Hyperwage Theory

Tuesday, August 29, 2006

Part 1 -- Hyperwage Theory: The Strategy of Poverty

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Table of Contents
Part 1 Part 2 Part 3 Part 4 Part 5 Part 6 Part 7 Part 8 Part 9 Part 10	Part 11 Part 12 Part 13 Part 14 Part 15 Part 16 Part 17 Part 18 Part 19 Part 20	Part 21 Part 22 Part 23 Part 24 Part 25 Part 26 Part 27 Part 28 Part 29 Part 30	Part 31 Part 32 Part 33

Hyperwage Theory Part 01

In which the Street Strategist unveils the state’s secret strategy of poverty

Published: BusinessWorld May 2, 2002

Chapter 1: The Strategy of Poverty

(Hyperwage Theory Part 1)

Of the state policies of poor nations perhaps none is more paradoxical than the strategy of poverty. The irony is that unless someone such as the Street Strategist points it out, even the government itself is unaware it is actually pursuing such a strategy.

Since we had just celebrated Labor Day, I find it relevant to reveal the secret labor strategy of the government.

When the country welcomes foreign investors with the promise of low labor cost, unconsciously it is prostituting the great talents of our highly educated workforce at decadent low wages. In promising so, the state sells out the souls of the country’s labor workforce by perpetuating low wages. The state effectively says, come to us because it is our policy to keep the people poor by maintaining low wages.

That, my friend, is the strategy of poverty.

Don’t tell me we are luring foreign investors with our infrastructure because there aren’t any. Don’t tell me we are luring them with our efficient and corruption-free government because it isn’t. And don’t tell me we are luring them with our English-speaking workforce because it is almost irrelevant – the Asian headquarters of American and European companies prefer Hong Kong or Singapore.

If the government is not the unwitting agent of this strategy of poverty, then worse, it is the unwitting originator and perpetrator of this offense against labor. The operative word is “unwitting.”

The greatest problem with the unwitting perpetrator is that it thinks it is doing something good for the country. This is the tyranny of well-meaning intentions using wrong analysis.

Allow me to sketch my economic theory first. In future articles, I will belabor them in detail, including addressing the loopholes that you may find in this simplified sketch.

Under this strategy of poverty, the man in the street directly suffers the effects of keeping the people poor as a matter of state policy. And since this is a state-sponsored strategy there is no hope in sight for him during his generation, and the generation of his children.

Thus, he escapes from the regime and seeks better chances in countries with higher wages such as the Middle East, Hong Kong, Singapore, and the most treasured paradise called the United States. The rich ones left in the country are the politicians, wherever their wealth came from.

What happens when the best brains of the country seek refuge in a high paying country? The poor country becomes poorer because its economy is drained of the best talents; while the rich country becomes richer because it is overflowing with the best talents in the world.

Due to the dearth of productive talents, the poor nation heads for a downward spiral; on the other hand due to an oversupply of productive talents, the rich nation heads for an upward spiral. The gap between the rich and the poor nations widens.

How can the rich nation be certain that the emigrating talent improves the productivity of its economy? Simple test. If he does not produce more revenue than his salary, he will be fired.

While reserving details for future articles, allow me to sketch the high wage scenario.

The world’s best talents – mathematicians, physicists, bankers, doctors, and nurses gravitate towards the highest paying center of the labor universe. They are paid high, but they must produce higher than their income, which means the business must grow or else it is shut down. Since the best minds are competing in one market, they produce the best science, the best computers, the best medical equipment and the best weapons of mass destruction.

When wages are high, the corporate structure tends to be labor-efficient. Instead of three staffers, supermarket check-out stands will have to make do with one. The same labor-efficient principle applies to the government as well. Bureaucrats will find it hard to justify hiring 20 casual employees each receiving a monthly salary equivalent to five TV sets.

Because automation saves labor cost, it is second nature to these corporations. The companies acquire the latest, fastest equipment, and in cases of agriculture, adopt the best yielding techniques. Thus it may happen a rich nation with all its expensive labor can produce rice cheaper than a Third World country.

When the wages are high, basic commodities are high. But since income outstrips the cost of basic commodities, there is still some savings left. The typical worker is still above the poverty line. Food prices go up, but how much rice and vegetables can you really consume? There will be funds left over for savings, or future investment.

When basic commodities are high, the worker rethinks the size of his family. Thus, in Japan, Korea, Singapore or in Europe, the population growth is very low compared to that a poor country.

