Hyperwage Theory by Thads Bentulan. He also invented and copyrighted the term "Hyperwage" in 2005. The first part was published in May 2002 and continued in 2005. When this book was serialized for 33 weeks in 2005 in the newspaper BusinessWorld, he was called crazy. Now, 15 years later, the world economists are now parroting his idea that the secret to rescuing the economy is to raise the minimum wage.
Saturday, January 14, 2006
Part 30 - Hyperwage Theory
Hyperwage Theory Part 30
Hyperwage Theory
Part 30
The beauty of Hyperwage is in its elegance in handling non-economic issues. Here are some more non-economic benefits of Hyperwage.
Slow wheels of justice
One is the very slow wheels of justice in Third World countries. In Hong Kong, a conviction for murder can be obtained in three to four months compared to about five years in a Third World country.
Here’s an example. Asia’s biggest “shabu” laboratory was discovered in Mandaue City in Central Philippines in September 2004. Their mastermind was arrested in Hong Kong a few days later. The Hong Kong case was tried and the mastermind served sentence in less than a year and has since been released. In the meantime, the trial of his cohorts in Mandaue has not even started after one year. This is a very glaring difference in the speed of dispensing justice.
Think of this, the trial in a First World country is extremely faster because the lawyers and all the court personnel are expensive. And the lawyers themselves are conscious that they are charging an arm and a leg for an appearance. I heard the lawyer of the drug lord mentioned above was charging HK$100,000 (US13,000 or P700,000) for his first appearance alone, not to mention the first class hotel and first class tickets from London. And to think nothing much was done on the first day.
Once we realize that court janitors and court stenographers are getting P20,000 to P40,000 per month, and that if there’s a cancellation without sufficient notice such costs are charged to the litigants, then we will be super productive. Relatively, the slow wheels of justice will turn faster, not slower, under a Hyperwage regime. Therefore, Hyperwage can only improve, not delay, the dispensation of justice.
Filipino time
This is not only Filipino time but Third World time. Because we don’t value our labor and our own free times, we expect everybody else not to value their own times as well. So, it isn’t abnormal in Third World countries for friends to arrive two hours after the appointed time. Or for government functions to start an hour later.
Under a Hyperwage economy, this bad habit will be eradicated almost overnight. Don’t waste my extra hour because I could have been babysitting our neighbor’s baby.
Even the government will be conscious of the huge waste of productivity of 200 people waiting with nothing to do but wait for the event to start. At P100,000 per month, their daily rates are simply too high (P625 per hour x 200 = P125,000 per hour of delay).
Again, Hyperwage will reduce, not increase, the waste due to the Filipino time.
Bad quality
We are used to bad quality because we cannot afford high quality items. (Puede na yan). But the repair, loss, or waste of time due to bad quality products eventually costs more for the economy than buying a better product. And yet we are not aware of this because we are more interested in our own cash flow than in the waste of time and opportunity.
We do not demand good products because we don’t have the purchasing power to buy quality products. Since we don’t buy quality products, we don’t make quality products. And since we don’t make quality products we can’t sell them abroad. And since we cannot sell abroad we have not inward earnings.
And, the irony of it all, we buy quality equipments from the US or Germany or Japan or Finland where those goods are made using Hyperwage salaries.
In a Hyperwage economy people demand quality products to avoid wasting their time and productivity, and maybe we can then export our quality products. All these are good for the Hyperwage economy.
Bad service
Another non-economic benefit of Hyperwage is the reduction of bad service providers. Since we can afford a higher level of prices for services, we will be seeking the best service providers and we will tell the bad ones in the face that they are not doing their best. The cost of services will rise but maybe a rise of 300% while the maids have their salaries increased by 1,000%. Not a bad prospect really.
Therefore, Hyperwage will encourage high service quality. We will demand brownout free electricity, high quality water in our pipes, and LPG via pipelines to our homes.
Empowerment
There’s no denying that Hyperwage will empower the consumer. Poor service by government agencies? Today, we lack the moral courage to castigate a government agency worker who renders poor service. But if our consumers are with hyperwage incomes, then they feel righteous and courageous. They will file complaints, they demand better government service, they will raise hell.
But now, given our hypowage salaries, we are too meek because as helpers, as janitors, we earn only peanuts and we don’t even have the courage to complain to the Department of Labor the violation of minimum wage laws.
