Business groups are urging the government to prioritize measures that boost productivity and strengthen investor confidence to help firms absorb the higher labor costs resulting from the increase in the daily minimum wage in Metro Manila.
The need to hike wages is recognized, as the rising costs of food, transportation, and other basic needs weigh on household budgets. However, wage hikes are more effective when supported by a competitive business environment and policies meant to lower business costs. This is particularly important for micro, small, and medium enterprises (MSMEs) and employment-intensive industries, which may struggle to absorb the increased labor costs.
To mitigate the impact of the wage hike, business groups are calling for measures to reduce red tape, streamline permitting processes, improve regulatory predictability, and accelerate digitalization. Additionally, policies to lower key input costs, such as electricity, logistics, and transportation, are being sought to minimize the impact on consumers and businesses.
The challenge now is to ensure that the gains from higher wages are not diminished by higher prices, reduced hiring, lower investment, or slower economic activity. To achieve this, reforms to strengthen investor confidence and attract domestic and foreign capital are necessary. Greater investment can expand productive capacity, create quality jobs, introduce new technologies, and raise productivity, providing a sustainable foundation for higher wages and improved living standards.
The effect of the wage hike on inflation, employment, business viability, and wage distortion should be closely monitored. The wage board recently approved a dual tranche increase in the minimum wage in the National Capital Region (NCR), with the first tranche taking effect on July 25 and the second tranche on January 20, 2027.
Some groups have expressed concern that the wage hike will harm MSMEs, deter investments, and threaten macroeconomic stability. However, others note that qualified MSMEs are protected under the law, and certain enterprises, such as barangay micro business enterprises (BMBEs), are exempt from the Minimum Wage Law. Retail and service establishments with up to 10 employees may also apply for an exemption with the wage board.
According to labor experts, the wage-fixing system has built-in safety valves for enterprises that cannot absorb a wage increase. This includes exemptions for certain businesses and protections for MSMEs. Nevertheless, business groups are emphasizing the need for a competitive business environment and policies that support productivity and investment to ensure that the benefits of the wage hike are not offset by negative consequences for businesses and the economy.