When wages are high, inflation is high. Inflation is a sign of growth, growth is good. Inflation therefore is a leading indicator of economic optimism. Inflation means higher prices. In which country is Nokia cheaper?

In the Philippines or in Singapore? How about TV sets, designer clothes, and hamburgers?

Do you really think that inflation in a poor country will skyrocket so high that cars, stereos, cellphones, will be more expensive than the price in the world market? There is a limit to inflation and in most instances, today, the country is already at these upper limits. The poor nation is currently paying First World prices using Third World salaries.

High wages create a larger middle class, with the ability to save and to create their own business using these savings.

Higher wages reduce the profits of the shareholders but this doesn’t mean they will go bankrupt. Thus higher wages reduce the gap between the middle class and the rich without corrupt government fingers dipping into the bowl.

High wages cause unemployment but which rich country has higher unemployment figures than poor countries?

When wages are high, the rich country’s citizens need not go to foreign lands. Instead they develop their own businesses, both service and manufacturing, and export their products to the world, profitably. At a later stage, they exploit the low labor cost in some poor country for even greater profit.

I am sure the economists are hot and raring to shoot down these sketchy ideas. Let’s hear them out now because in my future articles, I will be spending time on the implications of the above observations. At least, I could address your anxieties in the coming articles. As you have seen, I raised several issues, all of which cannot be covered in a single article. This article serves a mental guideline of the direction of my economic theory.

But before you do so, just try to answer in your mind: Why is it that millions of patriotic citizens leave the country each year to prostitute their talents to the highest bidding country? Why are these professionals and workers building other countries instead of their own?

And, before becoming rich, a country must have been poor. What did it do?

By the way, have you noticed that the rich countries are those with expensive labor, while the poor countries are those that have very cheap labor? Why?

Is high minimum wage the result of being a rich country? Or is being a rich country a result of high minimum wage?

These questions and their answers are central to the Street Strategist’s economic theory.

Increasing wages should be desired, not feared.

(Thads Bentulan, May 2, 2002)

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Table of Contents
Part 1 Part 2 Part 3 Part 4 Part 5 Part 6 Part 7 Part 8 Part 9 Part 10	Part 11 Part 12 Part 13 Part 14 Part 15 Part 16 Part 17 Part 18 Part 19 Part 20	Part 21 Part 22 Part 23 Part 24 Part 25 Part 26 Part 27 Part 28 Part 29 Part 30	Part 31 Part 32 Part 33

Saturday, May 06, 2006

Part 2 - Hyperwage Theory: Hyperwage Theory Revealed

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Friday, April 07, 2006

Part 3 - Hyperwage Theory: Paradigms

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To join the mailing list send an email to streetstrategist-subscribe@googlegroups.com

A PDF copy of the entire book on Hyperwage Theory is available currently for free.

Send an email to streetstrategist@gmail.com for the latest edition.

Want to order other books by Thads Bentulan?

The Misadventures of the Street Strategist Vol 1 to 13

.....................................................................................................

Hyperwage Theory Part 03

Hyperwage Theory Part 3

Chapter 3: Paradigms

“The secret of the Hyperwage Theory is that price modifies behavior. Its beauty is its elegant handling of non-economic issues.”
- Street Strategist

The Hyperwage Theory could launch the Street Strategist as the world’s most infamous intellectual eunuch. In the same breath, the Hyperwage Theory could land the Street Strategist the fastest Nobel Prize in Economic Sciences in history.

You bet on the former, I’ll bet on the latter. No in-betweens. Indecisiveness is for the faint-hearted.
I am going to incorporate a research think-thank to be called the Hyperwage Foundation to conduct statistical and econometric studies. This is probably with funding from the World Bank and the ADB so that, finally, their funds will be put to good use, instead of the aimless so-called anti-poverty strategy studies they have conducted over the last 50 years that resulted in worm-speed improvements.

I will also run for the next senatorial elections. All the security guards, domestic helpers, OFWs, janitors, sales clerks, and students will put me as the last candidate in their ballots. At least, they will vote for somebody who has actually spent time thinking about their modern-day slavery and who has a political platform, instead of mere acting personality, to offer to the voting public. Mine will be the last name in each ballot.

Outline
Here’s the outline of this series. Contrary to my usual cliff-hangers, in the Part 2 of this series, I immediately described the Hyperwage Theory.
Instead of a cliff-hanger, I opted for a jammer. I jammed the gears of your intellectual engines with a proposal that you would dismiss outright without further thinking.

