Foreign businessmen in the Philippines have rejected petitions for across-the-board wage increases, saying this could discourage foreign investors from entering the country and result in layoffs.

The Joint Foreign Chambers (JFC) made known its position in a letter to Alex V. Avila, chairman of the Regional Tripartite Wages and Pro-ductivity Board at the National Capital Region (NCR).

“We believe that petitions for an across-the-board wage increase in the NCR will have unintended adverse consequences that in the long run can adversely affect the very sector they wish to benefit,” part of the JFC’s letter read.

The letter was signed by the presidents of the American Chamber of Commerce of the Philippines, Australian-New Zealand Chamber of Commerce of the Philippines, Canadian Chamber of Commerce of the Philippines European Chamber of Commerce of the Philippines, Japanese Chamber of Commerce and Industry of the Philippines, Korean Chamber of Commerce of the Philippines and the Philippine Association of Multinational Companies Regional Headquarters Inc.

Foreign businessmen said a wage increase at this time could result in lay-offs among micro, small and medium enterprises (MSMEs). They also note that small businesses would be forced to downsize their operations to survive.

“When MSMEs cannot cope with another adjustment in wages or cost-of-living allowance [Cola], they will pass on the cost to consumers. Worse, they can resort to layoffs,” the foreign businessmen said.

The JFC said a wage increase would also “imperil” the increased interest in the Philippines as an investment destination. Citing data from the National Wages and Productivity Commission, the JFC said the Philippines has the highest minimum wages in Southeast Asia.

“Compared with Metro Manila’s $10.74 daily minimum wage, Myanmar has $0.52, Cambodia $2.03, Vietnam $3.15, Indonesia $7.46, China $8.08, Thailand $9.75 and Malaysia, $9.75,” the letter read.

“It needs to be remembered that rising labor costs over the past several years resulted in the closure of hundreds of factories in the once-strong footwear and garment sectors in the face of competition from countries where labor costs are lower —Bangladesh, Cambodia, China and Vietnam,” the JFC added.

A minimum-wage adjustment, the foreign businessmen said, would benefit only 6 percent of the total work force but the resulting increase in consumer prices would affect 94 percent of Filipino workers.

“Roughly 2.4 million minimum-wage workers, or 5.8 percent of the total workforce of 41 million Filipinos in the formal sector, will benefit from a minimum-wage adjustment,” the letter read.

“However, the resulting inflation that a wage increase will bring about will affect all workers, including the rest of their families. In essence, the entire general public including the unemployed, estimated at more than 3 million, will be adversely affected,” it added.

The JFC said a wage increase would be ill-timed as the government grapples with unemployment in the country. Last year the unemployment rate in 2012 was 7 percent in the Philippine, while Malaysia had 3 percent, Indonesia 6.5 percent and Thailand 0.7 percent.

The JFC businessmen threw its support behind the two-tier wage system, wherein the minimum wage is set close to the regional poverty threshold, while the second tier is an additional compensation linked to productivity.

“We believe that ultimately, compensation should be tied to productivity as determined by enterprise-level conditions. Wages should not be political in nature, legislated, and without regard for the nuances of the industries and individual enterprises that drive the Philippine economy,” the JFC said.

The regional wage board will decide on August 8 whether or not to grant the Trade Union Congress of the Philippines’s petition to increase daily minimum wage in the NCR by P85.

Source: Business Mirror; News; 07 August 2013