Congress is closer than ever to pushing for a legislated daily minimum wage hike — the first since 1989.
On June 4, the House of Representatives, with a 171-1-0 vote, approved a hike that will apply nationwide. Previously, the Senate approved P100.
We’re just days away from the end of the 19th Congress. But if passed, this would be a landmark legislation because minimum wage hikes are typically decided at the level of regions, based on the negotiations between members of regional wage boards: the government, workers, and businesses. Minimum wages are hiked based on local economic conditions, and are typically a lot smaller (ranking from P20 to P50).
Thus, the measure being proposed by Congress is unprecedented in terms of scope and size. But does it make sense? Who stands to benefit?
Rather predictably, business groups are up in arms. They echo the typical prognosis coming from an Econ 101 textbook regarding the effects of wage hikes on labor markets.
First, they claim that a drastic wage hike will be inflationary, or tend to push up the prices of goods and services. Said the, “The wage hike leads to higher labor costs, consequently resulting in higher costs of goods and services, and inflation.” In other words, businesses will most likely pass on the costs of the higher wages onto consumers like you and me.
What does inflation look like under the Marcos administration? After reaching a 14-year high in 2022, inflation has subsided to a low of 1.3% in May 2025. That’s well below the 3% target of the government.
It’s true that a minimum wage hike can be inflationary. But if you’re going to hike wages and prices, it’s more palatable to do so at a time of low inflation like what we have right now.
But lower inflation doesn’t mean lower prices: it just means that prices are rising a lot slower than before. Filipinos today are still reeling from the drastic acceleration of prices from 2022 to 2023. I’m not sure that another wave of higher prices will be much appreciated by Filipinos.
Business groups also allege that some of them may not afford the higher minimum wages and end up laying off some workers. Thus, the minimum wages are going to be enjoyed only by the lucky ones who will keep their jobs in the process.
Said the president of the, this is “good news for a minority of our workers, but bad news for the super-majority of our workers.” He further pointed out that “there’s no increase for the farmers, for the fisherfolks, for the jeepney drivers, for the market vendors” — in other words, those in the sizable informal sector.
Economists used to be a lot more concerned about the segment of the labor force who were “unpaid workers” or those working gratis in family farms or businesses. But latest data from the show that as of March 2025, the proportion of unpaid family workers is down to 6.6% of the labor force, or 3.2 million people.
Meanwhile, the self-employed are at 13.3 million, and employers in family farms or businesses number nearly 1 million. So in total, there would be around 17.6 million who don’t stand to benefit directly from higher minimum wages.
By contrast, the vast majority of workers now are wage and salary workers: 63.4% or 30.4 million.
In 2023, some 4 million workers earned exactly the minimum wage. That’s still a pretty good number of people who stand to benefit.
The extent to which some workers will face the chop owing to the minimum wage hike is an entirely different matter, and an empirical one.
Some economist colleagues have done studies on this in the past, and they confirm the disemployment effects of (smaller) minimum wage hikes.
In a by my good friend KC Canales (who now lives in the US), she found that higher minimum wages tend to reduce work hours “not only for workers earning the minimum wage but also for workers earning 50 percent more than the minimum wage.” Workers also have lower chances of gaining or retaining employment.
Similar findings were found by economists of the 蝌蚪传媒 in a they published in 2016 (but it’s more of a survey of studies, with no empirical estimates of their own).
The thing is, outside the Philippines, economists are finding weaker and weaker evidence that minimum wage hikes harm workers’ jobs and prospects. In fact, in the US, there was a seminal study back in the early 1990s that showed a null effect on employment rates. This sparked an entire literature in labor economics. Until now economists are finding similar results that challenge the already dated and debunked notion that minimum wages are necessarily bad.
At the UP School of Economics, I, together with some of my colleagues and students, are also looking into this same issue using modern techniques in causal inference. We’ve compiled historical data on minimum wage increases set by the regional boards. The analysis isn’t done yet, but so far we’re not finding significant effects of minimum wage hikes on employment outcomes — contrary to previous findings.
I would therefore say that the jury is still out on the disemployment effects of minimum wages in the Philippines, compared to groups who seem to be a lot surer about their conclusions about the economic impact of minimum wage hikes. Then again, the minimum wage hike being proposed is more drastic than the ones set by regional boards — so for all we know it could be more harmful to many than useful.
At any rate, we ought to be investing in basic research about the economic impact of minimum wages. It turns out that President Ferdinand Marcos. It would be good to get the insights of the newly created Department of Economy, Planning, and Development (DEPDev). But research ought to be emanating from more independent sources like academia nonpartisan think tanks.
Finally, we need to understand the motivations of politicians in pushing for this measure. Why now, of all times?
Recall that the “supermajority” in the House of Representatives, led by Speaker Martin Romualdez (the President’s first cousin), may be out to look for wins to boost the image of the administration (especially after the 2025 election results, which were disappointing to the administration).
If you noticed, President Marcos himself is pushing for more populist policies of late, including for his P20/kilo rice program. He even last week with his family, and in a bid to show he’s doing something about public transportation.
Expect more populist policies to come from the administration as Marcos builds up his legacy in his last three years in office.
