Economist: No record of companies closing due to wage hike

There is no record of companies and businesses closing due to an increase in wages, economist and former Department of Social Welfare and Development undersecretary Emmanuel Leyco said Wednesday.

Leyco made the comment in response to employers' groups’ staunch opposition to the proposed legislated minimum wage hike for private sector workers ranging from P150 to P750.

“There are no record of closures because of wage increases. There are records of closures not because the wages increased, but because competitiveness of certain businesses, simply, are not sustainable anymore. [Nagsara dahil wala] na pong merkado ang mga produkto, hindi dahil sa nagtaas ang sweldo,” Leyco told the House labor panel.

(They closed because there is no market for their product anymore, not because of the wage increase.) 

Leyco said that in an open market economy, it is the cost of production that affects the competitiveness of products, and that production cost has three major factors: land, capital and labor.

Of these three, Leyco lamented that labor cost has hardly increased, to the detriment of the workers.

He cited Philippine Statistics Authority data which shows that only six percent to 17% of production cost accounts for compensation, and the bigger percentage goes to spending on machineries, raw materials, rent and profit.

“That six to 17% is for compensation alone. If you include the benefits, it could go up to 21%. [So] over the years, the value of land, as well as capital, increased. Ang pinakakulelat, iyong value ng labor,” Leyco said.

(The value of labor has been left way behind.)

Further PSA data on Philippine business and industries, Leyco said, also revealed that the total compensation only grew by a measly 1.7%.

He added that PSA data also shows that the rise in inflation, or the rate of increase in the prices of goods and services which reached 8.7% in January 2023, is not due to labor cost.

“Tumaas po itong inflation hindi dahil sa cost of labor. Tumaas po ito kasi iyong production capacity ng ating ekonomiya ay hindi nakasabay sa pagbukas ng demand ng ating ekonomiya. This happened worldwide, not only in the Philippines, due to us [coming off the] COVID-19 pandemic,” Leyco said.

(Inflation increase is not due to labor cost. Our production capacity was not able to meet the demand as the economy opened [after COVID-19 pandemic].) 

Cost of coffee for managers

In closing, Leyco said that the pending wage hike bills would hardly make a dent in employers' pockets.

“The value they are asking...P150, P300, P750, pambili lang ng kape ng ating pong mga managers at may-ari ng mga kumpanya. Hindi masasaktan ang may-ari at mga kapitalista sa pagtaas ng presyo [ng sweldo],” Leyco stressed.

(These increases are as much as managers and business owners would pay for a cup of coffee. They would not be hurt by a wage hike.)

“Consumption accounts for 60% to 70% of our economy. If mataas, malaki ang ating purchasing power, mas may oportunidad na palakihin ang merkado, tataas ang ating GDP," he added.

(If consumption is high and our purchasing power is high, there will be opportunities to strengthen the market, and our gross domestic product will grow.) — BM, GMA Integrated News