MANILA – The P40 hike in the minimum wage in the National Capital Region won’t be beneficial to the Philippine economy, an economics professor said Friday.

• P40 minimum wage hike approved in NCR

Speaking on ANC’s “Market Edge,” Prof. Leonardo Lanzona of the Ateneo de Manila University's Department of Economics said the P40 is not enough to cover workers’ needs.

However, small businesses may also not be able to afford to give this amount.

“In the case of the workers, I think P40 might not be enough. But if you look at it from the point of view of the employers, that’s a very significant labor cost…I’m talking about the micro, small, and medium enterprises, which will be affected by all of these wage increases,” he said.

“So I would expect that there will be greater unemployment, on top of the fact that labor demand has actually been reduced because of the current digital transformation that is going on,” he explained.

Lanzona also said that the wage hike may have an impact on inflation.

“If the firms begin to find out that workers have more money, and demand has actually increased, it’s possible that they will not increase production, they’ll just raise prices,” he noted.

Instead of a wage hike, government should have instead put cash transfer programs in place for all needy workers, the expert said.

“A lot of social protection should have been the best solution to the problem of workers not being able to meet their needs,” he said.

Lanzona also said improving the skills of workers would also help boost Philippine industries.

“We need to improve the productivity of our industries. It is the industries that are hiring the relatively unskilled workers…it’s gonna be very difficult to raise your employment and raise the quality of work at the same time,” he said.

Labor groups have been asking for a wage hike for several months now as prices of many goods and services continue to rise sharply.

A bill was even filed in the Senate seeking a P150 across-the-board hike.

Employers groups however have been opposing proposals for a wage hike saying businesses are still recovering from the impact of the pandemic.

--ANC, 30 June 2023