Monday, November 26, 2012

Fat-Free Econ 31: On the Kasambahay, Solo Parents Welfare Bills

This is my article yesterday in TV5's news portal,

State welfare is sometimes defined as “the politicians are well, taxpayers pay the fare.” This is true for taxpayers’ funded welfare and subsidy programs for the poor, like the conditional cash transfer (CCT), education and healthcare, housing and credit, train subsidy and tractors, or condoms and pills.

But there are other state welfare programs that are not funded by taxpayers. Instead, the government forces private enterprises and employers to provide mandatory price discounts to consumers, or mandatory high wages and other benefits to workers. Those caught violating will penalized. Examples of this type of welfare are the minimum wage law and mandatory discounts to senior citizens and persons with disabilities.

There is a measure that is expected to become a law soon - the “Kasambahay Bill” or “Domestic Workers Act” lodged as Senate Bill No. 78 and House Bill No. 6144. The bicameral conference committee has already approved a common measure this week. Among the provisions of the unified bill are:

- Monthly minimum wage of P2,500 in the National Capital Region, P2,000 in chartered cities and first class municipalities, and P1,500 in other municipalities;
- Kasambahay entitled to other social benefits such as Social Security System, Philhealth, and Pag-Ibig Fund, with employers shouldering the premium payments if the helpers receive a monthly salary below P5,000; and
- Kasambahay should have a written contract specifying the terms of employment, a pay slip, daily and weekly rest periods, service incentive leave of five days with pay, 13th month pay, and so on.

The premise is that domestic workers are generally exploited by their employers and so must be protected by the state. This logic can be faulty. Hiring of domestic helpers is a private and often intimate contract with workers who often live in the house of the employers and know many confidential and sensitive information about the household.

It is hardly possible for employers to maltreat their kasambahay as they will be exposing themselves and other family members to danger when the kasambahay will not do their work properly. Like a nanny who fails to attend just for a minute to a baby who climbs the stairs or a high chair, then falls down.

Employers often grant salaries and other perks more than necessary to inspire their kasambahay to do their work well, and make them stay long with the family. There are many instances when a yaya would take care of a baby until he/she becomes an adolescent. The employers no longer treat them as ordinary domestic workers but as extended family members.

Lazy, inefficient or rumor-mongering workers are usually fired by their employers, rendering the mandated welfare moot and useless. In the same vein, abusive employers also lose their good workers in just a few days or months. This is a penalty worse than government-mandated penalties and fines as the household heads can hardly work in their offices since they have to take care of the kids, suffering a steep decline in productivity.

The bottom line is legislative measures like the Kasambahay Bill are generally unnecessary.

Then there are two Senate bills that want to give various mandatory discounts to solo parents. SB 2563, which Senator Manny Villar introduced, seeks to amend Republic Act No. 8972 or the “Solo Parents Welfare Act of 2000,” giving additional benefits to solo parents, including a 20 percent discount on all purchases of milk or formula products, diapers, medicines and supplements, other necessary infant items for children 0-4 years old.

SB 1439 by Sen. Loren Legarda provides the following additional benefits to solo parents:

- 10 percent discount on all purchases of clothing materials for children 0-2 years old;
- 15 percent discount on all purchases of baby’s milk, food and food supplements for children 0-2 years old; and
- 15 percent discount on all purchases of medicines and other medical supplements/supplies for children 0-5 years old.

There are serious flaws in these two bills forcing companies to give mandatory discounts.

One, they assume that all solo parents in the country are poor or financially distressed. This is not true.  Some solo parents are rich or have rich family members who can give them assistance in cash or kind.

Two, the bills assume that all shops, manufacturers and traders that produce or sell these goods are rich or financially stable and hence, can afford to give such discounts without adversely affecting their financial conditions. Again this is not true. While some companies are financially stable, others are not or may even be on the brink of bankruptcy due to various financial, economic and social challenges here and abroad.

