Should we burn the house down?

According to Romy Bernardo, an economist and former government technocrat, he has an old economics professor who told him he should stop arguing against high minimum wage legislation, even if it were to lead to a disastrous wage-price spiral. His professor, Romy said, has "gotten to the point where I don’t give a damn. Let the place burn down. Sometimes it’s the only way to get rid of rats."

Now that’s a thought… a very dangerous thought. The problem with playing with fire is that you could get hurt… a lot of innocent people could get hurt. And as for the rats, they are usually the first to sense any kind of danger and jump off a burning ship… run away from a burning house… making the desired outcome of permanently getting rid of them nothing more than wishful thinking.

Reckless house burning however, appears to be the strategy of Malacañang in dealing with the nation’s problems today. That’s what it is when it proposed to legislate raising minimum wage. It is difficult to believe that our economist-in-chief could have thought putting such an important economic move in the hands of politicians again. I can almost hear the original members of her PhD dissertation panel at the UP School of Economics chuckling. I was told she had to rework her dissertation because the review panel was terribly unimpressed. If the panel members had their way, she wouldn’t have any UP credential.

Taking her UP diploma at face value, I found it so unworthy of our Chief Executive who claims to be an economist to tell a group of businessmen she wants a legislated minimum wage increase and fifteen minutes or so later, after privately meeting with key business leaders, completely turn around. Poor DTI Secretary Peter Favila had to face the press and claim she was misunderstood. Ininsulto pa tayo na hindi marunong umintindi ng simpleng Ingles.

What was she thinking? I heard her sound bite and nothing could be clearer: she wanted a legislated minimum wage increase. I first heard that idea from Executive Secretary Eduardo Ermita, something I dismissed outright due to the fact that I know he doesn’t have a clue what he is talking about. But soon after, it was Ate Glue herself advocating it. Didn’t she consult her economic managers or even the sycophantic PCCI leaders before she opened her mouth? That closed door meeting should have been held before and not after she delivered her speech.

How can an economist like her possibly suffer such a lapse of judgment? One gets the impression that she is politically punch drunk, no longer thinking out her next moves and laying down public policy in blind reaction to the immediate pressure point she feels.

Then again, maybe she did think out her minimum wage idea. Romy Bernardo wonders if she might have done it as a means of diverting front page focus from her. "Why not create an issue that will pre-occupy her detractors both of the Makati Business Club and the Akbayan group types and throw them at each other’s throats, so that they are diverted from the central issue that has occupied the nation." Why not indeed?

But that’s playing with fire. I agree with Romy that "waving free lunches and quick fixes is something one can expect from those who have no responsibility to deliver; not from a leader who has the task of articulating a clear vision and educating citizens on collective sacrifice needed over the long haul for the country and everyone to be better off."

So, why did she do it? I can’t say I can read her mind. But even Alex Magno, who is supposed to be one of her close advisers, sounded puzzled. In his column, Alex confesses he does not "understand the stammering coming out of the Palace the last few days regarding the wage issue." Alex seems to have the impression she has been swayed by PR advisers that this is good for her image.

And that’s the problem with our dear ol’ Ate Glue these days. Everything is for image… for show… and with a very short time frame. Tomorrow’s always another day. She has to first of all, survive today by whatever means. Economic policies are too long term for her taste.

But thinking beyond a day’s survival is inescapable for a country’s Chief Executive. According to economists from government, academia and business, the VAT reform bill, even counting already the two-percentage point increase still to take effect next year, should not lead to increase of more than 2.5 percent in average cost of living of households.

But if Congress intervenes in wage setting, it is highly unlikely that it will pass a mere 2.5 percent wage increase legislation, which translates to around P7 to P8 per day. There would be pressure on these political animals to pass something closer to the figure being demanded by some noisy leftist labor groups, which is in the vicinity of P125 (roughly 40 percent). That is completely out of line with both inflation and productivity increases.

This is precisely why government has moved away from a politicized wage setting process. Once our kind of politicians get involved, they are likely to cater to the gallery, so to speak, and throw market and competitiveness considerations down the tube. This will surely drive away investments and kill our SMEs.

Romy observes that "most job creation in recent years has been in the self-employed and informal sectors. Raising minimum wages will drive businesses underground to the informal sector or under the ground, shrinking not just employment, but output and government’s already imperiled fiscal base (not to mention raising government’s wage bill which already takes up almost a third of its budget).

"Worse, an increase that far surpasses inflation and productivity can only feed into a wage-price spiral (especially with second round impacts on inflation, e.g., from reversal of peso appreciation) and will hurt the poorest most." Our beloved economist-in-chief couldn’t have missed all that before she called for legislated wage increase.

Or maybe, the UP School of Economics should recall her PhD diploma.

Wanted: English teachers

Filipino professionals and investors working in Shanghai predict this city and China in general may turn out to be the next big destination country for Pinoy workers. Even now, some Pinoys arrive here on tourist visas but quickly turn around and find a job important enough to make the hiring person or company take the effort to change their visa status fairly quickly.

On top of the list of job openings here are openings for English teachers, where qualified people can easily earn the equivalent over a thousand US dollars a month. There is a massive Chinese government drive for people here to be articulate in English. And they have a long way to go and very little time left before the 2008 Olympics. It is still very difficult to get around this city unless you speak some amount of Mandarin.

But just to show the world that there is no language barrier tough enough to stop Pinoys from seeking a better life, Pinoys here are known to quickly learn Mandarin. The 65 Pinoy expat workers who are here to run the Oishi snack food business are good examples. They arrived without knowing a word of Mandarin but are quickly enough speaking it like natives.

One old time Pinoy here surmised the number of Pinoys in Shanghai and elsewhere in China would jump significantly in the next few years, even to the hundred thousand level. He thinks China will be our new Saudi. But unlike in the Middle East, Pinoys who want to work here would have to be well trained, with highly marketable skills needed by China in its economic offensive. They have millions of the manual labor type. At least our teachers could get jobs here as teachers and not as maids, as in Hong Kong.

What we need, this Pinoy investor here told me, is an effort led by our government to systematically market Pinoy workers for the Chinese market. That would make the growth in the number of Pinoy workers deployed in China more predictable for economic planning purposes and their rights could be better protected. .

Buy and sell Here’s Dr. Ernie E.

A traveling buyer had been on a trip for three months. Every few weeks he’d send a telegram to his wife saying: "Can’t come home. Still buying."

The wife stood it for a while, but when the fourth month started and her husband still had no idea of returning, she decided to do something.

She sent him a telegram. "Better come home. I’m selling what you’re buying."

Boo Chanco’s e-mail address is [email protected]