on wage hikes and ‘math wizardry’

Presidential spokesperson Abigail Valte was of course only doing her job when she once boldly dared lawmakers to pass a bill that would effectively scrap the 12-percent value-added tax on oil products. When informed that such a measure has already been filed by Bayan Muna party-list representative Teodoro Casiño in 2010, she promptly apologized the following day. “Good for you, Congressman Casiño,” she says in an interview over the radio.

One can only admire Valte’s humility and her devotion to her job description as the palace’s mouthpiece. Indeed, in her own words, Malacañang “cannot speak for Congress.” In other words, if the VAT is such an annoyance, legislators have the duty to junk it and save everyone else’s time. Why should President Aquino himself meddle with laws when there are so many other things that require his attention?

Just yesterday, in a press conference, as Valte employed basic math operations to explain why the Palace does not support the P125 wage hike proposed by Congress, we once again witnessed the lady’s astonishing capacity to effectively deliver a familiar message from the President: “My hands are tied. I cannot do anything about it.”

The P125 increase is simply not “practicable” and that employers may not be able to afford it, Valte said. According to Malacañang’s computations, the proposed wage hike would translate to a P42,250 annual increase  in salaries. Multiplied by 38 million workers in the country, the hike would result to about P1.26 trillion  in additional cost for businesses—quite a hefty chunk of the country’s economy valued currently at P8.5 to P9 trillion.

“Instead of being able to help the majority, some people may lose their jobs if the legislated wage increase will be this high,” she said, almost threateningly.

It would be easy to buy this explanation—if one ignores a few errors.

In his column at the Manila Times, Dr. Giovanni Tapang of Agham pointed out that only 54.8 percent of the country’s labor force of 38 million are wage and salary workers. Out of this percentile, 8.2 percent are government workers, 4.6 percent are private household workers, and 41.6 percent (or only 15.56 million) are workers hired by private establishments.

This means that the P125 wage hike, which shall be limited to those who work in private firms, translates, not to P1.26 trillion, but to only around P0.657 trillion.

This slight mistake is enough to make one suspicious, but doesn’t the fact remain that  businesses are hardly making any profit to afford such an increase in wages? Independent thinktank IBON says Philippine employers can handle it—but only if they would agree to a cut in their profits.

In 2009, all private firms in the country had a combined profit of P1.63 billion and 3.94 million employees, according to the 2009 Annual Survey of Philippine Business and Industry of the National Statistics Office. Using these figures, IBON estimates that the total cost of the proposed wage hike will only be P194.9 billion, which translates in turn to only a 12 percent cut in profits.

Beyond these oversights, though, one might forgive Valte for neglecting to do her homework more thoroughly. It must be a very taxing job, speaking for a president perceived by many as… laidback. Look at Elena Bautista-Horn who works for a former president who is currently under arrest and witness some really unfortunate things she has to say to the public.

If anything, the consistency of Malacañang’s press releases amid brewing protests against his economic policies proves something: Aquino might be cautious about bothering businessmen and their take-home money, but he certainly does not get too worked-up about what his real “bosses” want. Neither does he fear the brewing protests of angry people on the streets.

Such coolness under pressure must be admirable in a leader. ▣

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7 thoughts on “on wage hikes and ‘math wizardry’

  1. probably even less since the minimum wage hike only covers those making minimum wage and those whose employers will actually follow any new law. I suspect the impact would likely be even half or a third of your projection which makes the President’s math even more untenable

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