The ₱200 Daily Wage Hike – A Well-Intended But Risky Proposition

The recent approval of the ₱200 Daily Across-the-Board Wage Increase Act by the House Committee on Labor and Employment has reignited the long-standing debate on wage policies in the Philippines.

Micro and small enterprises make up 99% of Philippine businesses—how will they cope with the wage hike? | Illustrator: Riz

While the measure aims to uplift workers and provide economic relief amid inflationary pressures, its far-reaching consequences on businesses, especially micro, small, and medium enterprises (MSMEs), demand serious reconsideration.

The MSME Dilemma: A Crisis in the Making?

MSMEs, which constitute 99% of businesses in the country, are already grappling with rising operational costs, limited access to financing, and post-pandemic recovery struggles.

A ₱200 daily increase in wages translates to an additional ₱4,000 per worker per month, a figure that could break the backs of small business owners operating on razor-thin margins.

Many MSMEs may be forced to cut jobs, downsize operations, or even shut down entirely, counteracting the bill’s intended benefits.

Moreover, businesses that manage to absorb the increase will likely pass on the added costs to consumers through higher prices, fueling inflation that will erode the purchasing power of Filipinos, including the very workers this bill seeks to protect.

Who Gets Left Behind? The Informal Economy Factor

Another significant concern is the exclusion of the informal sector, which accounts for approximately 70% of the workforce. These workers, often engaged in daily wage labor, gig work, and unregistered enterprises, will see no direct benefit from the mandated wage hike.

Instead, the wage increase may widen the gap between the formal and informal economies, pushing more businesses to resort to contractual arrangements or under-the-table employment to evade compliance costs.

A universal wage increase across industries and regions could lead to wage distortion, a scenario where newly hired or low-skilled workers earn nearly the same as experienced employees.

This could trigger labor unrest, demands for across-the-board salary adjustments, and a ripple effect that would further strain businesses. Companies may have to adjust their entire pay structure, incurring significant costs that could have been allocated to business expansion, innovation, or additional hiring.

The most alarming outcome of the wage hike is the potential loss of thousands of jobs.

Businesses that cannot cope with the additional labor costs may be forced to reduce their workforce, automate processes, or relocate to countries with more competitive wage structures.

The very workers whom the bill intends to support may end up unemployed or stuck in precarious work arrangements.

The Compliance Burden on Employers

The bill also introduces strict penalties, including fines of up to P100,000 and possible imprisonment for non-compliance.

While well-intended as a safeguard, this could discourage entrepreneurship, deter foreign investment, and create an adversarial climate between employers and workers. Businesses—particularly small enterprises with limited administrative capacity—may struggle to keep up with the rigid regulatory requirements.

Finding a Sustainable Middle Ground

Finding a sustainable middle ground in wage policies requires a balanced approach that considers both workers' welfare and businesses' financial viability. Instead of a blanket wage increase, policymakers should explore alternative strategies such as targeted wage hikes based on industry, region, and economic conditions.

Providing incentives like tax breaks or subsidies can support MSMEs in managing higher labor costs without compromising their stability.

Expanding social safety nets, including food vouchers, transportation subsidies, and housing assistance, can further ease financial burdens on workers.

Additionally, investing in upskilling and reskilling programs will empower employees to transition into higher-paying, in-demand jobs, fostering long-term economic growth and workforce development.

The push for higher wages is a valid and pressing concern, but it should not come at the expense of economic sustainability. A well-balanced, consultative approach that involves workers, employers, and policymakers is crucial to crafting wage policies that promote both livelihood security and business viability.

As the bill moves forward in Congress, lawmakers must weigh its potential consequences carefully.

The goal should not merely be higher wages but better, more secure, and sustainable jobs for Filipinos. The challenge is to strike a balance—ensuring fair compensation while keeping the engine of economic growth running strong.