Then, I will describe the paradigm or mindset that I used to arrive at a solution to the poverty of the Third World.

I will explain why I think the World Bank, Asian Development Bank, African Development Bank and other development banks, and all the Nobel Prize economists have failed for 50 years to come up with a solid strategy in solving Third World poverty.

Then, I will discuss the inadequacies of economic theories in solving Third World economic problems.

After that, I will discuss the beauty and strength of Hyperwage Theory, especially in the manner it addresses the non-economic issues which are left untouched the ordinary economic theory.

Then I will try to prove that Hyperwage Theory finds succor in the current theory of the firm, and other theories of microeconomics.

Next, I will prove that it is possible for Hyperwage to co-exist with current macroeconomic Keynesian theory.

Then finally, I will prepare a Question and Answer (Q&A) to directly answer your questions.

Paradigm
So, I ask you: Did your brain stop working immediately? Did the minimum wage of P20,000 (P769 daily) for domestic helpers - not sales clerks, mind you – trigger your automatic transmission-line fault relay into a trip-off? Did you instantly exclaim, “That’s baloney, that’s wishful thinking, that’s impossible?”
This is what I mean. The moment you tell yourself that it’s impossible, that means you tell your brain to stop working. You do not even attempt to think of the possible consequences. How do you know it’s impossible? Knee-jerk reaction? Academic brainwashing? Small-business-will-collapse bogey?

The most common reaction by economists is: “There will be hyperinflation!”

The rejoinder of the Street Strategist: “So what? Does that scenario paralyze your thinking process?

Why, what happens under hyperinflation? Have you really thought about it, or you’re just mouthing the inert textbooks and professors?”

Education vs. innocence
Contrast this: The Nobel Prize economists have a preset reply, therefore, they don’t have to think anymore. Due to their high education, for them, hyperinflation is terra incognita.

Remember that the Street Strategist is an aborted economist, therefore, he does not know what happens under hyperinflation.

For the Street Strategist, it is an economic twilight zone where his intellectual innocence does little to remind him he is committing intellectual hara-kiri.

Don’t worry, we will dwell on this later. Suffice it to say, the Street Strategist found heaven for the Hyperwage Theory in the twilight zone of economics.

Butterfly metamorphosis
In my book Strategy Myopia, I wrote an article The Metamorpher, which exemplifies my propensity for thinking along the lines of metamorphosis. Pursuing along the same wavelength I would like to invite you to keep an open mind to the Hyperwage Theory.

In effect, what I’m saying is that we are like caterpillars in the caterpillar world in the book Hope for the Flowers. Whatever we do, as long as we think of ourselves as caterpillars we will never achieve our destiny which is to become butterflies. In turn, butterflies are the hope for the flowers to bloom.

Pursuing the analogy economically, as long as we don’t make that quantum leap to hyperwage levels, whatever we do will be useless, a mere maintenance of the status quo.

This is the reason why for the last hundred years or so, the poor countries became poorer in a negative downward spiral while the rich countries became richer is a positive upward spiral. But that’s jumping the gun. I’ll discuss all these issues later.

You might think of the Hyperwage Theory as crank economics, but keep an open mind until after I have completed my exposition.

Some of you will be asking for empirical data, I’ll attempt to provide some along the way.

Twilight zone
In addition to the metamorphosis paradigm, I believe that Hyperwage Theory enters into the twilight zone of economics and it is probable that in this zone the normal laws of economics will be violated, or at least be suspended in animation giving space to the possibility that a theory like Hyperwage can exist. What I’m saying is, do not rule out Hyperwage just because it does not fit your everyday modern economic theory.

Newton vs. Einstein
In addition to the metamorphosis and twilight zone paradigms, I used the Einsteinian relativistic mindset.

Does Hyperwage call for the complete disposal of current modern economic theory? No.
Let me make an analogy. Newton was the greatest scientist of the human race. He deduced the three laws of motion. He also deduced the laws of planetary motion. He invented the theory of universal gravitation. He even invented calculus independently of Leibniz. Newtonian mechanics is valid for speeds in our ordinary working lives.

But in his lifetime did Newton ever create equations that accounted for motions at the speed of light? He didn’t.

During the time of Newton, every scientist believed that his laws of motion are applicable at any speed. It would have been unthinkable for Newton to think that there would be a different set of equations at tachyon (light) speeds.

