Neda nixes minimum wage hike, land conversion ban

By Luis Leoncio

If the economic managers who are under the Nation­al Economic and Devel­opment Authority (Neda) board would have their way, the P125-a-day across-the-board wage increase being sought in Congress is out of the question this year, and perhaps in the years to come.

The departments of Fi­nance (DOF), Budget and Management (DBM), and Trade and Industry (DTI), and the Office of the Vice President have signed a Neda position paper calling for a re­jection of the wage-increase proposal, which the signato­ries said could only worsen inequality across the regions.

The position paper was primarily submitted to the Office of the President in an­swer to a proposal by the De­partment of Agrarian Reform (DAR) for a two-year ban on land conversion, which the signatories said would have adverse effects on the econo­my, including the agriculture sector, which the proposed moratorium purports to pro­tect. DAR said the proposal was intended to support the country’s food-security pro­gram.

President Duterte was reported to have approved in principle DAR’s proposal last September 12, and an exec­utive order is now reportedly being prepared formalizing the presidential nod. The inclu­sion of the wage issue in the position paper was prompted by reports that a bill for the P125 daily minimum-wage increase was expected to be filed in the 17th Congress.

“While the economic managers want to raise the living standards of workers and their families, we do not support the P125 daily-wage increase, as it is likely to have adverse impacts on economic growth, employment, and in­flation,” said Socioeconomic Planning Secretary Ernesto M. Pernia, concurrent Neda di­rector-general, in a letter to the President. “Similarly, we do not support uniform wage in­creases across regions, as these may erode the attractiveness of other regions for labor-inten­sive industries and enterprises, consequently worsening in­equality across the regions.”

On her part, Neda Of­ficer-in-Charge and Deputy Director-General Rosemarie Edillon said: “The cost of liv­ing and cost of doing business vary in every region. This is why we have regional wage boards that set minimum wages based on several factors affecting prices in their respec­tive regions.

“If we have uniform wage hikes, then employers, espe­cially startups and small and medium enterprises, in areas where other costs like utilities and logistics are high, could be discouraged from hiring more workers.

“And the unemployed or underemployed workers in these regions could lose the opportunity to be fully and gainfully employed. In some cases, enterprises may also have to increase the prices of goods and services they sell because of the higher labor cost, thus pushing prices up­wards.”

According to a simulation study conducted by the Neda that analyzed the impact of a P125 across-the-board wage increase in all regions, the pro­posed wage hike could result in upward pressures on prices from 2017 to 2018, the stron­gest of which could be felt in 2017, when inflation could rise to 9.7 percent from a base­line of 2.1 percent.

The study also showed the wage increase could dis­place around 500,000 workers in 2017, which could raise full-year unemployment rate to 7.3 percent.

Increasing wages across-the-board is expected to sig­nificantly reduce real gross do­mestic product (GDP) growth to 5.5 percent from a baseline of 6.5 percent in 2017.

“This will have a more pronounced effect on the poor, who are expected to suf­fer the most from any signifi­cant increase in inflation rate and reduction in economic growth and employment,” the position paper said.

“Such a policy would like­ly have the unintended conse­quence of worsening inequal­ity, and would be detrimental to regions as it would erode their attractiveness as invest­ment destinations, particularly for labor-intensive industries,” it added.

The economic managers recommended, instead, the maintenance and strength­ening of the current tripartite mechanism for regional min­imum-wage setting that takes into account the unique eco­nomic situation of the region.

At the same time, infra­structure in the regions should be increased, especially those relating to connectivity, in or­der to improve the investment climate in the regions, they said.

Land-conversion moratorium

“While we are one with DAR in finding ways to address the country’s food security concern, food security has to be met through some other means,” said Pernia in his let­ter to the Office of the Presi­dent, expressing opposition to the to ban for two years the conversion of agricultural land to non agricultural uses.

Also signed by Finance Secretary Carlos Dominguez III, Budget Secretary Benja­min Diokno, Trade Secretary Ramon Lopez and Vice Pres­ident Maria Leonor Robredo, the joint position paper states that “overall, the land use con­version ban is antithetical to economic growth, job genera­tion, and poverty reduction.”

The position paper said the freeze on land conversion could derail efforts to revitalize agriculture, meet the housing backlog, accelerate infrastruc­ture development, and expand other economic activities.

“Paradoxically, the revital­ization of the agriculture sec­tor may suffer under this pro­posed policy,” the paper said.

With the ban on land-use conversion, land require­ments may not be met for agriculture-based processing and manufacturing activities, which could help make food affordable, increase farmers’ incomes, and generate export revenues, it said.

The paper nonetheless supports the DAR proposal to create a task force that would assess the status of land-use conversion and seek the nec­essary support of other imple­menting agencies.

Instead of imposing a two-year ban, the position paper strongly called for the implementation of a national land-use regulation through the enactment of a National Land Use Law.

“In the immediate term, government must strictly im­plement existing laws, which already cover non-conversion of prime agricultural lands, lands subject to land reform, irrigated lands, protected areas, and other areas non-negotia­ble for conversion,” according to the position paper.

“In the medium term, the legislature should enact a National Land Use Code that shall cover not only land use conversion but also effective land administration. Further, a National Land Use Code will help reduce congestion in Metro Manila and other emerging metropolitan cit­ies like Cebu and Cagayan de Oro,” it said.

The position paper also said the ban on land use con­version would introduce more delays in reducing the gov­ernment’s housing backlog, which the Housing and Urban Development Coordinating Council (HUDCC) projects to reach more than 5.5 million units this year.

The ban would also im­pede the development of re­settlement and evacuation ar­eas in disaster-stricken areas, which are mostly agricultural.

“Simply put, this will de­lay improving the living con­ditions of millions of Filipinos with the increase in cost of land for housing. In short, the ban is anti-poor,” it added.