When good intentions become bad economics

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Every few years, a proposal emerges in Congress that sounds noble at first but collapses under the weight of economic reality.

The latest is the push for a national legislated minimum wage increase of P200 per day championed by Kamanggagawa Party-List Rep. Eli San Fernando.

Fernando is pushing for the passage of House Bill 94 or the National Minimum Wage Act that seeks to create a single, uniform, national minimum wage instead of regional wage increases as determined by regional wage boards.

In his bill, the lawmaker noted that currently, the country maintains a fragmented regional age system administered by the Regional Tripartite Wages and Productivity Board under Republic Act 6727 or the Wage Rationalization Act of 1989 which authorizes these RTWPBs to set minimum wage levels based on regional economic conditions. He pointed out that while well-intentioned, this approach has led to legalized wage disparities where workers performing the same tasks receive different compensation solely based on geographic locations.

As proposed, the single, nationwide minimum wage shall be determined through tripartite consultations and socioeconomic assessments to serve as the statutory wage floor for all workers across the country. The bill will abolish the RTWPBs and their regulatory and policy functions will be transferred to the National Wages and Productivity Commission.

It provides that the minimum wage rates for agricultural and non-agricultural employees and workers in all regions shall be those prescribed by the NWPC in coordination with the Department of Labor and Employment and such national minimum wage shall be fully implemented not later than the fifth year from the effectivity of the act. One year after the law becomes effective, the NWPC shall begin implementing a convergence process to gradually align all current regional minimum wages with the national minimum wage.

And in every year of the transition period, every region shall increase its minimum wage by at least 20 percent of the gap between its current regional minimum wage and the national minimum wage.

On paper, the proposal looks compassionate. Who would not support higher wages for Filipino workers struggling with rising prices?

But good intentions alone do not make good policy. And this proposal, however emotionally appealing, risks doing the very opposite of what it claims to achieve.

The Philippine labor market is not uniform.

The cost of living in Metro Manila is dramatically different from that in Bicol, Eastern Visayas or BARMM. The economic capacity of businesses varies just as widely.

Yet the bill proposes a uniform nationwide wage floor, effectively ignoring these differences.

In Metro Manila, a P200 wage increase may represent a 31 percent adjustment.

In Region 5, it could mean an increase of over 50 percent overnight.

No economy, especially one dominated by small enterprises, can absorb that kind of shock without consequences.

Nearly 99.5 percent of businesses in the Philippines are micro, small and medium enterprises (MSMEs).

These are not multinational corporations with deep pockets. They are neighborhood bakeries, small garment shops, family restaurants, repair shops and sari-sari store supply chains.

For them, wages are not just numbers on a spreadsheet. They are survival costs.

A P200 daily wage hike translates to roughly P4,000 to P4,800 additional monthly payroll per employee, excluding mandatory contributions such as SSS and PhilHealth. Multiply that across a small workforce and the numbers quickly become unsustainable.

Faced with such pressure, businesses have only three choices: raise prices, reduce the number of employees and workers, or close entirely.

None of those outcomes benefit workers.

Economic models suggest the proposed wage hike could place 105,000 to 300,000 jobs at risk. For policymakers sitting in air-conditioned committee rooms, that number might appear abstract. But each lost job represents a family forced back into uncertainty.

When formal jobs disappear, workers rarely find better opportunities. Instead, they move into the informal economy — street vending, waste picking or precarious gig work without contracts, benefits or legal protection.

Ironically, the workers the bill claims to help could end up with less security than before. Higher labor costs inevitably ripple through the economy.

Businesses pass the cost forward. Prices rise. Foreign investors leave.

Experts estimate the wage hike could push inflation up by 0.7 percentage points for a P100 increase and up to two percentage points for a P200 increase.

And who suffers the most from inflation?

Not corporations. Not politicians. It is the poorest households, whose income barely stretches across food, transport and utilities.

In other words, the policy risks raising wages on paper while eroding purchasing power in reality.

The Philippines already has a wage-setting mechanism designed precisely to prevent such distortions.

The RTWPBs adjust wages based on regional conditions — cost of living, productivity levels, unemployment rates and business capacity. This system ensures that wage adjustments are evidence-based, regionally appropriate and negotiated among workers, employers and government.

Scrapping that structure in favor of a legislated nationwide wage is not reform.

It is regression.

One cannot help but notice the political timing of these proposals. Calls for dramatic wage hikes often surface when populist rhetoric is most convenient. But economic policy should never be reduced to applause lines. True leadership requires the courage to say what is unpopular but necessary.

Yes, Filipino workers deserve better wages. But sustainable wage growth comes from productivity, investment and job creation — not legislative shortcuts.

If lawmakers genuinely want to help workers, the solutions are clear - improve productivity through skills development, lower business costs through infrastructure and logistics reforms and attract investment that creates higher-paying jobs.

These are not slogans. They are long-term commitments.

The danger of proposals like the national wage bill is not that they aim too high.

It is that they promise relief while quietly risking the livelihoods of the very people they claim to protect.

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