NEDA: P100 wage hike to affect inflation, growth, unemployment rate

By Anna Leah Gonzales

February 22, 2024, 7:54 pm

MANILA – National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan on Thursday warned that the proposed PHP100 wage hike will create negative effects on inflation and economic growth, and increase unemployment rate.

"Well, our position at NEDA is, it’s not the right time that you see we are trying to work very hard to sustain the momentum in reducing inflation to a target of 2 to 4 percent and the last thing we want is to reverse those gains we have achieved for the last several months," Balisacan said in an online forum.

"For sure any proposed PHP100 wage hike would negatively impact inflation prospects. Our GDP (gross domestic product) estimate shows that GDP growth could be hit negatively," he added.

Balisacan said the wage increase, depending on how it is implemented, could have a 0.1 to 0.5 percentage point reduction in the GDP.

"If the lower number assumes, the wage will be applied to minimum wage earners. But if there are cascading effects on that to other workers, then it would go as high as 0.5 percentage point reduction in our GDP and that’s quite substantial," he said.

He said the wage hike could also increase unemployment rate by 0.2 to 0.7 percentage point, adding this will "amount to something like 100,000 to 340,00 additional unemployed people."

Aside from these, Balisacan said the inflation that would be induced by the wage hike is around 0.2 to 0.8 percentage point.

"We are not saying that we are against any increases in wages, in fact, … we would want some improvement in wages, but we would rather have those wages negotiated on the regional level because we have established regional tripartite discussions between government, firms and workers and the situation across the country are so different," he said.

Balisacan said allowing wage hike negotiations to take place at the regional level would get them to take into account those significant differences in the labor market conditions and economic conditions in those areas.

"So in the past several years now, we have had those increases in wages realized in the level of tripartite discussions," he added. (PNA)