Today, every school child knows that Newton’s laws break down at tachyon speeds, and that Einstein’s equations of relativistic mechanics take over.

Anyway, to answer the question, yes, the current principles of economics and Hyperwage theory can co-exist because they will have different sets of equations and curves to define the economic variables in their respective domains and ranges.

Modern economic theory may be likened to Newtonian mechanics, while the Hyperwage Theory may be likened to Einsteinian mechanics. Both can co-exist although at different planes. As I said, as I’m going to prove later on, Hyperwage is applicable only to Third World countries, the current theories are applicable to First World countries.

Marxist vs. capitalist
During one radio show, some leaders of the militant labor and cause-oriented groups reacted that they liked the Hyperwage Theory but that their asking price for labor is only for an increase of P125 daily.
Many reacted to say that I’m a communist or a Marxist. That’s completely wrong. In fact, I am a capitalist, and I base my pricing of labor from a capitalistic point of view.

The Marxists merely pluck out a figure from some NEDA statistical table without thinking of its effect to the entire economy or to the world economy.

On the other hand, I use market-based figures. That’s why our figures are completely different and disparate. In fact, I started from looking at the world economy then all the way to the household economy.

Survival vs. profitability
Yes, I’m not kidding. I started my thinking process from a macroeconomics viewpoint, on a world-wide basis until I ended up with the domestic helper’s wages.

The Hyperwage Theory was conceived from a completely capitalistic approach. The thinking process was completely different.

The militants are demanding for their wages for their survival, and despite their pro-poor sentiments, they have excluded the domestic helpers. That’s not really pro-poor is it? The businessmen, the wage boards, the economics professors, the government policy makers, and even including the president are working from the bottom up. They only want to solve the economic issues.

On the other hand, I was analyzing the world economy and arrived at a conclusion that for the profitability of the entire country, not merely survival of the laborers, we must give them the minimum wage that they deserve, and I am forced by my theory to include domestic helpers. I am analyzing this top down. I wanted to solve not only the economic issues but also the non-economic issues.

Expense-side vs. revenue-side
The difference in perspective is tremendous. They are thinking about the survival of labor, hence, they are demanding wages for labor’s survival. I am thinking about the profitability for the country’s economy, hence, I am giving labor wages that it deserves for the country’s profitability.

The businessmen, the economists, and the government are treating labor as an expense. I am treating an enriched labor as revenue. And yet, that’s not all. The Hyperwage Theory brings on hundreds of flow-on effects.

Again, that’s jumping the gun. Allow me to lay the predicate first.

First train vs. third train
In addition to the butterfly mind-set, I invite you to think of the train mindset. The Third World countries are riding on the Third Train on Track 3. The First World countries are on the First Train on Track 1.

Whatever the people on the Third Train will do, they will always be in Track 3. They will never go to Track 1. What is needed to move to Track 1?

The Hyperwage Theory is the quantum jump needed by the Third Train to jump to Track 1.
And there’s one more big problem. The people on the Third Train are using the Rules of Track 1 in the hope that they will jump from Track 3 to Track 1. This is a completely wasteful experiment.
What I’m saying is the Third World countries have been using only one set of economic theory but that theory is good only for the First World countries. Under the Hyperwage Theory, it is wrong to use First World economic theories to Third World countries. For one, First World economics is inflation-centric. The First World are afraid of inflation so much so that they want to control it.

Upward vs. downward spiral
One more thing about the train analogy. Track 3 is a downward negative spiral track. On the other hand, Track 1 is a positive upward spiral track. Therefore, Train 3 will always be going down while Train 1 will always be going up.

Come on, guys, you know that. Just a brief teaser: All the doctors on Train 3 are migrating to Train 1 as nurses. The quality of medical care in Train 1 can only go upward given this trend, while the on Train 3 it can only go down. Isn’t that proof enough that we are on the wrong set of tracks?

So now we approach Hyperwage with a different mindset. We are caterpillars who think we should be caterpillars forever when in fact we are butterflies.

We are Train 3 people on Track 3 but we refuse to entertain the possibility that we can be on Train 1 on Track 1. Why? Because our brains stop working. Our brains are the first casualty of the Hyperwage Theory.

Summa cum laude
“But they are a rich country while we are poor,” is a typical reaction to the Hyperwage Theory. “We cannot be like them.”

