THE wage hike approved for the National Capital Region may be among the highest approved in Metro Manila but, local economists said, this could also increase prices and cut jobs, particularly in micro, small, and medium enterprises .
“If firms realize that workers have money and increased demand, they will realize that they don’t need to increase production. They can just increase prices without increasing production. Sure, demand increases but production will not be responsive. This can further necessitate interest rate hikes by the BSP to stem inflation,” Ateneo de Manila University economist Leonardo Lanzona Jr. told the BusinessMirror.
Monetary Board Member Bruce J. Tolentino told the BusinessMirror that wage hikes are important factors in inflation estimates and will have an “upward pressure on price levels and inflation.” In Reside’s view, what would have a bigger impact on the country’s inflation rate is the coming El Niño, as the extreme weather phenomenon has a direct impact on the country’s food prices.
He noted that not all workers are based in Metro Manila and as such, the lookout would be to see whether there would be similar increases in wage rates in other places outside of NCR. Meanwhile, Lanzona expressed concern that apart from higher prices, the wage hike could lead to job losses, especially middle- and low-skill jobs. These job cuts may be more prominent among MSMEs compared to big firms.
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