No need to hike wages

MANILA, Philippines - Job preservation, not wage hikes, should be the priority to help the country survive the economic slowdown, a Bangko Sentral ng Pilipinas (BSP) official said. "Wage adjustment should be considered in the light of significant price movements. There are none at this time," BSP Deputy Governor Diwa C. Guinigundo said in an e-mail to BusinessWorld. Proposed adjustments to minimum wages are an annual exercise for the Philippines. The government has said it would wait and see how the economy fares in the first half before it decides to endorse a fresh round. Mr. Guinigundo said wage hikes were not appropriate unless the higher pay resulted in increased productivity. "I am not sure if there have been productivity gains in the recent period," he said. The BSP, Mr. Guinigundo said, did not factor in wage hikes this year. "Where in the first place would companies source additional resources to fund such a wage adjustment?," the central bank official asked. Last year’s hikes were prompted by volatile food and fuel prices and were accompanied by inflation peaking at 12.5% in August, before easing to 8% in December. The full year average was 9.3%, up from 2.5% the year before. Inflation has eased further to 7% in January, and is expected to hit 1.3% in the third quarter due to the slowing economy. The year’s average is expected to 3.9%, within the government’s 2.5-4.5% target. Mr. Guinigundo said both the government and the private sector should instead work on job creation, noting that this is one of the thrusts of the government’s P330-billion stimulus package. The Makati Business Club (MBC) agreed that hiking wages was not the proper strategy in times of crisis. However, MBC President Alberto Lim said it would ultimately be the employer’s decision. "It depends on the industry. For instance, there is still demand for jobs in the BPO (business process outsourcing) industry, so employers may want to hike wages to retain employees," he said. With more job cuts likely in the coming months, "the pain must be shared equitably", possibly via a reduction in remuneration packages. Employer’s Confederation of the Philippines President Sergio Ortiz-Luis, Jr. shared the same view, saying more firms are likely to cut wages, as well as the number of work days in a week, just to be able to avert layoffs. But for the most part, many companies have yet to really feel the full effects of the crisis, he said. "This crisis is more in the media and in politics than it is in reality," Mr. Ortiz-Luis said. Plenty of jobs are available, he added, claiming that the problem is more of a skills mismatch. Earlier this month, the Labor department said that as much as 5,400 Filipinos had lost their jobs abroad and have since then come back home. Locally, some 40,000 people have lost their jobs, it said. The Trade Union Congress of the Philippines (TUCP), for its part, admitted that considering wage increases at this time would be "unreasonable", but stressed that the idea should not be ditched all together. "At this time, it is unreasonable since the economy is in crisis, but it would be premature for anyone to say that there should not be any wage hikes this year," TUCP Secretary General Ernesto F. Herrera said in an interview. He said no one could discount the possibility of an economic recovery later this year. Some government officials and analysts have forecast a recovery as early as the second half. - BusinessWorld