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Millions of Studies from the Trust Me Bro School of Economics Show #SahodItaasPresyoIbaba Business Model Works


Happy Labor Day anyone? It's this time of the year when labor groups like Kilusang Mayo Uno (literally the May One Movement) would protest. They would raise banners demanding #SahodItaasPresyoIbaba. For those who don't speak Tagalog, it means raising salaries and lowering the prices of goods. However, basic cost accounting will tell you that salaries are part of the cost of production. People ignore facts and choose their feelings a lot. I tell them that salaries are part of the cost of production (no need for a Ph. D for that, which I no longer aim to get) but they just sneer at it. They think the government has absolute control over the economy like magic. Members of Filipino labor groups may even say that wage hikes aren't inflationary even when evidence shows otherwise. 

The Economics Help website presents why doing so can actually worsen inflation:

Wage Push Inflation. If labour is able to push for higher wages, despite lower growth, then we could get a combination of rising inflation, but slow growth. This is especially a problem if a country is part of the single currency. If wages rise, they become uncompetitive leading to lower demand. Therefore there is an unwelcome combination of rising prices, but lower growth. If countries were not in a single currency, the uncompetitiveness would lead to a depreciation in the exchange rate to restore competitiveness and increase demand.

I wrote an article where I talked about opening #SahodItaasPresyoIbaba stores. This article will be a follow-up to it because it's May 1. I'm still seeing the same old nonsense of demanding #SahodItaasPresyoIbaba. They say it will not cause companies to go bankrupt and it will encourage economic activity. It's easy to say something but can they do it? That's why I'm daring them to open businesses with that model. Yes, call them #SahodItaasPresyoIbaba stores.

I criticize President Ferdinand "Bongbong" Romualdez Marcos Jr. for his preposterous promise of PHP 20.00 per rice. That's one of my arguments against the presidential system--make a preposterous promise and candidates win. I wonder if Atty. Maria Leonor Gerona Sto. Tomas-Robredo would've won if she promised free food every day for the poor. Back on the topic, these labor groups demand for the PHP 20.00 kilo per rice from Marcos Jr. instead of protesting that it's impossible. It's because of a supply and demand problem. Now, they better show they can do it and fulfill Marcos Jr.'s promise. Yes, take the initiative to do so, so they can say to the president, "See Mr. President, we can do it." 

Let's say that they finally start their #SahodItaasPresyoIbaba stores. Their business' premise is to sell lower-priced goods to customers while giving higher salaries to their employees. They should sell their rice at PHP 20.00 per kilo and eggs at PHP 5.00 per piece. They should offer their employees PHP 750.00 per day salary. They should keep the same business model consistently even if the price of rice per sack increases, even if the price of gasoline in the world market increases, even if the cost of egg production increases, etc. After all, they've been demanding it so why not show the public that it works?

In business, sometimes you need to increase costs to continue giving the best for your customers. If a company offers quality services--customers are more than willing to pay higher whenever a price increase becomes necessary. I'd like to use Tealive as an example. I was shocked to find out that prices suddenly increased. However, I understood why because of factors like inflation and operational costs. Tealive in Ayala IT Park is now operational for 24 hours. That means electricity and water are used more often than their former schedule. To make up for the costs--they needed to increase the costs of their items. When you eat in a restaurant--you pay for both the food and the ambiance. After all, the coffee shop's tea and coffee are premium quality. The coffee shop doesn't serve coffee from a canteen but premium coffee. Coffee shops have longer operating hours--meaning there are higher bills to pay. 

I could imagine how #SahodItaasPresyoIbaba stores may operate. They might even use air conditioning units (and there's no local brand of airconditioner, by the way) even when they can't afford higher electricity. They may even offer ridiculously cheap delivery services to their customers. Soon enough, they may offer 24/7 services even if they lack profits. If their electricity and water bills get ridiculously higher--they should protest in the streets demanding cheaper electricity and water. However, they should retain the low prices of goods and continue paying their employees PHP 750.00 per day. However, they've been opposing FDIs, went against the Public Services Act of 2022 calling it an "act of imperialism", and any move that could've significantly reduced the costs of public services. Once again, it's a supply and demand problem.

In short, these businesses are operating at a loss. They're ignoring basic cost accounting. It doesn't take a doctorate in economics to understand that labor costs add up to the final product's cost. How is it that some graduates of courses related to business and economics even believe the likes of the IBON Foundation or other related groups? I blame the poor education system of the Philippines. I also blame people who want rewards without a struggle. People fall for scams because they want to get rich quick fast and/or financial illiteracy. Can these businesses pay for the costs they've accumulated because they refused to raise prices when the need arises? 

If these people were so smart, they would be generating better services and employment for Filipinos. Instead, they spew nonsense rallying all day. I don't need to be an economist to understand they're wrong. All I need is basic knowledge in accounting and economics. I can understand what economists are saying and with knowledge from Economics 101--I can really say that #SahodItaasPresyoIbaba business model is doomed to fail. 

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