NEDA warns of legislated wage hike impact on MSMEs
MICRO-, SMALL- AND MEDIUM-SIZED enterprises (MSMEs) may not be able to cope with the proposed minimum wage increase now under consideration in Congress, the National Economic and Development Authority (NEDA) said.
“One of the things we’re looking at is affordability levels, especially for MSMEs,” NEDA Undersecretary Rosemarie G. Edillon told reporters late Monday.
The Senate on Monday approved on third and final reading a bill that seeks to impose a P100 across-the-board minimum wage hike for private sector workers.
The last legislated national wage hike was in 1989. Since then, pay rates have been decided by regional wage boards.
The House of Representatives has yet to deliberate on a counterpart bill. The chamber is currently studying a proposal for a P350 to P400 minimum wage hike, while separate bills have been filed for P750 and P150 wage increases.
Ms. Edillon said NEDA studied the impact of the proposed wage hike may offset company savings generated by the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law.
“That’s one of the things that can provide a windfall. But we saw that for MSMEs, they will not be able to manage. The savings from CREATE will not be enough to cover the additional wage increase.”
Ms. Edillon said that large enterprises will manage to pay more. “The problem is if you increase minimum wage, (you have to increase everything) and there will be distortions.”
CREATE was signed into law in 2021 to support enterprises recovering from the coronavirus pandemic. It reduced corporate income tax rates, provided tax relief measures, and rationalized fiscal incentives.
The House is set to deliberate amendments to the CREATE law to simplify and streamline tax and incentive systems.
The proposed changes seek to impose a 20% corporate income tax under the enhanced deduction income tax regime and provide value-added tax (VAT) exemptions for enterprises devoted entirely to the export market.
Calixto V. Chikiamco, Foundation for Economic Freedom (FEF) president, said in a Viber message that the legislated wage increase will “reduce employment, punish SMEs and scare off investors.”
In an earlier statement, the FEF said the wage increase does not account for the cost factors and employment situations in the various regions.
The group warned that it would force small- and medium-sized enterprises to lay off workers or even close operations.
“It will only cause more suffering for informal workers, such as seasonal workers, fishermen, gig economy workers, and market vendors, because they won’t benefit from the mandated daily wage increase but will suffer from the higher inflation that the bill, if passed into law, will bring.”
Mr. Chikiamco recommended to instead raise the disposable income of all consumers by liberalizing imports.
Last year, Metro Manila workers received a P40 increase in their daily minimum wage.
Other regions that approved wage increases were Cagayan Valley (P30), Ilocos region (P35), Central Luzon (P40), Central Mindanao (P35), Western Visayas (P30) and Southern Tagalog (P35 to P50). — Luisa Maria Jacinta C. Jocson