Minimum wage, unemployment go hand-in-hand, a study says

By Danielle Ann Gabriel

 

Minimum wage is confirmed to have a major role in the issue of unemployment in the country, according to a study done by the Philippine Institute for Development Studies (PIDS) last August.

The 8-page research written by Leonardo Lanzona Jr. titled “Effects of Minimum Wage on the Philippine Economy” discussed how the increase in minimum wage amount could translate to lower company benefits and security that would, in turn, result to blown-up proportions of unemployment cases.

“Workers carry part of the burden of higher minimum wages in the form of benefits and reduced worker security. Both of these effects may result in greater incidence of unemployment or lower participation in the formal sector,” Lanzona said.

The study also indicated that small-scale firms struggle more when it comes to hiring and keeping their employees. These small companies usually resort to offering job hunters higher pay as opposed to large-scale enterprises technique of promising promotions, Lanzona said.

He added that workers will be more inclined to work for smaller firms for easy money but will then shift to larger firms once minimum wages rise up, causing small firms to close.

“Poorer and less experienced workers who are in need of immediate cash will probably accept the offer of smaller firms, instead of taking a chance with larger firms,” Lanzona said. “However, once the minimum wages increase, more workers would move to the larger firms because smaller firms cannot further raise their offered wages.”

Citing some loop holes in the country’s labor laws, the PIDS study concluded the Labor Code should be reworked to have areas like production efficiency and social protection accessible to the employer and employee.

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