But if we received Hyperwage, there’s now way you will allow the employer to cheat you of your minimum wage. After all, the maid will now be earning the equivalent two aircon units, or five cellphones, or one computer unit per month.
Enrichment of a few
In Third World countries only a few are enriched such as the politicians and corrupt government officials. With Hyperwage, the poorest of the poor will be able to share some of that enrichment. Remember, they are entitled to it as provider of the labor that enriched them.
Red tape
Bureaucratic red tape will be reduced under a Hyperwage economy because the people will be demanding faster services such a issuance of licenses and permits. Since the government by that time will earn more from the taxes of they Hyperwage salaries, then it will have money to buy computers and systems that will improve systems, and also to bypass procedures which have no real added value to the system.
Overtaxation
Right now, our people are overtaxed because there are a few taxable transactions and the government tends to increase tax rates rather than increase the number of taxable transactions. In a Hyperwage economy, the rates could be lowered while the transactions increase. The government will be able to reduce rates avoiding overtaxation.
Reliance on human labor
There is an unnecessary reliance on human labor because labor is cheap. Slow, inefficient and prone to repetitive errors. This will prevent or discourage research and development in innovation, computerization, systems studies, and invention of labor-saving devices. In a Hyperwage economy the incentive is automatic because price modifies our behavior.
Protection of industries
When Third World countries protect an industry, usually that industry is not efficient because it is labor-intensive. This protection results in more inefficiencies. And there is poor desire or incentive to improve to compete against the world market. In a Hyperwage economy, the companies will be forced to think: Should we be in this business at all? If so, how can we improve productivity?
Time and motion study
Have you encountered a company that as conducted a time and motion study in a Third World country? Hardly. Because labor is cheap. In fact, I have seen building owners who simple change designs of their building components after everything has been done. They change the tiles, they rebuild partitions, and relocate lamp posts. Why? Because labor is cheap. But these changes could have been prevented if the owner and the designer sat down and gave themselves some thinking time.
And look at government procedures. The Third World governments are so fond of introducing new regulations and new procedures that are supposedly to prevent corruption but are actually causing more avenues of petty corruption. But have you heard of a time and motion study to reduce the procedures?
In a Hyperwage economy, there is a positive pressure to do time and motion study to reduce unnecessary costs.
Automation
Why are automation machines, computers, and equipments imported? Is it because they are more brilliant than Third World countries, or is it because the First World countries are the ones who have the necessity of inventing these automation machines? In a Hyperwage economy, the companies will be forced to automate whenever possible. This will result in more productivity and faster development and delivery of products. This means more opportunity and more profits.
Low selling prices
Are low selling price bad? Yes, they are bad because the maker of the product takes short cuts, or does not value his own labor. We sell Banana cues or Halo-halo in the street corners at very low prices because the people cannot afford higher prices because they have low wages. What will happen? The maker will not find it meaningful to continue doing it because it is too time consuming and too tiring.
Because the lower prices are possible only because the maker sets his own labor cost to zero.
In short, entrepreneur’s spirits are dampened by the fact that their hand-made Xmas cards, and special Torta cannot be sold at a price that is meaningful for him.
In a Hyperwage country, even the maids can afford hand-made Xmas cards. The maids will be a completely new markets where now there is none.
No entrepreneurs
If you look at the so-called entrepreneurs in this country and in other Third World countries as well, they are actually children of multi-millionaires. Perhaps only less than 10% are really from the ranks of the poor.
There are many entrepreneurs with new products and new ideas but they cannot implement them because the people have low purchasing power and he cannot charge a correct price. Furthermore, he has no capital because his salary as a minimum wage worker cannot afford him decent meals for a day.
No middle class
Entrepreneurs are usually from the middle class, and there are no middle class in Third World countries. According to the World Bank, 5% of the society owns 33% of the wealth in the Philippines. Isn’t this obscene?
In effect, there is practically no middle class in this country. What we usually call middle class in this country have the same purchasing power as a domestic helper in Singapore or in Italy.
Why is there no middle class? Because our wages are too low. The lower court judges earn about five low end cellphones a month, about the same number of cellphones that a salary of a maid abroad could buy.
No purchasing power, no middle-class, no entrepreneurs, no small business, no good.
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