Photo credit: http://www.aflcio.org/
Saw on TV yesterday a leader of one of the big labor unions in the country. He spoke regarding the issue of minimum wage hike. I remember he said “companies who cannot afford the minimum wage hike should shutdown. These entities are just exploiting our workers”.
Now such statements beg the following questions:
1. Is it better to be jobless compared to not being granted a pay increase of Php14.00 per day?
2. Are those working below minimum wage at small companies out of their own free will, without any coercion or threat exploited? Even if they are paid regularly and in accordance to their employer-employee agreement?
The intent of the minimum wage law is noble. But sometimes it is being used by certain individuals or groups to harass or extort some companies.
For big and established companies there is no problem in complying with this law. Besides, they are already successful that it would be indecent making big money while paying minuscule wages.
But how about the small businesses? The struggling entrepreneurs? The Department of Trade and Industry (DTI) is trying to promote entrepreneurship and small businesses. But this law is in conflict with that intent. There is “Kalakalan ng 20″ which allows exemption from the minimum wage but it is applicable only to cottage industries. The majority of small enterprises are not covered.
Going back to what that trade union official said, if a small company folds up because he cannot afford the minimum wage, did he mean that the customers will have to go to the big companies? Maybe no problem for big customers as they most likely prefer big suppliers in the first place. But how about the small customers? Can they afford the rates that big suppliers charge? Or will the big suppliers take notice or care of these small customers from whom they would earn lower profits while incurring higher servicing costs?
It is not surprising that we have a big underground economy because some legislations like the minimum wage law is not cognizant with the realities.
My idea is not to abolish the minimum wage law. Rather, it should be revised and allow exemptions as follows:
1. For start-up companies, they should not be covered by this law for the first five years of operation. This is a big help to struggling entrepreneurs and a strong signal from the government that they support small businesses that are giving people jobs. If they become successful and get bigger, they can employ more people and help boost the economy. If the government gives incentives to foreign investors so they will put up companies in the Philippines, why not to our own entrepreneurs?
2. For companies operating after 5 years, exemption is on a case to case basis only. This should not be a tool that can be used by some unscrupulous businessmen. But on the other hand, legit and honest businesses like that sari-sari store in the corner where I buy softdrinks, cannot afford the minimum wage even after operating 10 or more years and should be given a break.
I don’t pretend to know it all. I am not even sure if I am able to get the message across correctly. So I would appreciate if you can comment to clarify or point out anything on this blog that you think needs correction. I would like to know what your views on the topics I shared.
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