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.
Monday, January 02, 2006
Part 32 - Hyperwage Theory
Hyperwage Theory Part 32
Hyperwage Theory
Part 32
Here are more non-economic but natural consequences of Hyperwage.
Traffic
I have always wondered why the First World countries such as Japan, Hong Kong, Singapore, and European countries have lighter traffic jams. Yes, New York is a mess, Los Angeles is another mess but compared to Bangkok or Manila, their traffic jams are a minor event. In general, taxis in Hong Kong can speed up to 100 kph in the business district. Take a land trip across Europe and you will wonder where the people are.
One way to reduce the traffic jams in Third World countries is to resort to Hyperwage. Sounds obtuse?
Not really. Under a hyperwage regime, we will value our time and productivity. We will refrain from unnecessary trips. If it costs you P700 per day to maintain a messenger, you will think twice about keeping one. Instead, you will rely on intra-city couriers who will pick up and deliver your packages within the same day. Result: lesser traffic due to lesser number of in-house messengers.
Also, since one can engage his time productively such as babysitting, unnecessary trips will be reduced.
Taxi fares will be expensive, bus fares will be expensive and our personal times will be expensive (though still affordable given Hyperwage) leading to cost rationalization. In short, Hyperwage will tend to reduce traffic especially if the government can afford high speed trains and tunnels. After all, for every dollar given the minimum wage workers the entire economy gets five dollars assuming a multiplier of five.
Reservation wage and indolence
A reservation wage is threshold that will force the voluntarily unemployed to seek employment. Remember that some unemployment in Third World countries are voluntary. Why?
To work across town, you need food, clothing and transportation expenses. But if wages in the factory are just about the same as these expenses, there is no incentive to work. It would be better to stay at home.
Say, if the wages are only P4,000 per month, and your monthly expenses in going and coming from the factory is also P4,000, why bother? That is the reservation wage.
Given Hyperwage, many of those who are voluntarily unemployed will be going to work. There will be no shortage of plumbers, carpenters, and electricians.
In fact, those who are unskilled will be forced by the new economic situation to attend trade skills programs by the government.
Who says the Filipinos are indolent. Is it because they are lazy or it is because of the reservation wage?
How many wives are breadwinners because their husbands are unwilling to find work? In this way, the indolence of the husbands will be cured. Under a Hyperwage regime, he will learn plumbing because plumbers will be handsomely paid and could now afford to buy their own cars or yatchs.
Rape, abuse and dignity
I once interviewed a 50-year old male OFW operating heavy equipment. I said, “Frankly, even at your age, how many times have you been sodomized by your boss in the Middle East?”
He was shocked I asked that question but he confessed: “There’s was nothing I can do about it. If I refuse, my daily life will be hard, and my boss can ship me out anytime.”
How many women and men have been raped and sodomized and remained silent about it to avoid embarrassment?
Everyday, our embassies and consulates are full of young women forced to do oral sex on their bosses, punched and whipped by the wives of their employees, their faces burned with sizzling flat irons.
Yet, what is our government doing? If you survey our OFWs you will realize that our government is inutile when it comes to defending our OFWs. The ‘new hero’ slogan is a mere slogan. Our government is only interested in getting its share of fees, charges, and taxes.
And I’m not being a cynic. This is the actual day to day experience of our abused OFWs.
Our government “requests” the foreign companies or employers. If such abuse was perpetrated on a US citizen, the USA will “demand.”
As poor citizens, we are not assertive enough to demand action from our government to demand action from the governments with abusive employers.
Given Hyperwage, our citizens will find courage and assertiveness. Economically empowered citizens demand for better service from the government.
Of course, our politicians don’t care. They get special treatment every time.
Strategy of broken homes
The government thanks the overseas migrant workers for their inward dollar remittances.
Yet, despite the short term benefit to the economy in terms of government dollar reserves, what is the long-term effect of encouraging our people to leave this country?
Broken homes, separated families, homesick fathers. The mother works as a sexually abused maid in Hong Kong.
This is the strategy of broken homes ironically being perpetrated by the state.
I know of one employer who places a camera inside the bathroom, and the maid knows about it but can’t do anything about it These are the kinds of abuses that they never tell their husbands back home.
Back in the country, her daughter gets pregnant at 16, her son is into drugs, and her husband has a woman. This is very common among OFWs, that if these are your only problems, your fellow OFWs will simply ignore your complaints and continue their karaoke singing.
You need to have a greater problem to catch their attention such a husband impregnating the daughter to be of value to the OFWs. This is the reality not seen by our families back in the country.
Politics
Why is it that our daily fare is political gossip? Because we have no business to run, no employment, and nothing to do. We consider politics as a way to climb up economically, via corruption obviously.
Third World countries spend so much time politicking. In Hong Kong, during elections, about 50 to 75 positions are automatic because only one is running as representatives. In some districts nobody runs at all. This despite the salary of the of about half-million pesos a month (how many TVs can that buy per month given that TV prices in HKG and the Philippines are about the same anyway?)
People with purchasing power usually have a reduced interest in politics.
Petty crimes and corruption
It’s very sad. You hear about people stealing telephone cables, rice kettles, manhole covers, and even street railings.
You hear about police stopping foreigners for a pack of cigarettes, or a government clerk asking for P5.00 for a xerox copy of a government form that is supposedly free.
