Understanding the Supply/Demand in the Job Market, Not #SahodItaasPresyoIbaba Economics

It's really annoying when people keep up with their #SahodItaasPresyoIbaba economics. It's easy to ridicule me because I'm not using a domain, unlike sites like the IBON Foundation. However, they may be very beholden to the WordPress blog of Atty. Teodoro "Teddy" A. Casiño (which is currently not as updated as intended, presumably due to his busy schedule as a lawyer), which is a free domain just like BlogSpot. Now, I'm going to write another post on the job market. Since I'm being belittled because of my lack of degrees like the Monsod couple (I'm neither a lawyer nor an economist) or the people at IBON, I'm going to quote other sources.

Graph taken from CFI

I came across the Corporate Finance Institute (where I got the graph above) where I found a useful article on the job market. This would be to help me understand why salaries just shouldn't be increased (or decreased) at a whim. This would also help understand how allowing more MNCs to invest in the Philippines, may actually push the salaries up. Here's an excerpt that one needs to read:

Supply and Demand in the Job Market
Similar to the markets of goods and services, job markets also follow the supply-demand mechanism. When the quantity of workers demanded is equal to the labor force available (the quantity of supply), the job market reaches its equilibrium point, and wages can be determined.
The wage level rises when the demand is greater than the supply and lowers when the supply exceeds the demand for workers. However,wages cannot always move freely. There is often a floor determined by the government, which is known as the minimum wage.
When the equilibrium wage is above the minimum wage level, introducing a minimum wage will not lead to a major impact on the job market. When a minimum wage is established at a level higher than the equilibrium wage, the quantity of demand will fall as businesses will instead try to control their labor costs by reducing the number of employees.
The quantity of supply increases as there are more active job seekers motivated by the higher wage level. It forms a gap between supply and demand and thus, leads to unemployment. Despite this drawback, the minimum wage policy can provide both economic and social benefits. By increasing the wages of low-income workers, the government can reduce its spending on social programs to support these individuals and relieve the economic inequality at the same time.

Basically, a wage increase is a good thing if there's a reason to increase the wages. Now, if we're going to take a look at supply and demand, it's also applicable to people seeking jobs vs. the number of job providers. The Philippines has more supply of labor vs. a supply of labor providers. The basic middle school and high school lessons in economics are supply and demand both determine the prices. Since there's a higher supply of labor and a lower demand for labor (that is, demand provided by the supply of labor providers)--we can expect that raising salaries can cause inflation.

The Economics Help explains this principle of why a sudden wage increase isn't advisable:

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.

Why are salaries in first-world countries higher than that of the Philippines? It should be ironic to oppose accepting FDIs while sending OFWs to countries that are more FDI-friendly. Reading the late Lee Kuan Yew's book From Third World to First--I wasn't surprised LKY mentioned about the problems of the Philippines, in the post-Marcos Years. Singapore has a higher salary because it's an FDI-friendly country. By accepting FDIs, the first-world countries where OFWs are sent, are forced by circumstances to raise their salaries. It's because having more available job opportunities--will naturally lower the supply of job opportunities. Both local investors and foreign investors will compete to increase their rates. People would naturally want bigger salaries. Sure, it would increase the price of the goods and services. However, if people have higher salaries--spending more for quality isn't much of an issue. It's like how I'm willing to spend an additional few pesos for a larger serving of coffee or tea from a coffee shop. Just think that the Vietnamese Dong is the lowest in ASEAN but that Communist country is doing better economically, than the democratic Philippines!

Meanwhile, salaries in the Philippines are lower for this reason. There's an abundant supply of labor but not enough demand for labor. How can there be enough demand for labor if there aren't enough jobs. Sure, some FDIs are in the Philippines such as food industries. It's even ironic to see these idiots protest against 100% FDI then they go to Starbucks for coffee later. However, wanting to nationalize (that is, trasnfer control to the state instead of private individuals) would lead to a supply crisis. Please, for the nth time, printing more money than needed will devalue the money. Nationalizing "critical" sectors like utilities will only cause an increase in prices while reducing the quality. If they don't believe me--they need to take a vacation in North Korea. If thye want to blame South Korea for North Korea's misery--they better present empirical evidence for that!

Those who engage in #SahodItaasPresyoIbaba may come from difficult to enter-to schools like University of the Philippines and Ateneo De Manila. I confess I wasn't even allowed to take the ADMU exam anyway--my grades in high school weren't good and I barely pass. However, with the education system caring more about grades over learning--do honor students truly deserve their honors (read here)? Rep. Raoul Manuel of Kabataan Partylist even asserted his cum laude status. However, what's the use of having a cum laude, masteral, doctorate, etc. if one believes in #SahodItaasPresyoIbaba economics.

