Nationalizing the minimum wage: Can the Philippines take the toll?

Abstract

The Philippines’ minimum wage debate has intensified following the 2025 passage of House Bill (HB) 11376, which marked the first legislated wage increase in 36 years after the original HB 7787 proposal stalled. While regional wage boards have struggled to keep pace with the economic disruptions associated with the Tax Reform for Acceleration and Inclusion (TRAIN) law and the Coronavirus disease 2019 (COVID-19), labor groups continue to advocate for national standardization. This study employs a regional wage partial computable general equilibrium (CGE) model to evaluate four national minimum wage scenarios. Implementing the proposed ₱750 daily wage without productivity adjustments yields severe economic contraction, with real GDP declining 8.31 percent. Furthermore, formal sector employment is projected to fall 37 to 64 percent across regions, leading to displacement of 44,701 to 101,824 workers to informal markets. Even with 20 percent productivity gains, real GDP still contracts 4.96 percent. Regional inflation varies dramatically from -2.98 percent in NCR to 13.07 percent in ARMM, with services sector producer prices increasing up to 88.5 percent. Despite these wage increases, poverty reduction remains minimal at 0.3 to 0.5 percent, while real incomes for informal workers decline 14 to 31 percent due to the labor influx. Only the moderate scenario, which aligns wages to NCR levels (₱515) with ten percent productivity gains, limits GDP decline to 1.46 percent. The simulations confirm theoretical predictions that downward wage rigidity creates substantial formal-informal labor reallocation. Results strongly caution against dramatic uniform wage increases without corresponding productivity enhancements and suggest the need for gradual, regionally differentiated adjustments coupled with complementary policies to formalize employment and boost productivity.

JEL classification: J38, J62, J23