Concession

No one seems pleased with the decision of the regional wage board to raise the cost-of-living allowance (COLA) by P22. The employers are not pleased nor, certainly, are the workers.

By raising the COLA, instead of augmenting the minimum wage, the regional wage board tries to address the social impact of an inflationary surge without inducing massive layoffs. The wage board must have calculated this concession to rising prices will be acceptable to employers since it will not result in increased labor costs for overtime pay, night shifts and social insurance coverage. Spokesmen for the employers, however, do not seem pleased.

The unions, who represent about a tenth of the labor force, those receiving regular wages in large enterprises, are not just unhappy. They are angry. They argue that the augmented COLA does nothing to offset the rise in prices in just the past few months alone. It is, they say, a worthless token that will do nothing to alleviate sharply rising misery. Militant workers stormed the offices of the wage board immediately after the decision was announced.

Before the wage board decision, the BSP declared that any increase in compensation over P25 will cause labor dislocation as well as higher inflation. The augmentation of the COLA appears to have heeded the BSP’s advisory.

It is not easy to appreciate the economics underpinning the decision of the wage board. In the face of steeply rising prices, demanding wage adjustments comes intuitively to those who earn fixed incomes.

Introductory economics teaches us, however, that if wages are inflated without improvements in the general productivity of society, the outcome could only be higher inflation rates. Eventually, rising wages reflect in rising prices. A deleterious spiral happens.

The basic problem of our economy is that productivity has remained largely stagnant. For a long time, our savings and investment rate has been low. We have received a miniscule share of capital inflows into emerging economies because our policies are not as hospitable to investments. Consequently, domestic productivity did not improve as it should.

Our economy kept afloat due to remittance inflows. Our economic growth has been consumption-led rather than investments-led. This is not a healthy model of economic performance. It is conducive to inflation, stagnant productivity and high unemployment.

The solution lies in altering the dynamic of our economic growth. We should improve our competitiveness by improving our efficiency and productivity. We should provide a policy environment that is more inviting for investments.

When President Aquino returned from his first ASEAN Summit, he boasted that our neighbors are courting Filipino investments. That is actually a sad comment on our state of affairs. For years, Filipino companies have been exporting capital because conditions abroad offer better returns for their money. It is unhealthy that a capital starved economy exports capital — and its President is so happy about it.

Raising wages, even as this might produce the semblance of short-term relief, is not the best way to ensure a pattern of economic growth that delivers a better life for the poor. Unfortunately, it is more politically profitable to demand, and to give, wage adjustments rather than working harder to reshape our economic patterns.

Proof of the political profitability of raising wages is a move at the Congress to return to legislated wage increases. We know from past experience that legislated wage increases create hyperinflation that harms the poor first. Our legislators should review their economics well before indulging in such a suicidal (albeit, popular) move.

Pretenders

Late last year, the public was inconvenienced by a truly bizarre event at the LTO. One group of armed security guards, accompanied by the agency’s head no less, invaded the premises of service provider Stradcom and tried to take physical control of the facility.

Even as some order was soon restored, a faction of shareholders continued to insist they owned the service provider. Former LTO head Virginia Torres, in turn, used this as a pretext to withhold payment to Stradcom for the services it provides the agency. This has pushed Stradcom to a severe cash flow situation that threatened even more dislocation in the crucial operations of the LTO.

Last weekend, a lawyer who falsified the SEC records of Stradcom was arrested on a warrant issued by the Quezon City Metropolitan Court. The prosecutor looking into complaints against lawyer Jer Samson found probably cause to charge him.

Samson, lawyer for minority shareholders Aderito Yujuico and Bonifacio Sumbilla, stands charged for falsification of public documents for submitting a spurious General Information Sheet (GIS) to the SEC. The spurious GIS showed Yujuico and Sumbillo as having controlling stake in Stradcom. This was the basis for their vain attempt to take over the company by force last December.

The DOJ, the DOTC and a committee at the House of Representatives that looked into the incident all took Virginia Torres to task for partisan involvement in this fraudulent take-over attempt. Torres has since last month gone on leave of absence so as not to embarrass President Aquino any further. With the findings of the prosecutor who filed charges against Samson, it now seems unlikely that Torres would return to her post.

Once the spuriousness of the GIS filed by Samson is firmly established, the battle for control of Stradcom should be decisively settled. Without the pretext of an intra-corporate battle used to withhold the IT company’s revenues, the information systems should begin to return to normal.

For the public, this means that services will again flow smoothly. All the disturbance caused by a vain attempt to grab control of the service provider using spurious documents should soon end. Those responsible for this farce ought to be charged.