That's why I've been daring them to open their #SahodItaasPresyoIbaba stores (read here). They better open their stores that sell PHP 20.00 per kilo rice and pay their employees PHP 750.00 per day. Can they really keep up with their business? If they can make their business model succeed--I would really applaud them and accept their findings. However, with all their selling at a loss and paying their employees too high--there's really no profit at all. Long-term profits are needed to keep a business running. That's why I consider anybody who believes in #SahodItaasPresyoIbaba economics to lose credibility, prestigious degree holder or not.

Get Stuck with EDSA, End Up Like Nokia

Yes, we should never forget what history teaches us. A classmate of mine, back in high school, wrote a simple and blunt essay called "History: A Teacher". I doubt he still has a soft copy, given it was already more than 20 years ago. I'd like to quote Duterte critic Andrew James Masigan wrote this in Philippine Star --something that should remain relevant: I would never undervalue the 1987 Constitution. It dismantled the legal framework of a repressive regime and established the democratic institutions we enjoy today. For this, I am grateful. The 1987 Constitution was crafted with the best of intentions. It sought to put the Filipino first in all aspects of governance and to level the playing field amongst sectors and peoples. But it is far from perfect. It failed to consider the importance of foreign capital and technologies and the stiff competition we would have to face to obtain them. In short, its economic provisions were short-sighted . So despite the Constitut...

#SahodItaasPresyoIbaba Economics' Bad Accounting

I would like to apologize in advance to my readers. The picture I'm presenting is in Tagalog, and not all my readers speak Tagalog. I would translate the picture's text into English for convenience. It says: "Ano ang bumubuo sa mga presyo?" means "What comprises the price?" "Gastos ng materyales" means materials expense "Gastos sa kasangkapan" means depreciation expense ""Gaston sa pasahod" means salary expense "Kapitalista" means capitalist Renta is well, rent "Kayang pababain ang presyo" means "Prices can be lowered". It says that capitalists (industrialists, landlords, bankers) and elitist governments are part in the gross profit. Get rid of excise taxes (either permanently or temporarily) for the prices of goods and services. In the times of crisis, in the burden of sacrifices, we need to be watchful for capacity. Whatever savings for times of difficulty by the workers and countrymen, the...

Past Chinese School Education in the Philippines was Based on "Sǐ Jì Yìng Bèi"

Chinoys of my age (and older) may remember these textbooks. I called them as the "symbol of trauma". It was memorizing something without understanding it . One would just memorize (without understanding it) because it was typical. Not being able to memorize what was assigned? Get a bad grade? One can expect physical punishment like hitting the hand with a ruler or chili in the mouth. Chinese language teachers are stereotypically strict . The language textbooks (above) are what were used during the 1990s to the early 2000s. As I wrote it, the Sinjiang textbooks aren't effective in teaching Mandarin , in a world where Mandarin has over a billion speakers! There's a Chinese proverb that says, "死記硬背 sǐ jì yìng bèi" or "Memorize to the point of death". That's exactly what those textbooks are. Memorize to the point of death! Okay, it may sound exaggerated. However, that's how Chinese language teachers in the Philippines were made to teach the ...

Migrante International's Really Bad Economic Literacy

March 17 (which is tomorrow) seems to be an unofficial holiday for some people, right? I'm sickened that the late Flor Contemplacion has been treated like she's some national heroine (and thankfully, tomorrow isn't a holiday) even after Singapore had proven her guilt. A movie was made by Joel Lamangan called The Flor Contemplacion Story . The call for Migrante (Migrant) International has been to remember Flor even after several years. What's not too surprising was to learn that Flor's sons were all arrested for drug-related charges. Even her eldest son died while in prison. You have Migrante International wanting to end the labor export policy. However, a post by Migrante really shows how this group fails basic economics. I will not post the whole press statement but one part that made my eyes roll. >> Further opening the country’s economy to foreign ownership and control will worsen the exploitation of our people and the environment without creating a susta...

"Filipino First Policy" Has NO PLACE in the Rising Asian 21st Century

I guess nobody saw the Asian 21st Century coming, right? China was once a poor nation but look at it now. Vietnam was once a poor nation but look at it now. Singapore was once a poor nation but look at it now. The late great Lee Kuan Yew wrote his book From Third World to First . I'm afraid some people have been using it to go against the presidency of Ferdinand R. Marcos Jr. while ignoring what else Lee Kuan Yew had to say. Lee Kuan Yew described the Filipino press to be rambunctious on pages 304-305 which I agree. I'm afraid that the Filipino press may have had a hand in getting rid of any economic or political reforms that could help the Philippines. Yet, one policy has been holding back the Philippines for decades and yes, it's the Filipino First Policy . Reviewing the Filipino First Policy and why it has no place in the rising Asian 21st century I remembered how the values education subject taught Carlos P. Garcia's stupid Filipino First Policy as a Filipino value...