Think of yourself as a teacher, are you going to tell a student that he is a “natural born flunker” or a “natural born summa cum laude?” Can you imagine how absurd that is?

Take my case. It took ten years before I understood debit and credit. But when I finally did, I eventually invented the world’s fastest, most effective, most efficient way to learn debit and credit with perfect accuracy.

Anyway, in my mind, like any student, any poor country can become rich.

Apples vs. oranges
During one of my talks about Hyperwage, one of the panelists who happens to be a member of a Regional Tripartite Wage Board said: “Your theory is flawed. You keep on comparing our country to Japan, Hong Kong, USA or Singapore. But you cannot compare these countries. They are rich, they can afford to pay.”

Can we compare apples with oranges? Why can’t we? If we can transform matter into energy under Einstein’s E=mc2, there is no reason we cannot transform an orange into an apple, if needed.
Don’t make the mistake of turning off your brains. Better a wrong idea than no idea at all.

Economic vs. non-economic issues
What is an economic issue and how does it differ from a non-economic issue?

An economic issue is one solved or addressed by economic theory or economic equations. Other issues
are non-economic.

Examples of economic issues or economic problems are inflation, monetary levels, unemployment, wages, purchasing power, and similar data.

Examples of non-economic problems are slow wheels of justice, underdeclaration of income, inefficiency, bureaucracy, migration, brain drain, corruption, population control, lack of computerization.

Why is it important to distinguish economic from non-economic issues? Because ordinary economic theories attempt to solve only economic issues. For example, how does economic theory solve the population explosion? There is no solution from them.

On the other hand, Hyperwage Theory addresses a large number of non-economic issues in addition to solving the economic ones. For example, Hyperwage addresses computerization, automation, population control, corruption, and brain drain in one single sweeping stroke.
It is this dual nature of Hyperwage that holds promise for Third World countries

Many-to-many
If you are a computer programmer, you know the one-to-many, many-to-one, one-to-one, and many-to-many database relationships.

I have identified about 50 major problems of Third World countries. Under ordinary modern economics, each of these 50 problems will have 10 solutions each for a total of 500 solutions. How can the government pursue these without spreading itself thin?

That alone will give you an idea of why the government cannot solve our economic problems.

This is an example of a many-to-many relationship. Many solutions for many problems.
On the other hand, Hyperwage is a panacea of sorts. It can address all the 50 issues using only one solution: Domestic helpers should be included in the minimum wage coverage and at a level of P20,000 monthly.

This is an example of a one-to-many relationship. One solution for many problems. Can you imagine the elegance of the Hyperwage Theory? It is a one-to-many solution.

Summary
In this installment, I have shared with you the combination of paradigms that I used to structure my analysis and gedanken experiments in formulating the Hyperwage Theory.

Why did I do this? Because I want you to vicariously feel the sense of direct, logical, natural and elegant genesis of the Hyperwage Theory when one uses the insight and paradigms above.

If I did not think along the lines of butterfly metamorphosis, twilight zone violations, Einsteinian relativity, Marxist and capitalistic pricing, survival and profitability, expense and revenue, trains on different tracks, positive and negative spirals, summa cum laude and flunkers, apples and oranges, economic and non-economic, one-to-many, I would not have arrived at the Hyperwage Theory.

Whether or not, you will eventually agree with the Hyperwage Theory is secondary. However, I hope that you will engage yourself in this debate, vicariously, because I am sure you will never look at economics the same way again. I will have the pleasure of making your imaginations run wild.

And you know that’s a scarce commodity among policy-makers, businessmen and economists: imagination.
(Thads Bentulan, May 19, 2005)
* * * * * ∯ * * * * *

Wednesday, April 05, 2006

Part 4 - Hyperwage Theory: Aimless Strategies

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To join the mailing list send an email to streetstrategist-subscribe@googlegroups.com

A PDF copy of the entire book on Hyperwage Theory is available currently for free.

Send an email to streetstrategist@gmail.com for the latest edition.

Want to order other books by Thads Bentulan?

The Misadventures of the Street Strategist Vol 1 to 13

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Hyperwage Theory Part 04

Hyperwage Theory Part 4

Chapter 4: Aimless
Strategies
The Hyperwage Theory could launch the Street Strategist as the world’s most infamous intellectual eunuch. In the same breath, the Hyperwage Theory could land the Street Strategist the fastest Nobel Prize in Economic Sciences in history. You bet on the former, I’ll bet on the latter.

