By Mark Joseph M. Sanchez
FILIPINO entrepreneur Wilson Lee Flores has kept Kamuning Bakery Café’s pandesal reasonably priced through inflation spikes, supply disruptions and surging electricity bills.
As Metro Manila’s higher minimum wage takes effect on July 25, nevertheless, the owner of the 87-year-old bakery says preserving that balance between fair pay for employees and reasonably priced prices for patrons is becoming even harder.
“We support the goal of giving employees higher wages because every worker deserves fair compensation and a greater quality of life,” Mr. Flores told BusinessWorld via Viber.
“Nonetheless, this latest wage increase also comes at a time when many small businesses nationwide are already scuffling with rising costs of food ingredients, electricity, rent and transportation.”
His dilemma mirrors that of many micro, small, and medium enterprises (MSME) preparing for the National Capital Region’s (NCR) latest wage adjustment.
Reasonably than resorting to layoffs, many business owners said they’d try to enhance productivity, reduce waste and absorb a part of the upper labor costs, while calling on the federal government to expand support programs for small businesses.
Under Wage Order No. 27, the day by day minimum wage for nonagricultural employees in Metro Manila will increase by P60 to P755 from P695 on July 25 and rise further by P25 to P780 on Jan. 20 next 12 months.
Agricultural employees, employees of retail and repair establishments employing 15 or fewer employees, and manufacturing firms with fewer than 10 regular employees will receive corresponding increases, with their day by day minimum wage rising to P718 and later to P743 from P658.
The wage increase comes as MSMEs, which account for greater than 99% of registered businesses within the Philippines, proceed to face higher costs for raw materials, electricity, rent and logistics.
Mr. Flores said Kamuning Bakery has little room to lift prices because its products are staples for college students, senior residents and low-income households.
“As much as possible, we are going to try to soak up the upper costs as a substitute of passing them on to consumers. Our business is understood for reasonably priced and good quality breads and pastries, so we cannot increase prices,” he said.
As a substitute, the bakery plans to enhance efficiency by training employees to perform multiple tasks, investing in energy-saving equipment, and reducing production waste through higher planning.
Mr. Flores said broader government support would help businesses adapt without sacrificing jobs or raising prices.
He proposed temporary wage subsidies in the course of the transition period, easier access to financing for equipment upgrades and digital systems, stronger tax incentives, lower electricity costs, improved transport infrastructure, skill training programs and simpler regulatory requirements.
Maria Avelaine S. Avellana, founding father of CYO Charcoal Grilled Hotdog & Burgers, said small businesses recognize the necessity to improve employees’ incomes but are also operating on increasingly thin margins.
“As a micro business owner, I understand that the wage increase is meant to assist employees deal with the rising cost of living, and I support the goal of providing fair compensation,” she told BusinessWorld through LinkedIn chat. “But from the angle of MSMEs, this is basically a serious challenge.”
She said many individuals mistakenly equate high sales with strong profitability.
“From our day by day sales, we still must deduct the associated fee of ingredients, rent, utilities, government contributions, taxes, maintenance and labor costs. Because of this, what’s left for management to sustain the business in the long run could be very small,” she said in mixed English and Filipino.
Ms. Avellana said her company operates under the Barangay Micro Business Enterprise (BMBE) Act, which exempts qualified enterprises from statutory minimum wage requirements. She said the measure has helped the business manage labor costs while maintaining employment.
“We don’t want to instantly pass all the additional costs on to our customers through price increases,” she said.
She added that the long-term solution lies in improving productivity quite than relying solely on wage adjustments. She urged the federal government to strengthen productivity and digitalization programs, expand financing and tax incentives, improve market access, and promote greater awareness of the BMBE law, noting that many entrepreneurs remain unfamiliar with its advantages.
Businesses outside Metro Manila echoed similar concerns despite the fact that they usually are not covered by the NCR wage order.
Gemma A. Berania, chief executive officer at Libro Espresso Ventures, Inc., said the corporate would prioritize operational efficiency before considering price adjustments.
Evianne T. Añonuevo, operations manager at Maru’s Food Lounge and Beachfront Rooms in Occidental Mindoro, said the business is reviewing cost-saving measures, product development and possible price increases.
The Foundation for Economic Freedom (FEF) earlier sought the suspension of Wage Order No. 27, arguing that the rise could worsen inflation, discourage investment and compel MSMEs to scale back hiring, shorten working hours or shut down because of upper labor costs.
‘STILL INSUFFICIENT’
Labor groups and economists rejected those arguments, saying similar predictions have repeatedly did not materialize after previous wage increases.
“We recognize that some MSMEs face real financial pressures,” Federation of Free Staff National President Jose Sonny G. Matula told BusinessWorld via Viber. “Nonetheless, the law already provides relief through exemptions for qualified Barangay Micro Business Enterprises and other establishments that meet the factors under wage rules. It’s subsequently inaccurate to portray all MSMEs as equally burdened.”
Mr. Matula said higher wages stimulate consumer spending, benefiting small businesses because employees themselves are customers.
He urged the federal government to assist MSMEs through easier access to credit, tax incentives, lower electricity costs, regulatory reforms, digitalization programs, productivity training and stronger enforcement against smuggling and cartels as a substitute of restraining wage growth.
“The wage hike is welcome but still insufficient,” he said. “It provides immediate relief, however it doesn’t fully offset the steep increases in the costs of food, transportation, rent, electricity and other essentials.”
IBON Foundation Executive Director Jose Enrique A. Africa likewise disputed claims that higher wages inevitably result in layoffs.
“Labor costs are on average just 11% of total business costs across all enterprises of all sizes in all sectors nationwide,” he told BusinessWorld, citing government data.
He estimated that the whole P85 wage increase in Metro Manila would amount to only about 5.3% of average MSME profits.
Mr. Africa said businesses typically absorb wage increases through a mixture of barely lower profits, reduced discretionary spending or limited price adjustments quite than cutting employees.
He noted that replacing experienced employees is usually costlier than retaining them, especially for small firms already operating with lean staffing.
He added that stronger household incomes ultimately support local demand, helping MSMEs sell more goods and services.
For entrepreneurs similar to Mr. Flores, the challenge now’s finding enough efficiency gains to preserve each jobs and reasonably priced prices while paying higher wages — a balance many small businesses say will depend not only on their very own adjustments but in addition on how quickly government support reaches them.