Saturday, May 15, 2021

Inequality 40, Real minimum wage is zero

A good paper on labor policy by Dr. Gerry Sicat, former NEDA Chief and retired Prof. at UPSE:

Making labor policies modern and flexible
Gerardo P. Sicat - May 12, 2021 - 12:00am
(Continued from April 14, 2021)

"Because the minimum wage laws protect the entrenched workers and those with better skills, the young cannot find good jobs that enable them to build upon a work experience. As a result they end up either unemployed or finding very low productivity jobs."

True. Because the real minimum wage is zero. If people cannot be hired because the state-mandated and legislated minimum wage (to fight "labor exploitation") is beyond capacity of the employer, many people become jobless, and that is the "wage" that the jobless get, zero, nada. Very often people employ themselves via the informal sector (street/ambulant vendor, tricycle driver, etc) and there is no fixed and stable income, the average pay is low.

So a true modern labor policy is zero government legislation, zero DOLE or LGU orders on minimum wage. Of course this is easier said than done, socialist and Marxist belief in capitalist "exploitation of workers" is still prevalent until now. (This photo from

Hong kong for many years has no minimum wage law. So the labor market was very dynamic, unempl rate was about 1-2% which is technically, a full employment econ bec the 1-2% are "voluntary unemployed", like being offered salary of X per month but the person has a "reservation wage" of 1.25X and so the person is not taking the job offer. Then the local bleeding hearts activists plus socialists from China lobbied for minimum wage in HK. 

My free market friends at Lion Rock Institute (LRI) in HK opposed the min wage legislation. They asked the HK parliamentarians:

LRI: What will you do for those who won't be hired because of high min wage?

HK parliamentarians: We will give them unemployment allowance. 

LRI: we tell our kids that we must do hard work to prosper, now they see some parents get money even if they are not working, what values do we tell our kids?

HK parliamentarians: (the sound of silence, ala Simon and Garfunkel)

Nonetheless, the socialists and bleeding hearts always win, so HK has a min wage law several years ago.

See also: 
Inequality 37, Freebies forever, March 04, 2019 
Inequality 38, Forbes' billionaires 2019, March 06, 2019 
Inequality 39, Capitalism and its detractors, October 03, 2019.
Welfarism 36, On mandatory 20% discount for seniors, PWDs, June 13, 2020.

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