By Chloe Mari A. Hufana

MICRO, SMALL and medium enterprises (MSMEs) in the National Capital Region (NCR) said they have had to rethink their business plans to deal with the additional cost pressures from the new minimum wage that took effect on July 17.

Ian A. Balmes, co-owner of 3A5 Bakery in Quezon City, said management is considering raising prices to keep the bakery going.

“We might be forced to raise the prices of our breads. We’re still considering, though, how much the increase will be,” he told BusinessWorld via phone.

“The wage hike will reduce profit, but at the same time, it’s good because it will increase our workers’ wage. It might not be a win-win for a business, but what’s more important is to survive,” he added.

“The cost of ingredients and equipment maintenance has increased, so an increase in wages would mean spending more money and earning less profit,” he said.

The bakery, which has been operating for 25 years, employs five.

According to the new wage order for Metro Manila, firms must pay their employees a daily wage of P608, up from P573. This rate covers companies employing less than 15 workers.

Workers in manufacturing establishments with regular staff of less than 10 will also receive a minimum wage of P608.

The minimum wage for nonagricultural workers in the region will rise to P645 from P610.

According to the Department of Trade and Industry (DTI), 99.59% of businesses in the Philippines were MSMEs in 2022.

National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan has said between 40,000 and 140,000 workers will be affected if small businesses end up shutting down or reducing their staffing. He called this the number “negligible.”

The wage order will directly impact 988,243 minimum wage earners in the NCR, the Labor department said on July 1 when the regional wage board released its order.

About 1.7 million full-time wage and salaried workers that earn above minimum wage “may also indirectly benefit as a result of upward adjustments at the enterprise level arising from the correction of wage distortions,” it added.

Ariestelo A. Asilo, owner of Batangas-based coffee business Varacco, which operates a branch in Quezon City, said the wage hike will “dampen margins because it means higher operating costs.”

“We are already feeling the effects because some of our ingredients have increased in price, which means an increase in our food costs. We are seeing an inverse relationship between the societal and economic benefits for our workforce and our business,” he told BusinessWorld via Viber.

“We are making a significant adjustment by increasing our product offerings, managing work productivity, and increasing our workload to offset additional costs,” he added.

Mr. Asilo employs five workers in his NCR branch.

Joanna Marie F. Gutierrez, founder and owner of Istorya, a 10-year-old shop carrying handmade gifts in the NCR, told BusinessWorld by phone that costs continue to pile up. She added that she is currently paying above minimum wage.

“I understand that the government wants to help the employees, but also, I hope that they think of helping the business owners, too… It’s not because we don’t want to (pay more), but there are also a lot of other things we have to pay for, like electricity, inventory, and taxes,” she said.

She added that post-COVID-19 sales pandemic have yet to return to 2019 levels, saying that inflation has put the business under pressure.

Inflation in June eased to 3.7% due to an easing in electricity and transport costs.

Economists have warned that the wage hike might be inflationary as businesses raise prices after the wage order.

Ms. Gutierrez said she also provides her workers with housing and food allowances, while Mr. Asilo provides food, transportation and study allowances.

Kurt Myer U. Lim owns the toy shop Collectors Quest PH, with a physical store in Greenhills. Like Ms. Gutierrez, he pays his sole worker above minimum wage, with allowances.

He said via Viber that he plans to offset the wage hike by increasing product offerings describing raising prices as contrary to his shop’s reputation for charging low prices.

Ms. Gutierrez said she was alarmed over the proposed legislated wage hike, saying consumers would have to take the hit if Congress passes such a measure.

“We will have to look for ways (to keep up with this wage increase) like cost-cutting measures. Maybe automation, and digitalization to make operations more efficient. As much as possible, the last thing I want is to let go of people,” she said.

“Making sure that the employee is being efficient in her or his work. So, you get the most out of what you pay for them,” she added.

Rowena B. Tua, owner of the leathercraft store YHF Manila told BusinessWorld via Viber message that she is worried a legislated wage hike would further dampen business.

“We tried to absorb the increased price of materials, so product prices remain the same. We are trying as long as we can,” Ms. Tua said via Viber message.

“If the government imposes the (legislated) increase, then we have no choice but slash the number of employees and maximize the work of the remaining people,” she said, saying that before the pandemic she had 20 workers, who have now been reduced to ten, of which two are on minimum wage.

Bills calling for wage hikes of between P100 and P750 per day are pending in both chambers of Congress.

In February, the Senate passed on third and final reading a P100 across-the-board increase for private-sector workers.

The House of Representatives has yet to pass a counterpart bill.

The last legislated wage hike was in 1989 when the daily minimum wage rose to P25 to P89.

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