Press Release
July 8, 2008

WITH INFLATION WIPING WAGE HIKE, CHIZ SAYS GOV'T MUST ENSURE TAX BREAKS ARE RETAINED IN PAY ENVELOPES

For workers to cope with inflation, opposition senator Chiz Escudero today said the government should see to it that wages which should have been remitted as taxes are retained in pay envelopes on account of the new law exempting minimum wage earners from income tax and increasing tax exemptions for other employees .

This after June's 14-year high inflation rate of 11.4 percent has wiped out recent wage increases granted to public and private sector employees, Escudero said.

"It's back to zero. As if no wage hike was granted. Inflation has cancelled whatever value was recently added to pay envelopes" Escudero, who is Senate's chairman of the Committee on Ways and Means, said.

The tax exemption law which was authored and sponsored by Escudero granting tax breaks from P3,630 to P25,800 a year , officially takes effect today. The measure grants P14 billion in additional spending power to low income earners.

At the same time the 10-percent hike granted to 1.4 million state workers will take effect this month, a move that will cost government an initial P12 billion this year .

Minimum wage private sector workers in 16 out 17 regions, except ARMM, have, on the other hand, got their "their token pay hikes" last month, following President Arroyo's Labor Day directive to regional wage boards to fast-track the grant of pay adjustments in the wake of the spike in food and fuel prices.

The daily floor pay now ranges from P196 for a certain type of agriculture worker in the Bicol region to a high of P382 for a laborer in Metro Manila. Workers in the latter got the biggest hike at P20 a day.

But because the prices of services and goods have risen faster than the salaries of those who buy them, the projected additional purchasing power from the salary increases did not materialize, Escudero said.

Worse, the erosion in the value of wages will continue to worsen as oil price increases - which in turn trigger a rise in the prices of the commodities - have yet to peak, he said.

Escudero said these pressures "will activate a corresponding pressure for wage salaries, which government has to calibrate carefully lest we enter into the maelstrom of an inflation spiral."

While asking for the full implementation of tax exemption for minimum wage earners, Escudero also asked the government to make true its boast that it will be sending to Congress a bill that will revamp the categories and increase the rates in the pay scale in the bureaucracy.

This has been promised by the President in two previous State of the Nation Addresses, Escudero noted. "While, to her credit, she has ordered three wage hikes in the past 30 months, each, however, was a one-time only initiative when a comprehensive compensation program is what is needed."

Escudero said targeted "food, fuel, tuition" subsidy for the "ultra poor" should be intensified "because collectively these can form as salary extenders, a safety net in these hard times."

He said the breakdown of the June inflation picture showed an across-the-board increase in the prices of commodity goods "taken at a time when high oil prices like a powerful storm have yet to make a landfall."

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