In Part 1 written in 2002, I revealed the strategy of poverty unwittingly perpetrated by our government, or any Third World country for that matter.

Our president visits every First World country and begs: “Come to our country. Give us your dirty, smelly, greasy work; any job that your rich people are no longer willing to take on. We offer our country as your dirty kitchen, your smelly pigsty, your greasy garage. Don’t worry about wages. We will give our laborers the lowest wages possible. In fact, if you come to us, we will make sure you stay in our country forever because we will keep our laborers forever poor by giving them low wages forever. We will make sure that our laborers will always be paid lower than your own rich people. Always. We will never allow our people to taste the wages of your First World country. We will always be a poor Third World country and you will always be a rich First World country. So what are you waiting for?
“We have cum laude graduates from UP or Ateneo who are willing to break down the rhythm of their biological clocks by working all night in graveyard shifts in call centers. Come to our country now. We have law graduates who are willing to work in call centers answering questions from your country’s spoiled secretaries who don’t even know what a diskette is. One call center employee was even one of the bar topnotchers in the last bar exams. How much more qualified can we get? Our law graduates in call centers are extremely happy working for $1.50 per hour, while you are paying mere high school grads in your country at $15.00 per hour. Your country’s one year wage expense is equal ten years in our country. One is to ten. Can you see the difference? That’s how we undervalue our labor. It’s actually our own style of modern-day slavery.
“You should also know about our domestic helpers receiving only P2,000 per month or $0.15 per hour. Yes, that’s how poor we want them to be.
“Come now, we want you to exploit us. We will even have your photos taken with me in our presidential palace. And again, don’t worry, we will maintain our poverty as a Third World country and you will maintain your wealth as a First World country. In fact, our local companies will buy your software, your CPUs, your computers at prices higher than these computers are being sold in your own country because we have to pay for freight, import duties, VAT, and of course, profit to our companies. We are willing to pay higher than First World prices for your products using our Third World salaries. We will perpetuate this system. This is our country’s unwritten, unwitting strategy of poverty.”

In Part 2, I described the Hyperwage Theory with the surprise feature that the solution to a Third World country’s poverty rests on the country’s valuation of the labor of the poorest of the poor. We must recognize that domestic helpers should be part of the minimum wage law, and that they should be paid wages with actual purchasing power.

In Part 3, I laid out the paradigms needed to understand the Hyperwage Theory. I hope I have convinced you that with those paradigms, the Hyperwage Theory comes as a direct natural logical and elegant consequence.

Rejections
Actually, as early as Part 2 when I described the Hyperwage Theory you should have seen how it purports to be the panacea for the Third World, and I don’t even have to explain further. But if you still can’t see how it works, I don’t blame you, although my respect for your intellectual capacity has just gone down.

There are three basic rejections to the Hyperwage Theory.
First: We cannot afford it. (Sen. Manny Villar raised his eyes to the ceiling thinking before saying these words, according to the radio host who interviewed him last month.)
Second: There will be massive unemployment. (Guillermo Luz of the Makati Business Club reacted immediately when I proposed Hyperwage to him five years ago.)
Third: There will be hyperinflation. (Everybody from the domestic helpers whose cause I am championing to the economics PhDs who are brainwashed by inflation-centric economics are ganging up on me. All together now: “Hyperinflation!”)

Surprisingly, Dr. Bernardo Villegas of the University of Asia and Pacific, in a brief chat at Mr. Raul Locsin’s wake supported the idea of Hyperwage although I was not able to give my figure of P20,000 for the domestic helpers. He would have been floored by the staggering amount I am proposing.

Wage range
At this stage, although I will discuss this in future installments, I would like to say that just because I plan to raise the wages of domestic helpers ten times from P2,000 to P20,000, it does not mean that all salaried workers will get a ten-fold increase. No, it’s not that at all. Here are the ranges:
Domestic helpers – P20,000 per month
Janitors – P22,000
Factory Workers, Messengers – P25,000
Secretaries, Sales Clerks – P50,000
Entry level engineers, teachers – P70,000
Middle managers – P150,000
Bank Managers – P200,000

By the way, in Japan, it is common that the salary of the highest company official is only about ten times the salary of the lowest. Salaries thereat are more equitably distributed.

Why not P50,000 or P100,000 per month as minimum wage? Smart Aleck. This only means your brain stopped working. But I’ll answer this impertinent question later. Don’t worry.