Due to the very low wages, we sell our souls for a few pesos. We cannot obtain a permit with giving some grease money.
And let me make this generalization: The poor people are not angry at high corruption but they are angry at petty corruption. The former does not affect them. Millions in kickbacks for fat contracts do not bother the citizens. It is the petty corruption at the local government units that angers the people.
And petty corruption will be wiped out in a large way with Hyperwage. There is high crime in Singapore, Hong Kong or Japan, but the people in the street don’t care because there are no petty crimes.
Yet, what is our solution to petty corruption? Large banners of “beware of fixers?” No sir, that is not the way. Hyperwage is the only viable solution. An economically-empowered citizens will be assertive enough to stand up to petty corruption and the government worker will not steep so low as to sell his morality and dignity.
High corruption
Large infrastructure contracts always mean high corruption in Third World countries. Yet, if the individuals comprising the bureaucracy will not sell their souls, high corruption will be minimized.
Furthermore, if the wages of the workers are of hyperwage levels, there will be lesser money to corrupt because while the government official can get kickbacks from the materials, it would be difficult to get kickbacks from wages.
Therefore, instead of kickbacks, the money goes to the workers as high wages. Before hyperwage, 40% goes to kickback because wages are low. Under a hyperwage regime, the kickback will only be 10% because the budget for labor is transparent.
And the contractors cannot simply overprice the project otherwise the project will be more expensive than its American equivalent.
Factor prices
The economists are an amusing group. They always preach about paying for market price, that markets should be left alone. They call it factor prices or prices for the factors of production.
Okay, what is the factor price for oil? Then all economies, rich or poor, have no choice but to pay for the world market price of oil. And the economists will tell you that a poor country like the Philippines should not tamper with market price and that we should pay that. They don’t even favor any form of subsidy. Indedd, they even add import duties, specific taxes, and VAT for oil.
Now, what is the factor price for labor? We have a reference. In the US, the federal minimum wage by 2007 will be $7 per hour or about P3,000 per day at today’s exchange rates.
Yet, what is the reaction of the economists when I say that we should pay workers using the factor price for labor in the world market which is P3,000 per day? (Actually, P20,000 per month works out to only P770 per day!!). They say, that’s impossible.
I can’t even imagine the logic. We pay for market price for oil but we don’t pay for market price for labor. Is human labor of lesser importance than a mere commodity like oil?
The computers, the cars, the mobile phones, the photocopy machines, printers, the control circuits all are produced in First World countries using hyperwage salaries. Their selling prices include hyperwage labor, and we are paying for these equipment.
In other words, every day, we use imported equipment and machines and yet we claim we can’t afford hyperwage? Are you telling me that our businesses and the government can afford to pay the hyperwages of some foreigners who built these imported equipment but cannot afford to pay locally-made machines if hyperwage is imputed? Isn’t that reverse discrimination? Where is the logic of it all?
Or is it because the government can afford to abuse its own people while at the same time protect the rights and pay the hyperwage of the foreigners who built the imported equipment?
Is this what is called dignity of labor? Hyperwage is probably the most Christian of all economic theories. The Church should support it.
Gini coefficient
The Gini coefficient one way to measure the distribution of wealth. According to the world bank, the top 5% of the country owns 33% of the wealth. Surely, that is obscene.
Yet given the current economic policies pursued by the World Bank, the Asian Development Bank and other poverty-alleviating banks the Gini coefficient has illustrated an increasing gap between the rich and the poor.
Distribution of wealth
What is the economic solution to the problem of extreme inequality in the distribution of wealth? Not much. Taxation is usually their answer. Very lame, very questionable solution. Taxation can be evaded, and in the hands of the government taxes can be corrupted.
The only realistic solution is Hyperwage. Excessive profits at the expense of the dignity of the workers is injustice.
And yet, the businesses should be concerned because all of these hyperwages will be spent by the minimum wage workers to buy own goods and service.
Plus the economic multiplier. The government will be extremely happy with the quantum increase in the number of commercial transactions and the multiplier effect on our GNP.
Isn’t hyperwage elegant? It solves poverty and unequal distribution of wealth and hundreds of non-economic problems with one single stroke. It is actually a cheap and efficient solution.
Center of the intellectual universe
I envy the capacity of the US as the center of the intellectual universe. Given our current economic policies, there is no way we can be such a center. No way.
But with Hyperwage, there is hope.
I dream of such a center. I will create a center for theoretical physics or mathematics or economics right in Panglao or El Nido. Those studies that don’t require heavy machinery, for a start. I will pay the Nobel Prize winners to come and stay for a year, and they can do all their thinking while scuba diving and lying in a hammock among the coconut trees.
Given the same amount of salaries but with the ambience of the beach within walking distance from the center, will the Nobel Prize winners come?
Yes! And they will teach in the local universities and hire research assistants.
They only reason why the Philippines is not the center of the intellectual universe despite its beautiful landscape and weather is the lack of financial enticement for the intellectual giants to come and converge in the beaches of Boracay for a year or two. The internet has bridged the world but the low wages perpetrates the intellectual divide.
Anyway, this is the only realistic way to stop and even to reverse the brain drain.
How I wish. A home in the beautiful beaches of the Philippines for 1,000 intellectual giants in their own respective disciplines - the Street Strategist’s Center for Strategic Thinking.
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