Stimulate growth and redistribute wealth by raising workers’ wages

Stimulate growth and redistribute wealth by raising workers’ wages

PRESIDENT NOYNOY AQUINO has rejected workers’ demand for P90-P125 wage increase by saying that it would cost the private sector P1.43 trillion for an economy that only produces P9-trillion worth of goods and services. This argument doesn’t hold water, for a number of reasons.

First, the computation is wrong. President Noynoy based his figures on 40 million Filipino labor force, which include a big number of non-wage and salary workers, such as the unpaid family workers and the self-employed (mostly jeepney drivers, vendors, tricycle drivers and the likes). Only about half of the labor force are wage and salary workers, or those who stand to gain from a wage hike.

If we ignore the President’s clumsy mathematics, it stands to reason that an increase in wages will increase the workers’ purchasing power, thereby stimulating growth in the economy. The P9-trillion economy will stand to grow. This is basic economics. But by keeping the wages low, President Noynoy is not addressing the issue of rampant unemployment – he is depressing the economic condition of millions of Filipino workers.

The argument that a P125 wage increase will drain the economy of trillion of pesos is a classic capitalist claptrap. Capitalists like to argue that every peso given to workers is a waste to the economy. The reverse is true -- every peso snatched by capitalists end up as a waste to the economy. An increase in workers' purchasing power increases workers' productivity (such that a healthy, satisfied worker is more productive than a malnourished worker). It also increases the production of subsidiary goods and services in the economy, which provides income for a growing number of vendors and tricycle drivers, for instance, in the workers’ community. On the other hand, capitalists do not add much to productivity and their personal expenses do not magnify economic activity (especially if they stash away their earnings in dollar deposits, or use it to buy imported luxuries).

The President also said that the minimum wage in the Philippines, at more than $9, is better than Vietnam’s $2.4 to $3.2. Noynoy should know that in Vietnam, food and rent are subsidized; education is free; people have land (so they don’t die of hunger); universal health care is implemented; and there are a host of other benefits that workers in the Philippines do not enjoy. Even in Indonesia, the food is relatively cheaper than the Philippines. No wonder Filipino workers are malnourished compared to their counterparts in Asia. And what about electricity costs? It has been reported that the Philippines has the most expensive electricity rates in Asia.

Time and again, studies have shown that the main cause why investors shun the Philippines is not labor cost. The leading problems have always been the high cost of electricity, the unstable political conditions, and the graft and corruption in the government. Why should investors choose Malaysia, Singapore, or Hongkong over the Philippines when wages in the former countries were double or triple that of the country?

Lastly, a wage increase is one way of redistributing wealth in the economy. The country has now 40 Filipino billionaires according to Fortune Magazine, while 40 million Filipinos wallow below the poverty line. This is structurally obscene and something has to be done to address this sorry imbalance. The President’s rejection of wage increase perpetrates the divide between the one percent and the 99 percent of the population. The Partido Lakas ng Masa (PLM) believes that the only way to address this imbalance is by increasing the wages of workers and expanding social welfare services, while increasing the taxes imposed to big-time capitalists and corporations.

Sonny Melencio

Chair, Partido Lakas ng Masa (PLM)