MBC Position on the Proposed Legislated Wage Increase

8 January 2007

1. MBC is against wage legislation by Congress.

a. The process of collective bargaining is undermined. CBAs are the most universal and effective form of negotiating wage increases. Labor and management both participate in the CBA process, in contrast to legislation where politicians determine the price of labor.

b. The process of setting minimum wage standards by regional wage boards, is also undermined. Regional wage boards account for differences in cost of living across the different parts of the country. Highly urbanized regions have higher cost of living and can also afford to pay higher wages. By contrast, a “one-size-fits-all” wage increase by legislation, will result in some regions becoming uncompetitive. This may result in disinvestments in those areas that are most starved for investments.

c. NEDA has forecast that HB 345 will result in the loss of 700,000 to 1.4 million jobs; DOLE predicts 1.2 million job losses over three years. Furthermore, NEDA also predicts that the proposed wage increase will stunt growth by an average of 1%. This is a relatively large percentage, considering GDP grows at around 5.5%.

2. HB 345 will result in loss of competitiveness in certain industries that are highly wage sensitive.

a. The minimum daily wage rate in Metro Manila is P350 or $7.11. This is an absolutely higher minimum wage compared to some of our neighbors like Vietnam ($1.25), India ($1.97), Indonesia ($2.64), China ($2.94) and Thailand ($4.87).

b. In a globalized economy, the Philippines has a niche in a long supply chain. We import inputs from a low wage country, add value through our labor, then export to a higher wage country that can perform higher value addition through their more highly skilled labor force. Adding to wages beyond our competitive level in the chain, may result in the loss of jobs to a more wage-to-skill competitive country.

3. The proposed increase of P125/day over three years is not the basis of our opposition to HB 345.

a. It is the process of wage determination, not the amount, that is of concern to potential investors and to our members.

b. A wage increase of P 125/day over three years would have minimal effect on inflation.

b. The amount of increase is inconsequential to industries that are obviously doing quite well. However, it may push some other industries that are barely breaking even, over the edge. Unfortunately, the industries in the latter category would likely be labor intensive and the result could be massive layoffs.

4. What MBC is for:

a. The collective bargaining process.

b. Minimum wage standards setting by regional wage boards.

c. Government granting incentives for training undertaken by private sector. Only by improving our workers skills will they improve the demand for their labor and thus their wages. With a more highly skilled work force, the firm becomes more competitive. On a macro level, the country can attract more investments because of its skilled work force so jobs increase and the economy grows through investments.