My Blog

Instead of talking about politics, let us talk economics.

They government says that our GNP is rising, our peso is strengthening, unemployment is down and inflation is kept at bay. Is this true? Do you feel it?

Many groups complain that they do not feel it. They say, how come wages aren’t increasing? How come we feel worse off today than before?

Let’s see.

If you talk about GNP increasing, the rise of the number of OFWs and call centers have brought in a lot of dollar reserves. This have appreciated our Peso and increased its purchasing power. We can now have more dollars to buy and therefore more money to spend when we import goods and services, travel, etc.

Unfortunately this strengthening of the Peso, has made it easier for foreign made goods to come to our shores as we now have more money to buy their products as they are typically either cheaper (unbranded Chinese products for the budget conscious) or more reasonable priced (branded products), thus killing our local industries and putting more people out of jobs. Morever, when we buy cheap China-made products where the failure rate is very high, we waste our hard currency for lemons, and therefore we are worse off today then we were before we bought them.

But then again, local industries that die, do so not because our costs are higher, but because our entrepreneurs are not equipped to compete globally. We are the pioneers in industrialization in Southeast Asia (does not include Japan), but our industrial companies have not progressed. The products they produced in the past are still the products they produced today.There was very little innovation and therefore little value added, and therefore profit margins of such goods and services is minimal. And since we are governed by a minimum wage act, our labor cost tends to be higher than that of our neighbor, China which allow market forces to demand the labor wage rate. How can we therefore compete?

In a market economy, many such firms would close down, but then again, many new firms would spring up to take advantage of global trends. Businessmen would find for themselves what industries would make money. This is why you now have alot of BPO companies, nursing schools, medical tourism companies, financial services companies, construction companies, tourism companies and trading companies sprouting. The labor force would then try to equip themselves so that they could take advantage of these opportunities. You now see a lot of people enrolling in technical schools and nursing schools following this trend. As such, some jobs are destroyed but more jobs are being created.

Full employment? What does it mean? In the spectrum of the population, the Labor force is defined as people who are between 18-65, who are not retired, not studying full time, not under institutionalized care, not taking a long vacation, and has either a job or has looked for a job in the last 6 weeks. Therefore, if you think of the "standbys" who are not looking for a job, they can not be considered part of the labor force. As such, those who are looking but didn’t find a job are the only ones considered Unemployed. In this regard, if a very large section of our adult population are "standbys", it is but natural to expect that they’d be complaining that they’re worse off. They do nothing all day but expect dole outs from other people. Look at the classified ads every Sunday, you have so many jobs but so few takers! This is because our population are either ill-equipped or not really looking. The ill-equipped group have hope, because they could undergo government training, or enroll themselves, and get themselves equipped. The latter group on the other hand, should we really bother with them? They do not even try to help themselves!

As for wages, the reason why the improved economy is not benefitting the average worker is because of one reason, the company is not paying them enough. Why? First, our productivity levels is very low compared to other countries, as such, employers need to hire more employees to get the volume it needs to sell. Given this, the wage budget is distributed among more people than if it run a tight ship with fewer people. Culturally, we Filipinos tend to take a lot of breaks, tend to chat a lot while working, tend to absent ourselves a lot for whatever reason. This is the cause of such non-productivity.

As for taxes, in any capitalistic country, you’d notice that the individual tax payer contributes to the bulk of the taxes paid, compared to the corporations. Why is that? Well for one, there are definitely more individuals than corporations. Moreover, we all know that most companies that are not publicly traded tend to hide a lot of revenues from the government. It is my sincere belief that these companies should take it upon themselves not to pocket all of the savings but distribute it among their employees to allow them a decent standard of living.

How much do you think a typical employee is taxed? Compared to a stockholder? Well, a typical employee is taxed 27%, plus 12% VAT (since this takes away his spendable income), plus SSS charge, Pag-ibig, Philhealth, etc. Effectively, we get taxed around 40% of our income. How about the shareholder? Well, corporate tax is 35%, plus 20% Dividends tax, a total of 48% (35% + 20%*[1-.35]), the VAT is actually paid by the consumer. But then again, employees tax are collected at the source so we have no choice, but corporate tax is paid at the "discretion" of the company.

Taxes are meant to equitably distribute wealth. But then, how can that be when you work harder to get to where you are, and this bum is benefitting from your efforts through the government’s services. How come those people who watch your car (to watch out for you) can earn as much as P500 a day collecting P5 from every parker, while you work your butt off and get a measely sum below minimum wage (since you pay taxes or your employer does not pay you enough). The jeepney drivers, pedicab drivers, street stalls, etc. don’t pay taxes, and yet they benefit from the taxes we pay for using the roads and bridges built using our money. The so-called landless farmer is just waiting for the government to distribute lands to them under the CARP and then resell it back to the owner then come to Manila and squat. Then the bank employee, or school teacher who took 20 years to save up money so that she could finally put a house over the land she bought years ago finds that her money is not enough because she has to drive away the squatters and spend on relocating them.

I think equitable distribution of wealth can truly be achieved if the individual tax payers were given privileges to enjoy that should not be available to non-taxpayers. Maybe a Tax Payer Card that gives them discounts or total elimination of their VAT purchases could be a start.

Really now, our economy is doing well. But then, the ones who complain are really the majority who does nothing but sit around. The rest are working their butts off to improve their lot. The government is partly to blame, because they introduced populist laws instead of laws that make sense. The late President Ramon Magsaysay once said that "he who has less in life should have more in law." This has been the battlecry of so many so-called politicians when they make these populist laws.

The real drivers of the economy are not the capitalists, but human resource. Money can get things started, but it is the people toiling it daily that brings in the bacon, so to speak. They are the ones that create value for the money and therefore, they should get as much benefits as a stockholder for creating the wealth needed by the government to take care of everyone.

Going back to our question earlier, do we feel that the economy improving? For those people who say yes, you are the movers and shakers of this economy. You deserve it because you work hard and pay the taxes for the goods and services that everyone is enjoying. God bless you all!