Inflation scare on wage hike plea

Yesterday, we observed Labor Day, a longstanding holiday tradition meant to recognize and pay tribute to the contributions of Filipino workers to our country.

As in the past, the occasion was marked by organized labor’s demand, among others, for an increase in the daily wages and improvements in working conditions.

Earlier, on account of the high inflation rate in the country, a coalition of workers filed a petition with regional labor offices to raise the minimum daily wage to P1,000 in Metro Manila and P750 outside the capital.

For the same reason, a bill had been filed in the House of Representatives for an across-the-board P750 increase per day in the wages of all employees in the private sector. In the Senate, however, the proposal was for a P150 daily wage increase for those employees.

The minimum daily wage in Metro Manila today is P750 and the rate is lower in other parts of the country depending on their wage boards.

For Socioeconomic Planning Secretary Arsenio Balisacan, increasing the wages by legislative action would harm the economy and contribute to inflation.

The fact that neither of those two bills had gone beyond the committee level in their respective chambers indicates that majority of the lawmakers are not inclined to enact a new minimum wage law or amend the law that gives regional wage boards the authority to decide on wage adjustment petitions.

That process is based on the premise that costs of living in different regions of the country vary depending on their economic and labor conditions. In other words, a one-size-fits-all wage rate is not considered sound nor practical.

Note that in the past, whenever organized labor demanded wage hikes, the usual (or knee jerk) response of the government was, putting more money in the workers’ pockets would be inflationary and should therefore be avoided.

But no such apprehension had been raised when the increase in money circulation was made at the government’s initiative to meet its social obligations to the public.

Recall that in 2021, the government released P3.78 billion to fund cash transfers and subsidy programs to the D and E sectors of our society. In 2022, the amount spent for the same purposes was P15.5 billion.

For 2023, the government has allocated P20.5 billion for the same social amelioration purposes.

The government had justified those expenses as necessary to help cushion the adverse effects of the pandemic and the high inflation rate.

They were not considered inflationary, but instead were described as part of social engineering and, with the additional money in circulation, would help jump-start the economy to prepandemic levels. Who can argue against those altruistic (and politically enhancing) objectives?

But unless economic theories have changed (which is doubtful), inflation is inflation regardless of the source, whether public or private, of the extra or “unwanted” money in circulation.

Can the same principle that guided the government in giving those billions in pesos as “ayuda” (or assistance) not be applied to the wage increase the workers are demanding?

Although the COVID-19 menace has abated, the high inflation rate has not in spite of the government’s efforts to rein it in.

Incidentally, in similar financially challenging situations in the past, minus the pandemic, employers were encouraged by the government to augment the wages of their workers through cash allowances to cover their meal and transportation expenses.

By and large, those payments were not considered part of the workers’ regular compensation and therefore not subject to income tax. It was a subtle way of boosting the workers’ wages without attracting any tax liability.

Not anymore. Unless those allowances are de minimis (or of relatively small values) and do not exceed the benchmarks set by the Bureau of Internal Revenue, those extras are taxable. Ouch!

Considering the lukewarm response from Congress to the legislated wage increase, it’s back to the regional wage boards for any upward adjustments in the workers’ daily wages. INQ

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