Metro Manila’s upcoming minimum‑wage increase is testing the financial resilience of small enterprises that rely on tight profit margins to keep staple products affordable.
Wilson Lee Flores, owner of the 87‑year‑old Kamuning Bakery Café, has maintained low prices for pandesal despite recent spikes in ingredient costs, electricity rates, and supply chain disruptions.
The wage adjustment, mandated by Wage Order No. 27, raises the daily minimum wage for non‑agricultural workers in the capital from P695 to P755 on July 25, with a further increase to P780 on January 20 of next year. Agricultural workers, retail and service employees in firms with fifteen or fewer staff, and manufacturing workers in establishments with fewer than ten regular employees will see comparable hikes.
Micro, small and medium enterprises, which comprise more than 99 % of registered businesses in the Philippines, are already grappling with higher expenses for raw materials, electricity, rent and logistics.
Flores says Kamuning Bakery has little flexibility to raise prices because its breads and pastries serve students, senior citizens and low‑income households. Instead, the bakery plans to boost efficiency through cross‑training staff, investing in energy‑saving equipment and tightening production planning to cut waste.
The owner urges the government to provide temporary wage subsidies, easier financing for equipment upgrades, stronger tax incentives, lower electricity costs, improved transport infrastructure, expanded skill‑training programs and streamlined regulatory requirements.
Micro‑entrepreneur Maria Avelaine Avellana echoes the concern, noting that while she supports higher wages, thin margins leave little room for price hikes. Her business operates under the Barangay Micro Business Enterprise Act, which exempts qualifying firms from statutory minimum‑wage rules, helping her manage labor costs while retaining staff.
Avellana stresses that long‑term sustainability depends on productivity gains rather than continual wage adjustments, calling for stronger government programs on digitalization, financing, tax relief, market access and broader awareness of the BMBE law.
Other small‑business leaders, including the chief executive of Libro Espresso Ventures and the operations manager of Maru’s Food Lounge in Occidental Mindoro, report similar strategies: prioritizing operational efficiency, reviewing cost‑saving measures and assessing modest price adjustments.
A business advocacy group previously sought to suspend the wage order, arguing it could fuel inflation and force firms to cut jobs or reduce hours. Labor unions and economists have rejected that view, citing past wage hikes that did not trigger widespread layoffs.
One labor federation president acknowledges genuine financial pressures for some MSMEs but points out that existing exemptions for qualified micro‑enterprises mitigate the impact. He adds that higher wages can stimulate consumer spending, benefiting small retailers that also serve as customers.
Data from a national foundation shows labor costs average 11 % of total business expenses across all sectors, meaning the P85 increase in Metro Manila translates to roughly a 5.3 % rise in average MSME profits. The analysis suggests firms can absorb the hike through modest profit reductions, limited price changes or reduced discretionary spending rather than workforce cuts.
For owners like Flores, the immediate challenge is to generate enough efficiency gains to preserve jobs and keep prices low while meeting higher payroll obligations—a balance that will depend on both internal adjustments and timely government support.
