hike is intended to promote worker welfare but it will backfire due to the rise in joblessness," he predicted.

Under the proposed measure, the wage hike would be implemented in three stages: P45 in October this year, P40 in October 2007 and P40 in October 2008.

Even if spread over a period of three years, Neri said the wage hike’s impact on the economy would be "massive" since the country’s economic momentum does not have the capacity to absorb a sudden increase in wages.

The Bangko Sentral ng Pilipinas (BSP), as well as the Development Budget Coordinating Committee (DBCC), assumed that wages would go up by only eight to 10 percent this year and any higher would require them to change official projections and targets.

According to Neri, the P45 increase in October alone would "throw 288,000 to 620,000 workers out of their jobs." He said National Economic and Development Authority (NEDA) simulations showed the range of resulting projected unemployment factors on a wide variety of wage levels.

Neri said that based on NEDA estimates, the proposed wage hike would cut employment further in 2007 by 225,000 to 424,000 and in 2008 by 210,000 to 365,000.

On the other hand, the BSP said the immediate impact of the wage hike would be on inflation and initial projections indicated that the wage increase would push up the inflation rate by 0.547 percentage points in 2006, 2.033 percentage points in 2007, and 1.520 in 2008.

Neri said the drop in employment and the hike in prices would in turn dampen economic growth.

"It will shed 0.94 to 2.03 percentage points from gross domestic product (GDP) in 2006, 0.74 to 1.39 percentage points in 2007, and 0.66 to 1.15 percentage points in 2008," he said.

GDP is the local output of a country’s economy.

BSP deputy governor Diwa Guinigundo earlier said the 2006 and 2007 inflation targets were based on the assumption that wages would be adjusted by no more than an average of eight percent and five percent, respectively — more or less tracking the high end of the increase in consumer prices.

Even with the expected moderate increase in wages, however, the BSP already conceded that the 2006 inflation target would be missed. There was also a chance that the 2007 inflation target would be breached in 2007, due to the lingering effects of high world oil prices.

Not pro-employment

At Malacañang, Press Secretary Ignacio Bunye lashed out at groups and individuals criticizing the government for not supporting the legislated wage hike, saying they were not being pro-employment.

"Those who are assailing the government are also those who cannot provide jobs and benefits to the workers who need an increase," he said.

Bunye added that "any increase will definitely be welcome but we would prefer that this be done, as we said, in the regional wage boards."

Bunye said the Palace has been supportive of a reasonable wage hike but this should be determined by the wage boards, not Congress.

"We’re not ruling out any increase but we just would like to see to it that any wage increase would be realistic and will not unduly affect the current situation," he said.

Malacañang earlier expressed confidence it could work out a solution to the legislated wage hike issue without compromising the workers’ welfare and the stability of the business environment.

"We don’t have to make a spat out of the wage issue because all stakeholders agree that we have to preserve jobs and create more, and accord some relief to our workers while keeping inflation under control," he said.

Meanwhile, detained Anakpawis Rep. Crispin Beltran said yesterday Mrs. Arroyo might just be digging her own grave once the legislated wage hike is "killed" because more Filipinos will join efforts to force her out of office,.

"This will be the final straw for millions of Filipino workers and their families, who are counting on the legislated wage hike (House Bill 345) for temporary economic relief," he said.

Beltran, who is facing non-bailable charges of rebellion, added that "people will be holding the Palace even more accountable for the hunger, sickness and despair they have to face every day."

"It’s obvious to all how (Mrs.) Arroyo is bending over backwards to kowtow to the demands of foreign investors and businessmen, but refuses to budge an inch when it comes to protecting the interests of suffering workers and peasants," he added.

At the same time, Beltran said local businessmen are "barking up the wrong tree" when they blame wage hikes as main reason for economic crises, noting that it is the absence of any support from the government that is making life harder for Filipino workers.

Senate Minority Leader Aquilino Pimentel Jr. urged all regional wage boards to conduct public hearings on the possibility of granting new wage increases.

He made the recommendation after learning from the Department of Labor and Employment that some wage boards are conducting hearings after labor groups lodged their petitions for wage increase.

The militant group Kilusang Mayo Uno, meanwhile, blamed Mrs. Arroyo for "hindering the trickle down effect" of the economic growth NEDA has projected, following a 5.5 percent GDP growth for the first quarter of 2006.

"Big banking, retail, food and beverage companies posted double-digit growth rate in revenues and profits in the first quarter while ordinary workers and families were being callously denied by Malacañang the much-needed wage relief," the group said.

KMU chairman Elmer Labog said "workers have all the right to take their share in the economic growth and earnings of companies," and noted that while "Mrs. Arroyo is hell-bent on protecting huge profits being reaped by big companies, workers are barely making ends meet."

He said the gainers in the first quarter of this year were Ayala Corp, food and beverage giant San Miguel Corp., and SM Investments Corp., which posted 23 percent, 29 percent, and 123 percent growth, respectively.

According to data gathered by the KMU, the highest labor productivity was noted in the National Capital Region, where each worker contributed P423,337 to the GDP in 2004 or P1,356.85 per working day. Despite this contribution, the daily minimum wage in the NCR is only P275, Labog said. — With Delon Porcalla, James Mananghaya, Aurea Calica


Chief News Editor: Sol Jose Vanzi

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