Reducing inequality is better economics

The issue of increasing the minimum wage has again become headline material. This seems to have become an annual ritual. It normally starts with the labor sector and some politicians proposing an across-the-board wage increase for low-income earners.

Then as usual, the Big Business sector will oppose with their usual argument. While they sympathize with the hardships that the average Filipino worker is undergoing, increasing wages is not the solution to improving the life of the workers. The main argument against a wage hike is that it will have an inflationary effect on the economy.

It is noticeable that those who are against the wage hike do not have any alternative proposals for improving the life of the Filipino masses. My own personal stand has always been that the ordinary Filipino is entitled to a life of dignity which can be attained either through being paid the living wage as the minimum or ensuring that there is an adequate social safety net for every Filipino.

The Filipino worker may not need a high wage hike if the state will provide his family with the basic needs. A family of four or five members, in order to live a life of minimum human dignity, needs adequate shelter, sufficient nutrition to prevent malnutrition and hunger and enough funds to decently clothe the members of the family. In addition, if the state provides quality education for even the poor families and the health care needed for the average family, then the Filipino family can rely on the state without having to demand higher salary for quality education and health care.

The present reality, however, is that the quality of education in the Philippines is now one of the lowest even in Southeast Asia. Despite this tragic state of education in this country,  our political leaders have come up with a budget that actually reduces the budget for education.

The other tragedy happening in the public education sector is that the University of the Philippines (UP) system used to be the vehicle for students coming from the lower-income classes to receive quality education on the same level as the most expensive private schools. Today, the UP system has slowly become dominated by students coming from the middle and upper income classes who have crowded out deserving students from the lower income classes.

I have always maintained that we should not pay taxes to provide education for students from the middle and upper income classes whose parents can afford private school tuition fees. The UP system should be totally reserved for deserving students but limited to those coming from the lower income classes.

Only then can the UP student proudly carry the label, Iskolar ng Bayan.

I am almost sure that this campaign to increase the minimum wage will be shelved as it has always been in the past. The usual means of diplomatically killing this proposal for a meaningful wage hike is by sending it to the so-called Regional Wage Boards who will quietly and efficiently mangle this wage hike proposal until it becomes a meaningless and drastically minimal wage hike. The politician will then claim that they were in favor of a meaningful wage hike even though the final result was not what the people wanted.

The income inequality between the upper and the lower classes has become so scandalous and yet it has ceased to be the source of any guilty conscience from the upper class. In effect, the upper class has by and large began to accept the wide gap in the quality of life between the rich and poor. For example, while the poor families have to share a single toilet with several families, it has become accepted that the rich live in houses with several bathrooms and toilets.

Countries tend to be more equal if the quality of education in schools and universities is also equal. This is one effective way towards reducing income inequality. The other ways are through the social safety nets. For example, in progressive countries, there is a generous level of support for those who are jobless.

The coming age of artificial intelligence (AI) will make education more critical to allow the average worker to acquire the necessary skills to at least find work in this new age of rapid technological development.

The most unequal countries in terms of quality of life of the ordinary persons are those which have tended to underinvest in public services. The noted economist, the late John Kenneth Galbraith, once called this phenomenon “private opulence and public squalor.” For instance, in Rio de Janeiro, crime-stricken slum areas can easily be seen from the luxury hotels that line the world-famous Ipanema Beach. In certain high-rise condominiums in Metro Manila, one can have a panoramic view of squatter areas from the balconies of those residential towers.

There are many business firms in the Philippines where the total cost for dividends, bonuses, salaries and allowances for its owners and top executives is actually bigger than the total salaries of the rank and file. Our government economic managers should stop being enamored with increasing GDP and focus more on reducing income inequality.

In a consumption-led economy like the Philippines, increasing the purchasing power of the lower classes will actually be a better economic stimulus.

Email: elfrencruz@gmailcom