Exporters are not in favor of the minimum wage hike.
PIC COURTESY: bworldonline.com
The President of the Philippine Exporters Sergio Ortiz Luis Jr. has a serious objection to the increase in wages. He made an observation that:
1. There was no correlation between the productivity of a worker and the raise of his wages, and
2. Since the increase in wages was just across the board without any corresponding adjustment of the productivity, goods and services were bound to become costlier.
This was the subject matter of a position paper that he submitted. In the paper, he has expressed total opposition to the proposed wage hike amounting to P 125 million wage hike.
He made it clear that this arbitrary increase of wages was likely to undermine the economic growth of the nation while having a negative impact on the competitive edge that the trade has currently.
In the highly competitive market environment, it was not feasible to just increase the wages and pass on the hike to the market.
The imports that were low-cost and the goods that were smuggled in to the country were the stumbling blocks to such increases in costs.
The results are not difficult to foresee.
The industry players that are not able to recover the inflated costs of the production line may be forced to totally close shop or to retrench their manpower to make both ends meet.
The effect could also be that they simply go underground and lead a risky life. This effect may be quite severe on Small and Medium Enterprises (SMEs) since these periodic wage adjustments might spell their doom.
In effect, the proposed hike in wages will force the already small entities in the organized segment to the unorganized sector; that is not a desirable movement.
These steps will have a directly, destructive effect on quality of employment and products, competitiveness, growth and advancement.
The only segment that may benefit from this wage hike will, probably be the formal sector but this segment is only a minority 15% of the total industry’s manpower.
The derogatory effect of this increase is likely to impact the economy remarkably since the same formal sector will be producing only about 60% of the total produce.
Moreover, the proposed wages will be the highest among the ASEAN.
Ortiz-Luis advised the government to look at the economic slowdown which China is suffering due to rising labor costs.
The wages are six times of those that were prevailing seven years ago on the Chinese east coast.
Many nascent industries are moving to Vietnam and Bangladesh since they are labor-intensive.
The labor code needs to be updated to allow more leeway for companies to negotiate with labor. Setting up of SEZs that allow labor intensive industries to function independent of the minimum wage requirements.
Indonesia, Vietnam and Bangladesh are getting the advantage, Luis said.
Umrao singh umraoz.wordpress.com
Wednesday, 05 October 2016
Written for: Lars-Magnus Carlsson www.thephilippinepride.com?utm_source=rss&utm_medium=rss
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