Arithmetic

Lies, damn lies, and statistics. — Mark Twain

Once again, as in the case of the Pagcor coffee bill, President Aquino startles us with a large number that, on closer examination, is really meaningless.

Last May Day, Aquino challenged his audience of union leaders to whip out their calculators and confirm the numbers he rattled off. If minimum wages are raised by P125, multiply that by the number of working days and then multiply that again by 40 million (the size of our labor force).

By multiple multiplication, the President arrives at a staggering number that approximates our GDP. The exercise was meant to preface his rejection of the P125 increment in the minimum wage demanded only by the militant trade unions.

It was the wrong exercise to perform. It damages the very case the President was trying to build. Whoever the underling was who fed the President this particular spiel ought to be hanged. He has caused his President unbearable embarrassment.

The President, of course, ought to have exercised a minimum of common sense. He should have parsed the numbers before letting them out of his mouth.

At the most basic, a very small percentage of the entire labor force actually receives the minimum wage. Discount the public sector workers, the farmers and sharecroppers, the self-employed, the employees of microenterprises exempted from paying the minimum wage, members of cooperatives and, of course, the millions paid above the minimum wage. The multiplier is very much smaller than the one the President uses in his speech.

If the multiplier is smaller than the one the President used, then the sum will be very much smaller. We all know that from basic arithmetic learned in primary school, long before K+12.

In the end, the President allowed himself to say something that does not make sense. He tries to shock and awe us with a large number that represents nothing. Too bad, because the point he was trying to make was actually sensible. That point is lost in the confusion of the President’s own making.

Stated bluntly, the President killed his own message. There should be an item in the Penal Code covering this.

To begin with, the President did not have to take issue with the P125 minimum wage demanded by the militant unions. That is a political, not economic, number. It is posted to make any actual wage adjustment look ridiculously small.

It is best to ignore that fabulous but false number. It is a trap. It is a straw man.

Unfortunately, the President chose to fall for the trap and ended up wrestling with a straw man. He did so not with acute intellectual integrity but with a fabulous but false computation.

If the inspiration for peddling dummy numbers was to cover up the fact government had nothing to offer private sector workers (comparable to the one-month advance of the standardized salary adjustment), it was the wrong gimmick. It exposed this administration to ridicule about innumeracy.

In the wake of the President’s extravagant display of bad arithmetic (and even worse economics), his cheering squad tried to spin the gaffe as a demonstration of the President’s political courage. He spoke his mind, the cheerleaders say, no matter the adverse political fallout.

The predicate here is wrong: he did not speak his mind fully.

If the President wanted to use May Day as an opportunity to display political courage (and economic correctness), he should have announced that never again should wages be politically-brokered. 

The practice distorts labor pricing, actually discourages job growth and undermines our competitiveness. It creates uncertainty for businesses. It encourages illicit practices such as labor contracting and forces much of the economy to go underground. In encourages employers to avoid registration with the DOLE, diminishing real labor protection for the workers.

The worse thing a government could do (if it wants to reduce unemployment) is to legislate wages. That creates an entirely unwarranted barrier to hiring, an entirely unwarranted source of uncertainty for investments.

On that score, the President should have denounced the existence of regional wage boards for what they truly are: disguised substitutes for legislated wage setting. The process of wage-determination in these boards is basically the same: political horse-trading between unions, employers and government to skirt the market and set wages politically.

If the President really wanted to use the last Labor Day as his Thatcher moment, he should have unveiled a truly courageous policy that leaves wage-setting entirely to market forces. Setting down such a no-nonsense, all-guts wage policy would have unleashed new dynamism in our economy that will reduce poverty levels at the shortest possible time.

The President should have announced a policy of preferential option for the unemployed rather, ending decades of kowtowing to the labor aristocracy that caused our economy to export jobs (and subsequently workers). A preferential option for the unemployed would be a policy of encouraging employment at any wage level. Employment at lower wage rates is still infinitely better than unemployment.

 This will be a most decisive step towards achieving the “inclusive growth” our economic managers promise — but, as per the latest SWS self-rated poverty numbers show, have yet to deliver.

Such a policy will be politically wrong but economically correct. The unions will bash the President, to be sure. They do that every day anyway. What the heck, the essence of courageous statesmanship is to do what is right unpopular as that might be.

By dabbling in delusory arithmetic, sadly, the President missed his Thatcher moment.