A gradual approach to increasing the minimum wage is needed for Filipino workers to afford a decent standard of living, according to industry experts.
In January, a bill that seeks to grant a P200 (US$3.5) across-the-board wage increase for private-sector workers was approved by lawmakers, nudging the legislation forward after being stalled for months. The Philippines last experienced a wage hike 35 years ago, when a commission was formed to study and set wages at the regional level, allowing wages to differ across regions to suit widely varying local conditions.
In recent months-long discussions, workers say they need the wage increase to cope with the rising costs of goods. An employers’ group, however, has warned that raising the minimum wage would compel companies to raise the price of their products, which could drive inflation.
But if wage hike costs are gradual, this will slow down inflation, argued Bonar Laureto, partner for climate change and sustainability at consultancy firm SGV & Co.
“If the wage hike is abrupt, and there is massive pass-on cost to the consumers, then there will be an impact [to inflation],” Laureto told a panel held by consumer goods company Unilever on 26 February.
“The implementation of a living wage policy should be executed in a calibrated manner to strike a delicate balance between costs and benefits.”
A gradual approach can mitigate the immediate financial impact on companies while allowing them to realise benefits such as reduced employee attrition, lower hiring costs, improved productivity, and enhanced quality, which could reduce or eliminate the need for subsequent price increases, he added.
Unilever Philippines launched its Living Wage Impact Report in February with an external-facing event, called Wages That Work, co-presented by Eco-Business. From left, Eco-Business moderator Ping Manongdo; Unilever’s sustainability lead for the Philippines and Greater Asia Rondell Torres; SGV & Co.’s partner for climate change and sustainability Bonar Laureto; International Labour Organisation’s regional specialist on wage Xavier Estupiñan (virtual speaker); Unilever’s global social sustainability manager Matteo Squire; National Wages and Productivity Commission’s executive director Criselda Sy; and Federation of Free Workers’s president Sonny Matula. Image: Unilever
Living wage refers to the wage level that is necessary for a decent standard of living, taking into account the country’s circumstances, according to the International Labour Organisation (ILO).
As of 2023, 15.5 per cent of the Filipino population live below the poverty line, which is equivalent to about 17.5 million people who cannot afford essential needs.
Xavier Estupiñan, regional specialist on wage of the ILO, agreed that a “phased” approach to increasing wages, such as gradual adjustments aligned with economic performance, will ensure businesses’ adaptability and inflation control.
“This approach allows firms to have some time to adjust [and] invest in productivity-enhancing technologies as well as other types of channels of adjustment to manage cost increases more effectively,” Estupiñan said.
This is supported by Unilever’s study that reflected that the best case scenario is a gradual adoption of a living wage programme.
“A staggered approach was observed to be most practical where Unilever’s supply chain partners can gradually adopt the living wage, allowing us to better manage both the financial and administrative impacts of the implementation,” Rondell Torres, sustainability lead for the Philippines and Greater Asia at Unilever, told the audience composed of representatives from corporations, government, trade unions, civil society, and the academe.
Criselda Sy, executive director of the National Wages and Productivity Commission, a government agency responsible for formulating policies and guidelines on wages, incomes, and productivity improvement, said the commission supports aligning the living wage with the minimum wage.
“Aligning means adjusting the minimum wage progressively so that it moves closer to the living wage over time, taking into consideration the prevailing socio-economic conditions. It doesn’t necessarily mean they will be the same, but the goal is to reduce the gap between them,” Sy told the panel.
The deferred scenario shows how firms would start at 10 per cent living wage compliance starting at 2030, increasing to 100 per cent by 2039. As it is a staggered implementation, the full benefits are yet to be realised but it allows for investments to gradually increase with reduced impact until such time that the benefits are felt by both businesses and employers. Image: Unilever Philippines Living Wage Impact Study
Researchers from the study found that if all Philippine-based firms invest about P64 billion (US$1.12 billion) from 2030 to 2040 to provide a living wage for their employees, the revenue generated will reach up to almost P74 billion (US$1.3 billion) from savings in reduced training needs and increased productivity from motivated workers. The government also benefits from the additional tax collected from increased employee spending.
The profits gained may be distributed to staff as cash and non-cash benefits earmarked for food, provisions for unexpected events, healthcare, communications, and clothing, which are the most pressing unmet needs among workers that researchers surveyed.
Filipino workers currently earn up to 23 per cent below the average benchmark of the living wage that covers enough for basic needs, according to the analysis.
“We recognise that every organisation has varying circumstances and considerations in implementing living wages throughout their operations. It took six years for Unilever globally to be living wage compliant for our employees, so we understand that this will be a marathon for your organisations as well,” said Fredy Ong, chairman and chief executive of Unilever Philippines, directly addressing sustainability advocates and professionals of large enterprises present at the event.
Upliftment of workers does not stop with a wage hike
Although having a living wage would help uplift the lives of Filipino workers, their suitability for employment must also be improved, said Sy.
Sy cited how free college education offered by the government can help the youth negotiate a higher salary from employers and not just rely on the minimum wage.
“By equipping our youth with the necessary skills, free education not only enhances their employability but also empowers them to negotiate for higher wages. This means that young workers won’t have to settle for minimum wage; they can use their education to demand better pay and improved working conditions,” said Sy.
Sonny Matula, president of the Federation of Free Workers and chairperson of the NAGKAISA Labor Coalition, echoed the need to educate and upskill the workforce, but cited the urgency for government intervention to upgrade the wages of workers given that even college students are “victims of contractualisation”.
He was referring to the practice of some businesses hiring employees under a fixed-term contract, without being regularised, and as such, not provided benefits like medical insurance, paid leaves and security of tenure.
While the bill granting the wage hike has been approved, it currently sits in the office of Philippine president Ferdinand Marcos, Jr. before being signed into law. Trade unions have called on Marcos Jr to certify it as urgent, but the legislation remains under review.
[Editor’s note, 14 April 2025]: Minor revisions have been made to this story following a request for clarification sent by Unilever to Eco-Business on 14 April 2025.
