Minimum wage hikes linked to slowing growth in W. Visayas

By Francis Allan L. Angelo

Western Visayas’ economic growth has slowed significantly in recent years, and a new report by the Iloilo-based think tank, Institute of Contemporary Economics, directly links the decline to aggressive minimum wage hikes that outpaced inflation.

The report finds that while these wage increases improved worker conditions, they imposed heavier cost burdens on businesses, leading to reduced economic momentum across the region.

According to ICE, the region’s Gross Regional Domestic Product (GRDP) growth rate plummeted from 6.8% in 2023 to just 4.3% in 2024, excluding the Negros Island Region.

The institute warns that this trend likely continued into 2025 and notes that “the burden of additional costs appears to have impacted economic growth” in a broad and sustained manner.

All major economic sectors saw reduced activity, but agriculture emerged as the most severely affected industry, contracting by -6.2% in 2023 and -7.3% in 2024.

“The regional economy barely recovered from the pandemic,” the ICE wrote, “and its underlying stability is still weak.”

In an economy already marked by volatility, the report suggests that further unchecked wage increases may jeopardize both business viability and employment levels.

Despite these concerns, the ICE acknowledges that workers in Western Visayas experienced real income gains as a result of the adjustments between Wage Orders RPVI 25 and RPVI 28.

Between November 2019 and November 2024, the compound annual growth rate (CAGR) of minimum wages ranged from 5.4% to 9.4%, depending on job classification.

This includes a 5.4% CAGR for Non-agriculture/Industrial/Commercial workers in firms employing more than 10 workers, and a 9.4% CAGR for agricultural workers.

Over the same period, consumer price index (CPI) growth lagged behind wage growth by between 26.6% and 120.9%, providing workers with considerable real purchasing power increases.

“Wage earners in Western Visayas have done well relative to similarly-situated employees in most of the rest of the country,” the report stated.

When compared to the National Capital Region, Western Visayas also outpaced in wage growth by significant margins, with NCR posting CAGRs between 3.7% and 4.0%.

However, the ICE underscores that such rapid increases come at a cost, particularly for small and medium enterprises struggling with tight margins and inflationary input prices.

“Continued price pressures from increasing cost of business expenses could further impact economic growth and affect employment levels,” the report warned.

The deceleration was not confined to agriculture—other key sub-sectors also recorded marked declines in 2024, according to Philippine Statistics Authority (PSA) data cited in the report.

The manufacturing sector dropped from a 17.0% growth rate in 2023 to 11.4% in 2024, while wholesale and retail trade fell from 7.8% to 4.3% over the same period.

Accommodation and food services, a critical segment in tourism-dependent provinces like Aklan and Iloilo, experienced a sharp slowdown from 10.4% in 2023 to just 3.5% in 2024.

Other affected industries included construction (8.0% to 3.4%), education (2.6% to 8.6%), and transportation and storage (1.7% to 4.3%).

The region’s economic engine also lost traction in urban hubs like Bacolod and Iloilo City, despite strong baseline recoveries in 2023 from pandemic-era lows.

In Guimaras and Antique, provincial GDP growth remained sluggish even as overall minimum wage levels rose across the board.

To arrest the decline and stabilize the business climate, ICE recommended a moderated approach to future wage setting.

It proposed limiting minimum wage hikes to a range of 2.5% to 3.0% in upcoming adjustments, emphasizing that this could “stimulate employment and encourage capital investment.”

“Tempered increases,” the report concluded, “would help in reversing the decline in economic growth.”

In addition to this, ICE called for a structural overhaul in how minimum wages are calculated across the region.

Citing the diversity of economic structures among provinces and cities, the report urged policymakers to adopt models that reflect “the nuances of the different provincial economies.”

This recommendation is especially relevant given the uneven economic trajectories seen between high-growth centers like Iloilo and struggling rural economies such as Capiz and Antique.

The ICE emphasized that unless policy action is taken, further instability could deepen and long-term development goals may be undermined.

While labor groups have celebrated the recent wage hikes as long-overdue corrections for stagnant earnings, business groups have signaled concern over escalating operational costs and dwindling profitability.

Government officials have not yet issued formal responses to the ICE report, though the wage board in the region are expected to consider its recommendations in future deliberations.

The Department of Labor and Employment, through the Regional Tripartite Wages and Productivity Board (RTWPB)-VI, has scheduled public hearings on October 8, 2025, in Iloilo City and on October 15–16, 2024, in Negros Occidental to discuss new wage adjustments for both domestic workers and those in private establishments.

As of November 2024, the minimum daily wage in Western Visayas stood at PHP 513 for Non-agriculture/Industrial/Commercial workers in establishments with more than 10 employees, PHP 485 for those in smaller firms, and PHP 480 for agricultural workers.

These figures mark significant increases from November 2019 levels, when the same wage categories were set at PHP 395, PHP 310, and PHP 315, respectively.

The ICE report stops short of advocating wage rollbacks but firmly cautions that sustainability requires striking a balance between worker welfare and economic viability.

“If not moderated,” it warns, “the cumulative burden of wage-induced cost pressures may offset gains in real incomes and ultimately harm the very workers these policies intend to support.”