Labor Day is upon us once more; in the Philippines, it is a time for militant groups to petition the government for this and that, and for the government to pretend to try to appease them.
A friend of mine shared with me this blog, apparently written by a staff member of some party-list representative in the House. The blogger’s latest post is a bid for the passage of the legislated P125 wage hike, a bill that has been filed and refiled through the years. The proposal would in effect raise the current P404/day minimum wage.
The blogger reasons out that, contrary to what “neoliberals” say, companies could bear the brunt of such a wage increase. I suppose that to him and many others, a P125 hike is a small concession, compared to their desired overhaul in wealth distribution where everyone would have an equal amount of economic possessions ― the socialist ideal.
Out of playful mischief, I wrote a not-so-sincere comment:
Very good points, Mr. Villanueva. Several questions:1. To what extent will investors cut back on new ventures?1.b. To what extent will such a cutback in new ventures affect employment?2. Is it safe to disregard percent changes in profitability (e.g. 15% only), when considering the effect of wage hikes on employment?3. What are the better things to cut back on in the event of a wage hike, other than workers?4. What effect will wage hikes have on prices, what with an increase in demand of goods? How will such price increases be shouldered? More wage hikes?You're doing a great job exposing the dogmatic thinking of many heartless people who refuse to recognize the need of the Filipino people. It's only right that your money is spent on trips to Hong Kong, you surely deserve it."The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups." - Henry Hazlitt
The reason I’m even making a whole blog post about this is, he rejected my comment, or perhaps it was registered as spam.
It’s funny how this guy could cast aside as irrelevant ‘mere percentages’ of profits to be used for salaries, as though such would not have even a marginal effect on employment or the capacity of businesses, large or small, to operate. At what percentage of profits then would there be an adverse effect?
And for all the vitriol he unleashes against greedy corporations, and sympathy he claims to have for the downtrodden, he has no qualms about enjoying a relatively luxurious activity as going to a theme park abroad, let alone one named after one of the richest capitalists in history.
It is also quite reasonable to suppose that with the negative effect on employment and output as a result of a legislated wage hike, the prices of goods would rise all the more. And then what? More cries for wage hikes?
This is the tragedy of poverty. It makes people eager for quick fixes that do harm in the long run. Instead of looking to the real obstructions to economic growth (state interference via taxes, regulation, monopoly, etc.), these militants are intent on taking existing wealth from others, even if this means greater poverty later on.
Although plenty of corporations are successful precisely because of their political ties ― which makes them cronies ― the remedy is not to legislate a forced taking of profits to fund salaries, the redistribution of which has no rational justification. A real solution would be to disable such political power as exists due to unjust laws.
In order to make a change, one has to recognize their limitations; all the wishing, all the compassion in the world could not overturn economic principles. The next best thing would be to redirect one’s hopes and compassion accordingly.
Happy Labor Day!