NAIA privatization is good, legislated minimum wage is bad
February 20, 2024 | 12:02 am
My Cup of Liberty
By Bienvenido S. Oplas, Jr.
https://www.bworldonline.com/opinion/2024/02/20/576609/naia-privatization-is-good-legislated-minimum-wage-is-bad/
LAST FRIDAY, the Department of Transportation announced the winner of the competitive bidding for the solicited project to upgrade, maintain, and operate the Ninoy Aquino International Airport (NAIA). The San Miguel Corp. (SMC)-SAP Co. Consortium won. The government will get a P30-billion upfront payment and P2 billion/year from then on, plus a share of the revenue from operations: a projected total of P36 billion/year.
It was indeed good news. The country will have a more modern international airport at no cost to taxpayers, and the government will even earn more yearly. Proof of another dynamic market-oriented policy reform.
Cynthia C. Hernandez, the executive director of the Public-Private Partnership (PPP) Center, aired her optimism, She said, “We are thrilled with the successful award of the NAIA PPP project, which marks a significant milestone in the Philippines infrastructure landscape. The achievement exemplifies our commitment to fostering PPP that drives sustainable development and economic growth. With the enactment of the new PPP Code, we are confident that the streamlined process and successful outcome of the NAIA project will serve as a blueprint for future endeavors, catalyzing further investment and enhancing the quality of public services for the benefit of all Filipinos.”
Budget Secretary Amenah F. Pangandaman also expressed satisfaction at this development. She said, “Our fiscal policy has continued to fulfill its combined objectives of fiscal consolidation, investment promotion and high growth trajectory. Crucial to this is the fulfilment of our commitment to spend 5-6% of GDP on infrastructure. In partnership with private businesses and financial institutions, our Build Better More program hastened the awarding of solicited NAIA PPP project. Best results for the country including generating high stream of revenues in the long term.”
When the end of the concession period — which is 15 years, extendable for another 10 years — is approaching (2039 to possibly 2049), the next phase should be closing the airport, privatizing the NAIA land itself, getting the revenues from the sale and using all of it, 100%, to retire some public debt, reducing the country’s annual principal amortization and interest payments.
Our gross public borrowings increased from about P0.8 trillion/year in 2019 to P1.7 trillion/year from 2020 to 2023, the bulk of it from domestic loans (see Table 1).
This year, the programmed interest payment alone is about P670 billion — that is interest alone. It is huge because of the high interest rate regime set by the Bangko Sentral and the high interest rate up to 10.5% for foreign treasury bonds. Paying that huge public debt should partly come from big ticket privatization of government assets, not entirely from the pockets of Philippines taxpayers.
LEGISLATED MINIMUM WAGE IS BAD
There is a new strong lobby for Congress to legislate another minimum wage hike and bypass the tripartite Department of Labor and Employment-Employers-Employees negotiations for wage adjustments. See this report in BusinessWorld: “House looking at wage hike of as much as P400” (Feb. 16).
Here are 10 arguments why a higher legislated minimum wage is wrong.
1. Employment is a private contract between employers and employees, not between government and employees. Each employer, even in the same sector and sub-sectors of the economy, has different financial, technological, locational conditions, and these affect their capacity to pay their employees.
2. A wage is a function of productivity, not the number of children a worker has. Otherwise, many employers will hire only the unmarried or the married who have one or two children only.
3. A wage is differentiated and segmented, not uniform. In the same bus company, not all drivers are paid the same. The most experienced, the most careful staff drive the high-end bus units and are paid more than other drivers.
4. Wage inequality and not uniformity is conducive to job creation and raising productivity. A person with a physical and/or mental disability who desires to work will be happy if he/she is hired for half the minimum wage at fewer work hours and lower output expectations. It is the feeling of being useful that uplifts a person’s dignity.
5. Total wage is higher than the minimum wage. Total wage is the basic (or minimum) wage plus allowances plus the employer’s share in social insurance (SSS + PhilHealth + Pag-IBIG) of employees plus private health insurance/HMO plus occasional perks. Perks include a company-sponsored outing, travel, birthday parties of the bosses, etc.
6. The real minimum wage is zero. If people cannot be hired because of a high state-mandated and legislated minimum wage which is beyond the capacity of small employers to pay, people can become jobless. So, people employ themselves via the informal sector (as a street/ambulant vendor, a tricycle driver, etc.) where there is no fixed and stable income, and the average pay is low.
7. Wage-based employment is declining while revenue-based or task-based employment is rising. Drivers of cars/vans for rent are paid higher when the distance travelled is longer, or driving hours are longer — and people like that.
8. Workers are allies of employers to deal with non-allies or competing businesses. Employers compete for highly skilled, experienced, efficient and high productivity workers and give them higher pay, many times higher than the government-ordered minimum wage.
9. The “expensive to hire, difficult to fire” policy in the long term is anti-worker because employers will hire as few people as possible and use more machines and robots. And more people will end up working in the informal sector.
10. Most workers do not aspire to become employees forever unless they work in big, stable and regionally/globally competitive firms. Most workers now aspire to become startup entrepreneurs someday.
Let wage setting be done at the industry and firm levels, at the micro level, not a national one-size-fits-all level. Government should focus on improving the investment and entrepreneurship environment and more jobs will be created. Workers will never accept a low-paying job if they think they are productive and experienced enough and higher paying opportunities are available.
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See also:
BWorld 678, Philippines has third-fastest growth among world’s top 40 largest economies, February 19, 2024
BWorld 679, Growth forecasts vs actual growth, and agriculture performance, February 20, 2024
BWorld 682, The nuclear option for Asian industrialization, February 27, 2024
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