Three, the bills assume that even financially unstable shops, manufacturers and importers of these products will continue selling these goods. This is wrong. One result of the implementation of RA 9994 or the “Expanded Senior Citizens Act of 2010” - which requires 32 percent discount on medicine purchases - is that small drugstores that cannot afford to keep selling medicines at a loss have stopped selling essential medicines to senior citizens. Senior citizens living in small and rural municipalities have to travel farther to bigger cities so they can buy at Mercury or other large chain pharmacies.

This proves again that Newton’s third law of motion - “For every action, there is an equal and opposite reaction” - can also apply in economics. This can be aptly restated thus: “For every government intervention to force welfare, there is an equal and opposite reaction that results in dis-welfare."

The economic tensions in Greece, Spain and other European economies that are limping from heavy public debts are additional proof that heavy welfarism can create more long-term harm than benefits. The bills on Kasambahay and Solo parents, as well as many other welfarist programs should be abandoned. Government should focus on promulgating the rule of law, protecting property rights and the citizens’ basic freedom, instead of forcing equality among people. 

See also:
Fat-Free Econ 27: Sin Tax and Nannyism, October 22, 2012
Fat-Free Econ 28: Poverty, Planning and Populism, October 29, 2012
Fat-Free Econ 29: Anti-capitalism, Fanaticism and the Poor, November 13, 2012
Fat-Free Econ 30: BPOs and Obama, November 14, 2012


Unknown said...

Its nice to know that government is working on a law for our kasambahay, i hink tama lang na bigyan sila ng mga benefits and increase kasi mabigat naman ang trabaho nila and sometimes mas mahirap pa talaga ang ginagawa nila. some of them dedicated all of their lives para lang mapagsilbihan tayo.

Unknown said...

mabuti naman at mabibigyan na ng sapat na benepisyo at dagdag na sahod ang mga kasambahay.malaking tulong to para sa kanila.sana lang wag abushin ng mga amo at ibigay sa kanila ang nararapat :)

Unknown said...

This is good news for our maids and im sure they'll be happy to know that they'll have salary increase plus benefits same as with other employees. good job to those senators who worked hard for this law!

Unknown said...

ayos meron na din benepisyo!para pag merong nagkasakit na katulong meron ng pampagamot.ok sakin yan!

Unknown said...

Buti na lang at inasikaso ng senado ang bagay na tungkol sa pagbibigay ng tamang benefits para sa mga kasambahay. hinahangaan ko sina loren at iba pang senador na nag pursigi para maipasa ang ganyang batas

Bienvenido Oplas Jr said...

Thanks all for the comments. This bill that may become a law soon is indeed popular for its labor protection. In Europe, North America, benefits for domestic helpers are much larger than the ones stipulated in this bill that includes unemployment insurance, sick leave with pay, longer vacation leaves with pay, etc. The result is very few people, only the very rich, would hire kasambahays, that contribute to high unemployment in those economies.

Making plenty of mandatory benefits would naturally raise the cost of hiring a helper. If we combine: wages + mandatory contributions to SSS, PhilHealth, PAG-IBIG + food + lodging + bonuses and gifts, the cost is not small, and would force some middle class households with both husband and wife working (much worse for solo parents) to drop hiring a helper and one of them must stay home.

Would it be good for the kasambahays if they have all those benefits stated in the bill, but their food and lodging quarter is poor and lousy as the employers must comply with rising cost of employing them?

Government should respect private contract between employers and employees and not meddle with details. There are so many killers and murders, kidnappers and rapists, thieves and carnappers, extortionists and land grabbers, corrupt officials and plunderers, that are roaming around that government is either too inefficient or too corrupt to go after. Their hands should be full just enforcing the rule of law and protecting private property rights, the citizens' right to life. They should have little time meddling in private contracts, much less in monitoring strict implementation of each new laws and intervention they make.

GabbyD said...

i dont get it.

you favor health insurance, right?

the law ensures domestic workers get health insurance.

whats wrong?

Bienvenido Oplas Jr said...

Read my other article on socialized healthcare. Health insurance doesnt have to be govt monopolized and provided. There is no govt resto or carinderia corp and yet people have "food insurance".