I have written two columns on Senate Bill 2002, an act increasing the minimum wage across the board nationwide, authored by Senator Migz Zubiri and Senator Loren Legarda. Still, I am compelled to write again because the good senators are relentless and unmoved by the desperate pleas of business leaders, economists, and many stakeholders to set this bill aside.
Senator Migz threatens to pass this bill in December of this year.
If it could convince the honorable senators, I enumerate below ten specific reasons why this bill should be shelved or shredded for its audacity bordering on apathy:
ONE. We are a labor-surplus economy. There are more workers than available jobs, and the gap widens yearly.
Only 80 percent of the yearly 1 million graduates are employed, adding 200,000 jobseekers annually to the unemployment statistics.
The government’s dream of full employment remains in the realm of aspiration for those who are and will be jobless, such as new graduates, unskilled entrants to the labor market, and those who will be laid off from their jobs.
TWO. 99.5 percent of the more than a million registered enterprises are MSMEs, and 91.6 percent or 900,000 are micro and exist hand-to-mouth.
MSMEs are the backbone of our economy, employing 62.4 percent or 29.9 million workers, contributing 40 percent to our GDP. And any wage increase will hit the MSMEs the hardest.
THREE. Experience shows that the failure rate of Philippine MSMEs ranges from 20 to 80 percent every 10 years because of increasing operating costs triggered mainly by increases in the minimum wage.
With SB 2002, MSMEs will fail sooner.
FOUR. Each yearly mandated wage increase always results in higher unemployment as MSMEs cut back on their operations, institute job rotations to meet the new wage hike, in effect reducing the net take-home earnings of their workers who are on a no-work, no-pay basis, stop new hires, or shutter their businesses permanently.
FIVE. Inflation ensues after a mandated minimum wage increase as producers tack onto pricing the new wage increase.
SIX. Less than 8 percent or 3.9 million of the total 48.8 million employed workers in the formal sector benefit temporarily from a mandated minimum wage increase. The ensuing inflation from the wage increase reduces their purchasing power, and their short-term gain becomes a long-term pain.
Ultimately, it will be a zero-sum game for these workers.
SEVEN. The informal sector employs 2 out of 5, or 19 million, workers in the gray economy, which is legal but unrecorded and unregulated. They are not covered by any mandated minimum wage increase and are further driven down the economic ladder due to the ensuing inflation.
EIGHT. There is a 30 percent additional cost to employers for each mandated minimum wage increase in the form of upward adjustments to overtime pay, retirement benefits, holiday pay and contributions to SSS and PhilHealth.
NINE. Hefty upward adjustments in pay scale due to salary distortion as minimum wage salaries move closer to the next pay grade not covered by the wage order. This is unquantifiable as it varies for each industry and enterprise. But DOLE has a prescribed formula for this.
TEN. Doing the good and the right is not unidirectional but inclusive and multi-dimensional. SB 2002 aims to legislate what is good for the workers without considering the capacity of employers to pay. This is a great injustice, a twisted sense of charity and forced generosity.
There are two fundamental morality issues at play here. First is the morality of happiness or “eudaemonia,” a Greek word for “fullness of human flourishing,” which is a dream for all, not only for the bleeding hearts.
The second is the rules-based morality of obligations or morality of “shoulds,” which commands employers even if they cannot afford to give their workers, the alleged “exploited poor,” a wage increase in the name of obligation.
SB 2002 is mainly guided by the second precept and completely ignores and violates the first as it wants to legislate charity.
For sure, there are other dark and serious economic implications of SB 2002, but it will take a textbook to list them all down, and I will leave that to the companies that will be shuttered and to the workers who will be laid off if this bill is passed into law.
There is still time for Senators Migz Zubiri and Loren Legarda to reflect and reconsider the destructive folly of SB 2002 and avoid the shocking experience of Saul before his conversion to the faith as Saint Paul.