By the way, I’m not saying an instant one-time wage increase. We can have a staggered increase of 20% annually for five years. (Of course, using real wage rates, not nominal rates, so the nominal increase will be higher than 20% each time.)

Irony
The first casualty of the Hyperwage Theory are our minds. Our brains stop working. And we cannot see the logical and direct consequences of the Hyperwage Theory. This is the reason I spent Part 3 discussing the paradigms behind the Hyperwage.

But do you know what is the biggest irony I have observed given the Hyperwage Theory? You will be surprised big time.

The biggest irony of the Hyperwage Theory is that the labor groups themselves are skeptical about it. Why are they skeptical about it?

Labor do not think they deserve such a hyperwage with high purchasing power. That’s why they are skeptical. They don’t think they deserve it. That’s the biggest irony.

Again, the labor groups want survival wage, on the other hand, I want to grant them purchasing that could cause the explosion our own domestic demand thereby accelerating the Keynesian economic multiplier.

This is why even the most militant of labor groups could not even think of the Hyperwage Theory in the first place.

(In fact, when a TV host asked the reaction of former BusinessWorld columnist, now Party-List congressional representative Teddy Casino, the latter said that their group was not even asking for wages as high as the Hyperwage but just wages for survival. I’m more Marxist than the Marxists. Two days later Casino used the P21,000 threshold for a tax relief proposal in order to increase the purchasing power. Why do we have to beat around the bush with tax reliefs, etc which in turn will create distortions and loopholes? Do it in one single clean stroke - minimum wage of P20,000 to give helpers purchasing power and everything else will follow.)

Circular flow
Again, this is jumping the gun, but let me assure the businessmen one thing. Under the macroeconomic theory of circular flow, households receive incomes which are their wages from businesses. In turn, these incomes will become household expenditures which will be the incomes for the businesses.

What does this mean? Any wage increase, no matter how big, should not worry the businessmen because the households will spend all of them anyway. All wage increases will go back to the businessmen whenever the households spend. And remember, almost all households spend all of their incomes. Whatever the businessmen will give to workers as wage increases will be given back to the businessmen.

What will happen though is that in the initial stages (at the start only), the businesses will have to take some of their retained earnings and give it to workers as wages. Their profits will be slimmer in the initial stages. But once the workers spend it back, their profits will be higher.

And by the way, just because wages will be raised does not mean that businesses cannot raise their selling prices. Will there be hyperinflation? Why, which country has a cheaper price for Nokia 9500? Singapore or Philippines? Which country has a cheaper HP Tablet PC, USA or Philippines? Compare the prices of goods there in relation to their wages. Which has a comfortable margin? Again, that’s jumping the gun.

Businessmen don’t be stingy, you will reap back all wage increases anyway because under the circular flow theory of macroeconomics, all household incomes will be spent to buy your goods and services.

Note that we don’t have to print new money, therefore no inflation, in a manner of speaking. What is involved is simply redistribution of existing wealth from the pockets of the rich families where they are stagnant, to the active economy where they will be circulated and subject to the Keynesian economic multiplier. From stagnant to circulating, that’s a good change.
See, I have shown you a glimpse of what’s in store ahead. Hyperwage Theory is possible under the current economic theories. I don’t think any PhD economist will disagree with this.

World-class failure
After more than 50 years, I consider the World Bank a world-class failure in eradicating or minimizing world poverty. How much more time shall we give these World Bank economists before we have to finally declare their economic theories, policies, and actions a failure? Is this all that the economists can do? Do they need another 50 years?

Although, this is jumping the gun once again, allow me to demonstrate the failures of the economic theory espoused by the World Bank and First World economists.

The Gini coefficient (measure of wealth inequality) has increased. In some countries the Gini has increased by 5 to 9 percentage points, in some countries from 10 to 19 points, and in some countries more than 20 points. In other words, in two decades, world inequality has even risen. We will discuss this later. This is only a taste of discussions to come.

A student after one semester of poor performance will be marked “failed.”
How much longer do we have to wait until we finally declare that our economic theories and policies are a failure?

Has it ever occurred to you that the World Bank, with its mandate of solving world poverty, has been using the wrong economic theory all along?

This is very crucial because if we use the wrong tool we will never solve the problem. Train 3 will always be on Track 3. Train 1 will always be on Track 1.

By rejecting First World inflation-centric economics, I was forced to start with a zero-base theory until I formulated the purchasing power-centric Hyperwage economics. And lo and behold, I ended up with the wages of the domestic helper as the key.