Remembering the Late Jesse Robredo's Quote on Systems That Force People to be Good

It's been some time since Jesse M. Robredo died too soon. Hopefully, his wife Atty. Maria Leonor Gerona-Robredo is true to her word, in her willingness to amend the 1987 Constitution of the Philippines, for the sake of foreign investments. It's a shame I never wrote about the late great man. The CoRRECT Movement on Facebook gave this important note on Robredo's life. Robredo said, "It's not enough for an official to be good. There has to be a system that forces them to be good." Whether or not Robredo was for charter change or a few constitutional amendments, I can't tell. For some racists, let me remind them that Robredo's real surname is Lim and his paternal grandfather is the late Lim Pay Co. In terms of Robredo's credentials (and I tend to sometimes brag about the credentials of those I quote), here's what the City Government of Naga website says: He is an Edward Mason Fellow and a graduate of Masters in Public Administration at the John...

Filipino First Education Created the Fixed Mindset Over Growth Mindset Mentality

Tomorrow is Bonifacio Day. It's effortless to say that Filipino First Policy works. I wouldn't be surprised if Andres Bonifacio gets used as a poster boy. However, Bonifacio worked for British and German investors . I'd like to talk about how decades of Filipino First Policy compromised our education system. Some idiot on Facebook said which I'll paraphrase to avoid getting personal. The idiot said, "If you let foreigners invest here, can Filipinos afford it?" The same idiot also scorns the law of supply and demand (read my post discussing why that's plain silly here ). People who believe in #SahodItaasPresyoIbaba must first prove it works by opening such stores nationwide, to show that the Philippines doesn't need FDI to succeed (read here ). Of course, I can expect them to say "It's the government's responsibility to raise salaries without raising the prices of goods." That's just plain bad accounting and finance too! Andrew Ja...

Refuse to Do Business with a Person Who Looks Down on Menial Work

If there's any reason why some people are angry with the rich--it's because of rich people who look down on the poor. Some people are born rich without knowing the struggles of the one who originally acquired the wealth. Some rich parents make the fatal mistake of making their children feel entitled. Meanwhile, some rich parents make their children do the right thing by not waiting until things get too far. Some rich parents end up making their children attend middle-class schools, do summer jobs, work as employees in their own businesses, and teach them the value of wealth, especially by narrating the struggles before they got wealthy. In looking for a business partner, I feel it's very important to look at the attitude of these people. How do they treat people who do menial work? I could imagine looking forward to a business contract. However, it turns out that the potential business partner is a spoiled brat . Maybe, it's already a red alarm if I'm invited to an ...

Dayang Daya: The Case of Five-Six Lending Services Roaming to Collect Christmas/New Year Debts by January

I remember during the late 1990s when the song "Dayang Dayang" (Princess of the First Degree) was played on the radio. The origins are often debated whether or not it was from Muslim Mindanao or from the other neighboring countries. The Philippines has had settlers also from Malaysia and Indonesia. A parody cover by the late Yoyoy Villame was called Dayang Daya or Cheating Cheating. It was probably making fun of the Indian five-six lending business. Indians tend to be called Bombay because of the location known as Mumbai. I even made the mistake of referring to Indians as "Bombays" more than once. The song "Dayang Daya" does talk about the five-six lending services. It does target a lot of gullible people. I even became nearly distrustful of Indians in college for quite some time. I wrote how a Merry Christmas may lead to an Unhappy New Year due to debt burden (read here ). I tend to say to myself, "Somebody hasn't paid their debt!" every ti...

Will Opening the Philippines to 100% FDI Lead to Foreign Monopoly?

Monopoly - Hasbro I was looking at the CoRRECT Movement Moderated Public Forum on Facebook. I found more illogical arguments by a certain troll in the forum named Juan Dalisay Jr.--the writer of the Superphysics One website. However, this isn't the first argument I ran into as I've seen arguments from Kabataan Partylist and the League of Filipino Students on Facebook. They have claimed that foreign direct investments (FDIs) will lead to exploitation, only they will get rich, that they will rape resources, and an even funnier claim is that they will lead to monopolies . Some people, even fools, should be allowed to defend themselves at CoRRECT Moderated Public Forum than just live in their echo chamber of Facebook pages. However, Kishore Mahbubani and the late Lee Kuan Yew had long disproven that . The testimony is in the book From Third World to First by Lee himself. Mahbubani said foreign investors create jobs, bring capital, and teach new skills. I wonder if protectionist adv...

Shaun T. Dy's Business & Economics Perspective Blog

Search This Blog