BSP Fear Wage Hike Effect

"A wage hike of more than P25 a day could cause prices of goods and services to increase faster than targeted, the central bank said.

According to the Bangko Sentral ng Pilipinas, increasing the daily wage by more than P25 could cause demand for goods and services to rise significantly more than the growth in supply, thus causing the inflation rate to exceed the ceiling set for the year.

Labor groups are demanding wage hikes ranging from P75 to P100 a day, citing the increase in prices of oil and other basic commodities and services.

However, economists said that wage hikes should be commensurate with an increase in production of workers. They said that if wages rise faster than production, then demand for goods and services would grow faster than the rise in supply. If this happens, they said, then prices of goods and services, and thus standard of living, would increase some more." 

(Remo, M.V. [2011, April 2]. BSP fears wage hike effect. Philippine Daily Inquirer. B8)

     

     The issue about the demand for the increase in wage is really extensive to reality. Laborers demand for the increase of their salary, minding also the increase of the basic commodities. It cannot be denied that we, in our country, is experiencing economic crisis among the products that we purchase. There has been a problem with the proportionality of the wage of the laborers to the unending increase of the prices of goods. There are three points that I would like to stress out as a reaction to the article: my understanding to the laborers, my understanding to the BSP and the economists and the my overall understanding and recommendation to the issue.

      First, I truly understand the desire of the laborers to increase their salary. These people only rely on their everyday earnings to sustain their family. By the increase of the value of the commodities and basic needs, there would always be a hard adjustment for their budget. Many laborers commute to go to their workplaces and back, making this also an issue to the habitual increase in fare. By the never- ending increase in the prices of common needs, laborers and their family would also experience poverty to the large extent.

     Basing on the article above, I can personally say that the Bangko Sentral ng Pilipinas has a point to why they fear the increase of wage to laborers. This is because inflation rate will exceed its limits if the commensuration of the increase in wage and the production is unequal. If the salary of the workers will increase, this leads to more demands to goods and services. This is the fear of the BSP because the economy will more to be on the rough state. The economists affirm and agree to the concern of the BSP because the former knows best on the situation and run of the economy as it balances its way to the equilibrium.

     Hearing both sides of the concerned, I understand the points that they make. Laborers find their salary deficient to sustain their family's needs because of the crisis we are experiencing that affected the basic commodities and services that we avail. On the other hand, the BSP and the economists make it a point that there must be equality to the increase of the laborers' wage to the volume of their production so that there would not be a conflict to the demands of the society if the increase in wage will be implemented. The point of the BSP and the economists are considerably true and plausible for they make it a point to put economy to its equlibrium, preventing the rise of problems and deteriorating economic crisis.