ECONOYNOYING?
MANILA, MARCH
22, 2012 (MANILA TIMES) Written by : Giovanni Tapang,
Ph.D. - Undersecretary Abigail Valte, deputy presidential spokesperson, told a
press briefing last Tuesday that President Benigno Aquino III has rejected the
proposed P125 legislated wage hike for minimum earners.
Valte told her audience that upon consulting Aquino about the
proposal Tuesday morning, he presented to them a computation showing that
employers will be shelling out P42,250 for the salary increase of each employee.
Showing a slide with the calculations, the Palace people got this
figure by multiplying P125 by 26 days and multiplied the result further by 13
months.
They added that this P42,250 multiplied by 38 million workers in
the country would result in expenditures for employees of P1.6 trillion
(mistakenly written as 1,605,500,000 trillion [or 1.6 billion trillion] in their
slide).
Aquino then compared this P1.6 trillion to the size of the economy (which
they quoted as P8.5 to P9 trillion) and pointed out that the P1.6 trillion
increase would comprise a large percentage of the economy. This large amount,
the President said, thru Valte, cannot be absorbed by businesses and would be
counterproductive since companies might lay off employees instead of giving the
wage increase.
The nice thing about these calculations is that they are verifiable.
First, the slide which Valte showed reflects how little study or verification
was done by the President and his team. The mistake (assuming it was one) of
writing 1,605,500,000 trillion instead of 1,605,500,000 or 1.6 trillion is one
that might escape many but when it is used to justify a policy statement then we
expect extra care from the Palace.
A more substantial problem with their calculation is when they used "38
million workers" to calculate the total effect of the increase in our economy.
According to the National Statistics Office's latest data, Aquino must have
been referring to the total employed labor force which is 37.394 million
according to the January 2012 Labor Force Survey. This total covers all workers
from the private sector, the government, those self-employed or with "own
accounts" and unpaid workers.
Only 54.8 percent of the total employed are wage and salary workers. Broken
down, 41.6 percent (15.56 million) of the total labor force are from private
establishments, 8.2 percent are in government, 4.6 percent in private
households.
Had Aquino and Valte read the text of House Bill 375, which pushes for a
legislated across-the-board P125 wage hike, it is clear that the wage increase
is limited to those workers in private enterprises and does not cover government
workers and others.
In overestimating the impact of the P125 wage increase, Aquino misrepresents
the measure and uses exaggerated claims to discount the need for the wage hike.
Correcting for these numbers and using only those employed in private firms, the
figure that Valte should have presented would be 15.56 million times P42,250
which gives around P0.657 trillion.
Compared to the latest 2011 GDP (found in the NSCB website) of P9.7 trillion,
the number seems to be not as fearsome as Aquino and Valte have thought.
Yet this number is already an over-estimate according to the economic
think-tank Ibon Foundation.
They pointed out the economy has more than enough profits to support a
substantial wage hike.
They pointed out that employers can afford a substantial wage hike with only
a small cut in their already considerable profits.
They pointed out that in 2009 the combined profits of all the establishments
in the country amounted to P1,629.5 billion with 3.94 million employees,
according to the 2009 Annual Survey of Philippine Business and Industry (ASPBI)
of the National Statistics Office (NSO).
Using these numbers, an across the board wage hike of P125 would cost only
P194.9 billion. When subtracted from total profits, this will still leave
establishments with P1,434.6 billion in profits, a 12 percent cut in their
profits according to IBON.
It is best that Aquino also calculate the effects of the wage hikes to the
conditions of workers.
According to IBON, the average daily basic pay that wage and salary workers
in the country actually received – as opposed to merely mandated minimum wages
that are not necessarily actually paid – increased from P222 in 2001 to P321 in
2011 (July estimate).
The additional Php99 amounts to a 45 percent increase in wages but was not
even enough to make up for the continuous increase in prices which increased by
over 62 percent over the same period. The wage increase was more than offset by
inflation and workers wages dropped by nearly 11 percent over the same period.
Cherry-picking their data and using wrong aggregates to bolster their policy
statements either reflects the lack of preparation and study on the side of the
President and his advisers or, worse, an attempt to mislead the press and the
people into seeing the demand for wage increase in a bad light.
In the first case, we see this as another case of "Noynoying" albeit in
economics and, in the second, a tiring repeat of the arguments that employers
and the government have used over and over again in order to prevent wage
increases in recent years.
As such, the President's calculations give us an insight as to how Mr. Aquino
personally looks at the issue of wages and also an insight to how haphazardly he
decides on issues that are critical to many.
Chief News Editor: Sol Jose Vanzi
© Copyright, 2012 by PHILIPPINE HEADLINE NEWS ONLINE
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