Income and employment

Many worry that should wage be deregulated, the income of our workers will drastically dip. That is half the truth because the other half and the real truth is it will create more employment. Our failure to realize this can be traced to the fact that we do not know that economics is all about wealth creation. Logically, for one to have an income, one must either have an employment or must be doing some kind of work to produce an item that would command value in the market. So, just like the rest, we seek some kind of employment because it is where we would be able to create more wealth and give ourselves the kind of income that will assure us of our survival, and possibly promote our well-being.

Maybe the super rich could afford to remain idle that is why they have been called by Thorstein Veblen the “leisure class,” but that is more of a euphemism. In truth, capital now melts fast like ice that the affluent have to preserve it to allow it to generate additional wealth. In other words, it is useless to talk of income if there is no employment. Hence, anybody who proposes the idea of deregulating wage is not really a sadomasochist who enjoys seeing humanity suffer. He knows the absence of income amounts to depriving one of his basic opportunities to survive. Rather, his intention is noble for while income could be reduced that is again half the truth. The other half and real truth is he wants to open the door that could lead to the creation of more jobs that would provide our people additional and even higher incomes.

The current minimum wage is P410 daily. The amount has been protested by many of our businessmen as too much considering that many of them are mostly traders and merchandisers or one engaged in the buying and selling of goods. Most of them add an average mark up of three to five percent. To go beyond that could possibly drive them out of the market. This means that not much money is derived out of this endeavor because the marginal profit they earn is just enough to allow them to roll on their business of paying their workers, in purchasing goods to re-supply their inventory; to paying the high cost of rent, electricity, transportation, taxes, yet earning for themselves an amount almost no different from what a wage earner is getting. They could hardly save to give themselves a break of becoming manufacturers.

Under this situation, one could clearly see that the minimum wage law now serves as barrier to the creation of more wealth. The meager wealth our businessmen tightly want to preserve remains stagnant with a great number of them now on the brink of being wiped out. Of course, there are other valid factors that serve to constrain investors like the high cost of electricity, fuel, and water. Nonetheless, the solution to that problem is not by deregulation, but by examining businessmen’s position as one we might say on top of the food chain in the industrial and business sectors, and why their role is pivotal to our chances to economically take off the ground. That is why to deregulate wage necessarily should be accompanied by the reduction in the cost of goods and services produced or rendered by the country’s vital and strategic industries

There is the likelihood we will be creating more jobs for our people should we to depart from that system of maintaining a minimum wage. Although their income will be less than what they used to earn, the effect is that there will more employment, such that there would be more people lending their hands to create more wealth for our economy. The aggregate income is much tangible to families with two or three unemployed members which is not uncommon among Filipinos. So, if the income of the sole breadwinner will dip to as low as P350, and the two or three members of the family will no sooner find a job earning respectively P320, P300 and P280 day, that would amount to P1,250. Individual income may have been reduced, but family income has tremendously increased.

The Left, by their usual ideological frame of mind, will never see the point that the strategy is to create more employment to provide income to many of our people. They will argue that deregulating wage would unduly punish the workers for in that case the capitalists would be earning much higher profit. It is in that narrow perspective why the stereotype Marxist belief of exploiting the workers no longer stand as valid because the assumption of unlimited profit resulting from the deregulation of wage can be checked by stiff competition, and no practical businessman will put at risk his business by unnecessarily jacking up his prices just to gain more profit. He will only to find himself out of business. In that sense, deregulating wage is only a way to encourage more investors, but just the same they will initially compete not really in trying to sell their products, but on how to reduce their prices.

In our case, we unduly punished our workers by regulating their wage while deregulating the prices of almost everything. For that we destroyed the network that could keep our economy moving, thus resulting in the increase in the prices of goods and services, while seeing the gradual closure of many businesses and the swelling in the number of unemployed. Worse, we created our own evil of labor-only contracting which has devoured to near extinction trade unionism in this country. All these happened because we adopted a policy of systematically reducing employment opportunities for our workers that invariably deprived them of income.

Rod Kapunan is co-author of the book “Labor-Only Contracting a ‘Cabo’ Economy”, a labor relations consultant, and is about to come out with a new book tentatively titled, Deregulating Wage: Our Best Approach to Eradicating Labor-Only Contracting, and Unemployment. –Rod Kapunan, Manila Standard Today

rodkap@yahoo.com.ph