Tuesday, January 09, 2007 Oledan: Bending paradigms By Radzini Oledan Slice Of Life
A FAIR minimum wage is a sound investment.
Higher wages benefit business by increasing consumer purchasing power, reducing costly employee turnover, raising productivity and improving product quality, including customer satisfaction, which in turn props up company reputation.
It will provide a boost to local economies where businesses and communities will benefit as low-wage workers spend their much-needed pay raise in the community where they live and work.
Contrast this to the current inadequate wage that creates a vicious cycle of high turnover and low productivity, which is bad for workers and businesses.
Business groups refuse to look into the positive aspect of increasing wages. Instead, they tend to create a "doomsday scenario" whenever there is a move for a wage increase, raising the specter of an increase in the prices of commodities and loss of jobs.
Of course, we have our labor agencies echoing their perennial refrain despite being unable to reflect reliable data on the unemployment rate in Mindanao, and particularly Davao City.
Government data shows that labor productivity increased by almost 10 percent from 2002 to 2005 in real terms yet the real value of the minimum wage has been recorded by over 18 percent since 1999.
This productivity figures justify a substantial wage increase indicating that even if wages in the formal sector were doubled, workers would still be creating profits for their employers. And since wages make up only around 10 percent of production costs, the threat of inflation is merely exaggerated.
The fact is a wage hike would only be inflationary if businesses are allowed to pass-on the increase to consumers instead of trimming down their profit margins.
Government figures also show that over one-fifth of all establishments resorting to closures and retrenchments cited "lack of market or slump in demand" as the principal reason for the decision. Less than one percent cited wage rates as a problem.
Wage hike cannot also be cited as a threat against investors. According to the World Competitiveness Yearbook, the Philippines' ranking fell in four major criteria: economic performance, government efficiency, business efficiency and infrastructure.
Another study conducted by the Asian Institute for Management (AIM), the country's primary strength is centered on the labor market, particularly the abundance of skilled labor, the availability of competent senior managers and the wealth of finance skills available.
This is contrary to claims that labor is to blame for the country's so-called eroding global competitiveness.
Countries in Asia with higher wage levels compared with the Philippines such as Hong Kong, Singapore, Taiwan and South Korea, attract greater foreign direct investments. This shows that market size, including purchasing capacity is an important consideration for investors.
Shifts of perspective may be needed, but who says they have swayed public opinion?
