How to stop or solve the poverty in the Philippines?

[Tarmac]

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It seems you do not have the capacity to understand/appreciate sarcasm. You remind me of Sheldon Cooper (BBT). Thank you for the entertainment.

-RODION

Except Sheldon Cooper is a fictional character. Foolonthehill is for real, and even funnier.

[unsay_ngalan_nimo]

I told you from the start questioning Hyperwage is not the same as rejecting it. Asking questions about Hyperwage is not the same as not understanding it. On the other hand, understanding it is not the same as accepting it either. Because I still have lingering questions on some points. But for the sake of moving the discussion forward...

Believe it or not, my introduction to the concept of Hyperwage predates my reading of Bentulan. It was something already discussed as far back as my college macroeconomics class circa 1987, although we didn't have a name for it. Our professor asked the not-so-simple question, "How do we eliminate poverty?" and it engendered a lively discussion that stretched over the entire week. Of course, the flippant solution of "killing the poor" was good for a few laughs but nothing came of it.

One of the solutions put forward was raising wages to increase the citizenry's purchasing power. Hyperwage, if you allow. We all agreed that increased purchasing power was key. This is not new, of course. It is already axiomatic in Keynesian thought.

The primary objection was, of course, inflation and the need for government to step in to stabilize the monetary situation Keynesian-style (at least in the interim). There would be a need to increase the money supply by printing money which must be matched by an output increase to forestall currency devaluation or inflation, or borrowing through T-Bills, which could raise interest rates. We ran out of time because we had to go back to our Samuelson and Sicat textbooks and the lesson plan.

My issue with boosting wages to the levels Bentulan specified is the ability of businesses to sustain the increases over X period of time without going out of business. The five years you mentioned is too short and will be certainly fatal. As a business owner, I know what my particular business can sustain and it certainly cannot sustain a 10-fold increase in wages over 5 years.

We are not in any way related to Henry Sy or Lucio Tan although Mr. Bentulan seems to think all employers are. Speaking for ourselves, we do not have massive savings locked up in a private vault somewhere deep within the bowels of a mansion and most of our income actually goes back into the business in the form of investment.

In effect, in implementing Hyperwage would there be a net increase in purchasing power? Would there be a net increase in aggregate demand? The employer's money has simply been transferred to the employees. I know that employees supposedly have a higher propensity to consume than the employers, and consumption rather than investment spending forms a larger part of aggregate demand, but what happens to our ability to reinvest in our business and make it grow? And because we cannot grow our business, neither can we grow our employees' wages on a sustained basis.

Even accepting that domestic demand is boosted and demand for our business's products and services does go up, our ability to meet the increased demand is directly tied in to our ability to invest. But alas, our hard-earned corporate savings have now been depleted by the requirement to boost our employees' salaries.

Again, we are not Henry Sy or Lucio Tan. We do not spend our money buying luxury cars, yachts, vacation homes in Aspen or expensive watches and we do not have factories or businesses in labor-cheap China to cushion the consequences of the suddenly-increased cost of doing business in the Philippines. And most business owners do not either.

In essence, employers are going to be out of pocket at the initial point of implementation of Hyperwage.
Is government going to step in to help us out? Should it? Or more importantly, can our perennially cash-strapped government even do so?

Remember we are talking about early implementation. And from there, even more questions arise. But a few issues at a time.

the solution-hyperwage- will not so much affect MNCs but it will kill first our own industries and businesses before it can actually be beneficial? more like wine... you need certain amount before it can be good for some parts of the body but then again it will also be bad for the other parts...

so how will hyperwage solve the onslaught of unemployment.. wait before that there would be alot of businesses that have to closed down.. not really like Mcdonalds... how about local construction companies, local garment factories, retails stores...

id like to ask mr.fool what is the likely effect of hyperwage to our agricultural industry? will they benefit more? or basin ang middle man na pud ang mu-benefit?

[Tarmac]

the solution-hyperwage- will not so much affect MNCs but it will kill first our own industries and businesses before it can actually be beneficial? more like wine... you need certain amount before it can be good for some parts of the body but then again it will also be bad for the other parts...

Like radiation treatment?

[al1974]

The answer is not arbritarily increasing wages. A country's resources are finite. The phils must minimize corruption to allow for the re-allocation of resources from the corrupt politicians to the schools and other relevant programs. educate the population so that they can compete for businesses and jobs with other countries in the world. create foreign investment vehicles that are business focused. current deals done here are saturated with fraud with no real investment return. the world doesnt trust the philippines to be honest in its business dealings. that limits the amount of capital flowing in. phils must elect honest officials who are dedicated to upholding the constituition and serving the people and not themselves. The phils must start to severly punish the corrupt officials for any real change to begin. If theres no real consequence for corruption, there will be no real change.

