For popularity sake

President Benigno Aquino III's most recent economic policy advice to business owners, to raise wages in order to improve living standards for Filipinos must be seen as the popular pandering that it is.  This proposal is merely an attempt to stem the popularity slide resulting from the Mamasapano fiasco.  No politician should be allowed to spend our money on feeble attempts to improve their popularity under the guise of improving living standards. 

If he believes that raising wages would not have equal or greater negative consequences, and would somehow raise the value of labor, he must have learned economics at the same school as his USA counterpart Barack Obama, who thought spending (mis-allocating)  $700 billion for "economic stimulus" would provide sustained economic growth in the US. 

The only sustainable way to increase compensation for labor — whether in a free market, socialist, or even collectivist market — is to increase the real value of labor.  This is not done by government fiat, but by pro investment policies that will drive higher demand for labor in general, and skilled labor in particular.

The empirical truth is that there are much better and more sustainable ways to increase wages in our country — unfortunately none of them can be done in such a short timeframe.  

As Thailand, Singapore and other Southeast Asian countries which have raised their productivity and standard of living much more effectively than the Philippines have proven, an economic policy framework encouraging and allowing more business formation, and Foreign Direct Investment will drive higher wages, and also drive more and better training and formal schooling to prepare the workforce to fill the jobs being created by much higher FDI.

So what is the real problem?  

It should be quite obvious that since the Marcos regime's pandering myth of "Filipinos First" business ownership policy, the people have been systematically hoodwinked into accepting an insular economic policy of protecting the oligarchs from Multinational Investment, and thus also "protecting" workers from higher demand and accompanying higher wages. 

Thailand enjoys FDI many times that of the Philippines, and that has driven up business formation and demand for labor, both skilled and unskilled. The resulting higher compensation and living standards for the workers of Thailand comes at a cost of somewhat lower returns on capital (more of a free market return rather than an oligarch's return).  

Invested capital in the Philippines receives a very high (non competitive) return because competition (supply of capital) is restricted.

Restriction of FDI is done through barriers like red tape, but mostly a slow and corrupt legal system that gives all multinational corporations pause when it comes to expanding or locating their operations in the Philippines. We should be able to learn from Chief Justice Renato Corona's example of what selling court decisions can do to confidence in the legal system.  What rational business decision maker would subject a massive FDI to the arbitrary (a.k.a. for sale) legal system of the Philippines when they can go to another country without those costs and risks? Of course the red tape and slow licensing process is also a deterrent to business formation and demand for labor. I would suggest that this too has encouraged by the ruling elite as it is in the best interests of the dominating oligarchs, who enjoy outsize returns on their capital, but in the process limit aggregate capital investment and economic growth, and in turn demand for labor.  

Suggesting that prosperity and higher living standards somehow lie in simply exhorting businesses to pay higher wages is an argument only the uninformed or foolish would believe.