Strategy
Have you ever read the anti-poverty strategies of the World Bank? Or the Asian Development Bank? Visit their websites. There’s even a copy of the Philippine poverty strategy. There was a Millennium Summit in 2000, and the Philippines was represented there. Forthwith, there came out a paper called Poverty Reduction Strategy and Poverty Monitoring. Get it from NEDA or World Bank’s website. Do you know that we have allocated P6.1 billion of poverty alleviation funds? In year 2000, the Philippines had the highest incidence of poverty in Southeast Asia where 12.7 percent of the population were living at $1 per day compared to Vietnam’s 9.1% However, I will focus this series on ideas first, then statistics later.

From where I sit, these documents from all over the world are a bunch of motherhood statements.

Yes, these documents are full of statistical data, but that’s the only thing good about them. They have monitoring parameters but almost zero strategies. Poverty strategy studies from all over the world have maximum data analysis but minimum strategy formulation.

About the only strategy I see in their documents is the word “strategy” itself. All these poverty strategy studies are a commingling of useless recommendations by economists paid at First World salaries attempting to strategize for Third World economies using First World economic theories. On the other hand, Third World workers are paying for goods at First World prices using their Third World salaries. Do you know that the price of gasoline in the US about P32 to P34 per liter while in the Philippines it is already P31? Whatever is the exact figure, you know what I mean.

Of course, that’s my personal opinion, World Bank being a failure, I mean. In the same manner that I declared that the two million accountants in the world do not know how to teach debit and credit, I also hereby declare that the millions of economists in the world do not know how to solve the economic problems of the poor countries.

Beating around the bush
Before you waste your time reading the anti-poverty studies of the World Bank, let me describe to you what they are. They are merely solutions that beat round the bush. With this mind-set try to analyze our own country’s anti-poverty strategies. Not only ours, but all those from Third World countries. Tell me if I’m wrong: they are beating around the bush.

Problem: Why do our doctors go to the US as nurses leaving us with skeleton medical teams? The doctors’ reason: High wage. Government solution: Enact a law banning doctors from leaving to the US within 5 years after graduation. Isn’t this beating around the bush?

Problem: Why do our teachers go to Hong Kong as lowly maids leaving our educational system in ruins? The teachers’ reason: High wage. Our government’s action: Don’t solve this problem. Continue exporting our teachers so that they can remit OFW salaries to help our dollar inflows.

Problem: Why do workers in Singapore or US do not go on strike because of high oil prices while our workers do? Their reason: Their high wages are not heavily affected by oil prices. Our government’s action: Raise transportation fares further aggravating the poor worker.

Changing horses
Do not change horses in the mid-stream. So they say. What I’m saying is, I think we were riding on the wrong horse since the beginning and we are getting nowhere. We are running around in circles.

There’s no hope in sight but a mere maintenance of the status quo.

We must change the way we think. It is high time for a new strategy. Seeing what everybody else has seen and thinking what nobody else has thought.

Don’t be fooled by the statistics and econometrics of the economists. Challenge their theory, after all, it is only theory.

Why do we refuse to see the solution? Why do all the biggest companies in the world want to invest or set up shop in the USA when it has one of the most expensive labor and business costs in the world?

Does Toyota go to the US because the country has low wages? In fact, does Jollibee go there because of low wages? Does San Miguel Corp go to Australia because of low wages there?

Don’t worry, guys, I will address all the loose ends of the Hyperwage Theory. If you have thought of any fault about it, I probably have thought about it before you did. After all, I have formulated this theory for almost a decade now.

Nevertheless, I will get you excited about economics as a subject more than your teachers ever did. I just did, right? When I declared all World Bank economics are junk, I got you excited, right?

Face it, ladies and gentlemen, businesses flock to an economy which have high wages. Isn’t that completely opposite to how we are selling our country? It is high time for the Hyperwage Theory and the Nobel Prize that comes with it.
(Thads Bentulan, May 26, 2005)
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Table of Contents
Part 1 Part 2 Part 3 Part 4 Part 5 Part 6 Part 7 Part 8 Part 9 Part 10	Part 11 Part 12 Part 13 Part 14 Part 15 Part 16 Part 17 Part 18 Part 19 Part 20	Part 21 Part 22 Part 23 Part 24 Part 25 Part 26 Part 27 Part 28 Part 29 Part 30	Part 31 Part 32 Part 33