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How will wage hikes impact businesses? Economist breaks down the data

MANILA, Philippines — If minimum wage workers earn P200 more daily, can businesses handle them? 

Some businesses fear it will weaken their “competitiveness” and eventually drive up the cost of goods and services or cut down jobs to compensate for added expenses. 

On the other hand, an increase in minimum wage would ideally help Filipino workers cope with inflation, or how fast the price of goods and services increase. In other words, it seeks to assist families in offsetting additional household expenses. 

The argument is circular, with some assuming that wage increases fuel inflation, while others argue that they are necessary to keep up with it. 

This was pointed out by Rep. Arlene Brosas (Gabriela Women’s Party-List), one of the proponents of the proposed P200 legislative wage hike. 

RELATED: House panel endorses P200 wage hike for private sector workers

“Basic economics shows that wages follow prices, not the other way around,” she said in a statement. “The proposed P200 increase will barely help workers catch up with the rising cost of living.” 

Economic think tank IBON Foundation explained that the issue lies in employers' reluctance to share a portion of their profits. The idea behind increasing the price of goods and services is to maintain a consistent level of profit, if not boost it.

“Taking businesses as a whole, there is no negative effect if only employers were willing to part with a small share of their profits,” IBON Executive Director Sonny Africa told Philstar.com.

The concept of “competitiveness” may also be misconstrued, as it should focus on “increasing worker productivity through better training and improving their health.”

“There's something fundamentally wrong, counterproductive and retrogressive whenever ‘competitiveness’ is understood as keeping wages low because this is putting the burden of profitability on workers,” he said. 

Brosas also mentioned that the loss of competitiveness is unlikely, as work productivity has risen despite minimal changes in the minimum wage.

According to IBON’s analysis, work productivity rose by 88% since 1989. This is measured by how much economic value each employed Filipino creates — or the gross

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