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Reasonable and Affordable Wage Adjustment Due to the Currency Crisis

Raul Fabella

No 199802, UP School of Economics Discussion Papers from University of the Philippines School of Economics

Abstract: We estimates the affordable wage adjustment for various types of firms (by orientation and by share of labor in total cost) on the basis of reasonable estimates of price responses to the currency crisis. We conclude that, to minimize the likehood of layoffs, no more than 10 percent wage adjustment seen affordable for export-oriented firms. For domestic market-oriented firms, no more than 5 percent is reasonable. There are cases where even zero wage adjustment may not prevent layoffs.

Date: 1998-02
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Published as UPSE Discussion Paper No. 1998-02, February 1998

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