Even if we replace all corrupt officials tomorrow- the minimum wage earner will still have less than 3 decent meals a day. Increasing wages will surely decrease poverty and it is directly given to the workers- not passing thru the hands of corrupt officials- and that is a sure way of re-distributing wealth unlike the present set-up where only 5% of our population owns 905 of our resources. Enough said, read the Hyperwage theory to understand it.

[al1974]

Here is my practical understanding on the hyperwage, in its simplest form.

1. If we increase wages to a level where the lowest min wage earner can LIVE a life, not survive, then he can now have the purchasing power.
2. With this purchasing power- one can now feed the family, clothe them, shelter them. Aside from that- he can now afford items he once can not. He can now buy more.
3. Since he can now buy more- there will be a lot of spendings thus economy will be stimulated. Sales volumes will be up.
4. There will be no hyperinflation- only locally made items will increase. The imported items being already hi-priced and produced using hyperwage salary from other countries will tend to increase but only to a certain level that it is still affordable. Our current imported items are already priced a lot higher than if you buy it from first world countries.
5. Small businesses will either closed down or they would have to be manned by the owners themselves like in first world. Big business will either multi-task or be fully automated.
6. There will be lay-offs, yes. but take note that with hyperwage, the combined household income will now be greater than before. The wife can give up working and focus on the family. Helpers then will be expensive. With the mother attending to the family, kids will have better upbringing.
7. Brain drain will be lessened. If I can earn here just like when one is earning abroad, why go?
8. With better salaries, lives will improve- no Father/Mother going abroad- lesser teen preganacies, lesser extra-marital ***, lesser crime, lesser OFW harrassment
9. Why is Jollibee investing 20+ stores in US where wages are higher? Its because there is a demand there. There is money there. If our people will have money to spend, will investores come in? Yes of course. And that is a better reason for investors to come to our country rather than offering our low wages thats tantamount to slavery.
10.LAstly, why should Filipinos be paid with salaries way way too low than our American, Brit, Japs, etc counterparts? Are we lesser humans than them?

[al1974]

to foolonthehill, I hail from USA. I have a two degrees from Ivy league schools, worked on Wall Street for 10-years at an Investment Bank, and then was an executive at a Fortune 50 Company ($100B business), and last taught graduate school classes in finance and economcis.

As in all debates, it is appropriate to comment or critize on the idea but not the person. Please explain what aspect of my comments you disagree with and why.

Dakota,
I admire your credentials, surely you are enjoying way above hyperwage incomes. If I may ask, have you read the Hyperwage theory from cover to cover? I assume you have a busy schedule but I would be glad if you find time to read it.

[al1974]

Also- The Hyperwage Theory gives the 13th month Salary or the December Season where everyone gets twice his salary in the form of that 13th month. The December season is a Hyperwage scenario where everyone is paid more and can spend more. The economy is a lot better in December- Sales are UP and there is economic stimulus.

Isn't it hyperwage in action?

[Dakota]

The reason I enjoyed so called "hyperwages" is because the free market assigned wages to me that were in line with the vaule that I created. My wages were not arbritarily increased. This is the most compelling reason why the hypewage theory is highly unviable. It violates the fundamental aspect of many economic principles including one rarely mentioned here, Theory of the Firm, and Price Theory. The wage earners value must be in line with the value it creates. Most goods and services especially the ones dicsussed here are price elastic. That means a change in price will cause a change in quantity demanded. Arbritarily increasing ones wages without without a corresponding increase value wil only make this problem worse. Now if you add in the effect of the International Fischer effect on the GNP, inflation, and currency values you may recognize how this will not work in a global market.

While I have not read the book cover to cover, I acknowldege I am not an expert on this theory. But I do know this, even the most complex equations fail because of a single bad assumption. You may may have 1000 assumtions right and still be wrong because on one iss. This theory violates basic economic principles. The reality is there is no free lunch. This theory intends to supply one. Highly unlikely it can be done.

[al1974]

Dakota,
While it is ok to give your opinion on hyperwage, I say it is also unfair to shoot an idea without FULLY understanding it. Read it and you will realize there is indeed a reason for his theory.

Also, are you a Filipino or have you been here in the Philippines? You will know that even if we double the current minimum wage, it is still below the survival wage. I have posted a lot on this discussion in the previous page. Feel free to view it.

Yes it violates the fundamental of economics. But even the brightest economists at ADB and World Bank have not made a dent on poverty problems of third world countries. And I think its time to try something that haven't been tried before; The Hyperwage Theory- the single most effective way to end poverty and modern day Filipino slavery.

[al1974]

And by the way, my co-Filipinos are toiling just like their counterparts in other first world countries. To some extent, they even offer more value. Why? Our labor workforce barely earns a living but these workforce are highly-skilled. When they go abroad, they are hailed as very good workers. Our college graduates works as cashiers, clerks and some even at fastfoods. They are offering value but their wages are inequitable to their credentials.

Don't you think the Filipinos deserve hyperwage?