“The characterization of the proposal as politically motivated rather than economically grounded is misleading at best”
This responds to the article published in Manila Standard on March 20, 2026, authored by one Kelvin Santos titled “The economics Rep. San Fernando forgot to study.”
While scrutiny of wage policy is both necessary and welcome, the article evaluates a version of the National Minimum Wage proposal that does not reflect the actual provisions and empirical grounding of House Bill 8081.
It is essential to clarify the structure of the measure. The bill does not impose an abrupt and uniform wage increase, but rather mandates a three-year phased convergence, with 30 percent of the adjustment in the first year, 35 percent in the second year, and the remaining balance in the third, explicitly designed to allow firms to adjust gradually.
It further provides exemptions for duly registered Barangay Micro Business Enterprises (BMBEs) and allows temporary deferrals of up to six months, renewable under extraordinary circumstances. These provisions directly address adjustment risks and contradict the article’s central premise of a sudden, unbuffered wage shock.
On the issue of regional heterogeneity, the article assumes that geography is the primary determinant of wage-setting.
However, empirical evidence indicates otherwise. Our analysis shows that industry explains approximately 65 percent of productivity variation, while region explains only about 2 percent once sector is accounted for.
Similarly, wage differences are about fact that the bill does not impose a P200 immediate hike, Bangko Sentral ng Pilipinas research indicates that a 1 percent increase in minimum wage is associated with only a 0.10 percent increase in CPI, with no statistically significant impact on food inflation.
More fundamentally, the article overlooks the structural issue the reform seeks to address.
Over the past two decades, the Philippine economy has experienced substantial growth, yet wage transmission has lagged significantly.
From 2001 to 2024, real GDP grew by 209 percent, labor productivity by 84 percent, and corporate earnings by 531 percent, while real minimum wages increased by only 4 percent.
This divergence is reflected in the declining share of labor in national income, which fell from 48 percent in 2001 to 31 percent in 2024.
The result is a structural condition in which economic growth does not translate into commensurate improvements in workers’ living standards.
The question is not whether wages should respond to productivity, but why they have failed to do so despite sustained economic expansion.
The argument that wage increases threaten growth and investment also rests on an incomplete framework.
Investment decisions are influenced by a wide set of structural factors, including infrastructure quality, logistics, regulatory stability, and energy reliability.
Comparative evidence shows that countries such as Vietnam increased minimum wages by 101 percent alongside 246 percent GDP growth, and Indonesia increased wages by 214 percent with 160 percent GDP growth, while remaining competitive investment destinations.
In contrast, the Philippines increased real minimum wages by only 3 percent despite 151 percent GDP growth, yet regional disparities persist.
This suggests that low wages are neither a necessary nor sufficient condition for investment or regional development.
Growth strategies that rely on wage suppression are empirically weak and distributionally inequitable.
Finally, the characterization of the proposal as politically motivated rather than economically grounded is misleading at best.
HB 8081 is explicitly built on empirical analysis, incorporates institutional safeguards, and mandates consideration of employment, inflation, and firm capacity in implementation. It is a calibrated response to a documented structural imbalance, not a rhetorical intervention.
There is no disagreement that wage policy must be approached with caution and rigor
However, rigor requires engaging with the actual provisions of the proposal and the empirical evidence surrounding it.
HB 8081 does not disregard economic fundamentals but responds to them. It recognizes heterogeneity, provides adjustment mechanisms, and aligns wage-setting more closely with productivity and industry conditions.
The central issue is not whether wage reform entails trade-offs. It does.
The question whether maintaining a system in which wages remain disconnected from productivity, and workers are excluded from the gains of economic growth is the more defensible policy choice.
The evidence clearly indicates it is not.
We are in solidarity with the working class.
(Elijah R. San Fernando is the Representative of Kamanggagawa Partylist while Angela D. Bonuel is the Partylist’s Chairperson.)
