Wrong

Hours before adjourning for the holidays, the House of Representatives passed on third reading a bill that would raise minimum wages. That is bad news for wage workers and all others looking frantically for a job.

The logic here is counter-intuitive – and it is obvious that logic escapes those advocating legislated wage increases.

But then, perhaps, the majority of congressmen are merely humoring the militant party-list solons pushing for a legislated wage hike. At the same time, they are sending up to the Senate a poisoned gift.

They are humoring the militant solons because the bill will have, as a matter of course, be killed in the Senate. They are sending the Senate an aggravation because it now becomes the responsibility of that chamber to perform what statesmanship requires and kill this patently wrong piece of legislation.

That correct act of killing this stupid bill will be politically costly for the senators. They will be burned in effigy in the streets by the radical groups.

Or, to save their skins, the senators might pass this bill as well. That will torpedo our budding economic growth.

The task of killing this stupid bill sponsored by the Bayan Muna solons will probably have to be done by someone like Sen. Ralph Recto, who has a fairly good idea about how modern economies work. But Recto is running for reelection and might be unwilling to sabotage his own political prospects by doing what his intellect dictates.

Should Recto fail to perform his duty as a statesman because of the political cost such entails, then someone like Juan Ponce Enrile might do the honors. Enrile is due to retire anyway and he might as well perform one last act of statesmanship in defense of economic sanity.

Or else, the Senate might, collectively, perform what it has been known for the past few years – which is, to do no work and let the wage bill coming up from the House gather dust and lapse. In which case, that stupid bill will have to be re-filed in the House in the next Congress that comes in next July.

It will not be terribly unusual for the Senate to follow this course of accidental statesmanship. That chamber has been remarkable for doing very little work anyway. The wage bill simply meets the fate of thousands of other pieces of legislation passed by the House and decayed in the Senate archives.

Should the Senate choose to abandon the dictates of economic statesmanship and actually passes this Bayan Muna bill, then that stupid bill will have to be vetoed by the President. It will be one more correct but unpopular act that will be penalized in the May election.

There are time when statesmen just have to bite the bullet and do the right thing in regardless of the political costs. The President did that with the RVAT. She might as well do it again with that economically wrong proposal to legislate – and therefore politicize – wages.

Proponents of legislated wage increases tell us that the last time wages were legislated was in 1989. That is true. It was the first of the double-punch that cut short our budding economic growth. The other was the bloody coup attempt led by Gringo Honasan.

But it is not true that wages have not been adjusted periodically. Since Congress, in a magical stroke of economic wisdom, decided to yield the power to legislate wages, minimum pay has been reviewed and adjusted annually through the regional wage boards.

When wages were legislated, minimum wages tended to be raised on the eve of every elections. That benefited the incumbents and prejudiced the challengers. More important, they created huge uncertainties for businesses and caused our productivity to lag behind wage rates.

When minimum wages were legislated in 1989, there was no worse time to have done that. China was rising as a light industry powerhouse. Countries like Thailand, Indonesia and Vietnam were competing for the labor-intensive businesses. Our wages were not only higher comparably (especially compared to our stagnant labor productivity), our power costs were among the highest in the region.

In the aftermath, whole labor-intensive segments of our manufacturing sector (most notably garments) simply disappeared and migrated to China. That caused the loss of hundreds of thousands, probably millions, of jobs. Domestic unemployment rose and with it, poverty rates.

In a word, while legislated wage increases might win grandstanding politicians some cookie points, they wrought devastation on the lives of the poor. The eradication of so many jobs in the aftermath of the 1989 legislated wage increase combined with the population boom brought about by the Aquino government’s scuttling of the population management program under pressure from the Catholic Church. Put together, the outcome could only be massive unemployment and massive poverty.

Settling minimum wages by way of the regional wage boards is immensely wiser. They allow the poorer regions to compete for jobs by setting lower wages, commensurate to local costs of living. We have now seen the benefits of that in the spread of economic activity to the lower-wage regions. That has tempered domestic migration to the metropolitan area.

If we abandon this manner of setting wages, we will eradicate whatever chance there is for the poorer regions to compete for their fair share of economic activity. The poor regions will become poorer.

In addition, if we legislate wages across the board, they will please Metro Manila workers only if they are adjusted to the cost of living in the national capital region. That will lead to the re-concentration of economic activity in Imperial Manila and the denial of economic opportunities in the provinces. That can only lead to a return to massive domestic migration fueled by people looking for economic opportunities in the capital. The social outcomes will be horrific.

If we look at the issue with better-equipped economic eyes, it should be clear that legislating wages across-the-board is patently anti-poor and anti-growth. Its only beneficiaries are grandstanding politicians playing to the narrow-mindedness of their constituencies.