STAGGERED implementation of a just-announced Metro Manila minimum wage hike will lessen the inflationary impact, economists said, but the increase overall could have broader implications.
The Labor department on Tuesday said that private sector workers in the metropolis would receive an P85 wage increase, which would raise the minimum daily pay of non-agricultural workers to P780.
Agricultural workers, meanwhile, will see an increase to P743 per day.
The adjustment will be implemented in two stages: P60 starting July 19, 2026 and P25 on Jan. 20 next year.
“The recent P85 wage hike in the NCR (National Capital Region) — equivalent to a 12.2-percent increase from the current minimum wage — could exert some upward pressure on inflation, particularly coming on the heels of last year’s P50 adjustment,” China Bank Research chief economist Domini Velasquez said.
“However, a staggered implementation could help temper the impact,” she added.
Velasquez said the increase would primarily affect labor-intensive industries where minimum wage earners are concentrated. These include construction, manufacturing, and accommodation and food services, where labor costs account for a significant portion of operating expenses.
If businesses absorb only part of the higher wage bill, the effect on inflation could remain contained. However, if companies pass on the additional costs to consumers through higher prices, broader inflationary pressures could emerge.
Union Bank of the Philippines chief economist Ruben Carlo Asuncion also said that the wage adjustment would become more inflationary if price pressures remained elevated.
“If inflation proves to be more persistent or ‘higher for longer,’ the inflationary implications of the wage increase become more relevant, particularly if businesses pass on higher labor costs to consumers and if wage adjustments become more widespread across sectors,” he said.
“In that environment, there is a greater risk of second-round effects, where higher wages and higher prices reinforce each other,” Asuncion added.
Second-round effects occur when an initial increase in wages or production costs leads businesses to raise prices, prompting workers to demand even higher wages to preserve purchasing power, creating a cycle of rising wages and inflation.
Despite the risks, the economists said the wage increase alone was unlikely to significantly alter the country’s inflation outlook.
Velasquez estimated that phased implementation would add only about 0.132 percentage points to inflation during the initial tranche and another 0.055 percentage point next year, suggesting that the overall impact would be relatively modest.
This should give the Bangko Sentral ng Pilipinas (BSP) room to continue easing monetary policy, she added, provided that broader inflation trends remain favorable.
“From a policy standpoint, the potential second-round effects on wages and prices could warrant a more cautious stance from the BSP, especially if inflation expectations become less anchored, although the modest and phased impact should keep room for measured easing should broader inflation trends remain benign,” Velasquez said.
Asuncion noted the economic benefits of a wage hike, which he said “also helps protect household purchasing power amid elevated inflation, which is important for sustaining consumer spending.”
“The challenge for policymakers will be striking the right balance between supporting incomes and preventing higher inflation expectations from becoming further entrenched,” he added.
“For now, the broader inflation trajectory will still depend more on supply-side factors such as food, energy, and global commodity prices than on the wage adjustment alone,” he added.
