BWorld 40, CCT vs other welfare programs, SSS vs pension deregulation

* This is my article in BusinessWorld the other day, January 27.

It appears now that there are many data showing that the conditional cash transfer (CCT) is good and successful in reducing poverty. Good, then it is now time to abolish other existing welfare programs that were failures. Each new welfare program is an admission that other existing welfare programs are wasteful and unsuccessful in reducing poverty.

Let us count some of those existing welfare programs: Books and education for the poor, medicines and PhilHealth for the poor, housing and relocation for the poor, credit and agrarian reform for the poor, irrigation and rural roads for the poor, MRT/LRT subsidy for the poor, jeepney diesel subsidy and e-trikes for the poor, rice price subsidy for the poor, condoms and pills for the poor, public Wi-Fi for the poor, etc.

There is an endless, no timetable, and even expanding welfare programs for the poor. Which means there will be endless and expanding taxes, fees, fines and penalties, and mandatory contributions for the rest of the population. These benefit the poor, non-poor who pretend to be poor, and the many layers of legislators and bureaucracies that administer these endless welfare and entitlement programs.

A warning: CCT is a targeted program, targeting the “poorest of the poor.” This is not possible actually because many of these people are highly mobile in the midlands and uplands. They don’t have IDs, they seldom stay at home, and cannot attend the mandatory, regular meetings by the Department of Social Welfare and Development (DSWD). They are always in the mountains, hunting or cutting trees, producing firewood and charcoal, and so on.

So by convenience, those who can regularly attend DSWD seminars and not blacklisted from the program are those who have some means to stay at home. Like a spouse or one older child has regular work, or working abroad and sending money regularly.

SSS MEMBERSHIP SHOULD BE OPTIONAL

Our social security insurance and pension system should be deregulated.

Membership in the government Social Security System (SSS) monopoly corporation should not be mandatory and by coercion. The people should have more choices, more freedom, to whom they should trust their current contribution for their future pension fund.

This measure can be called as “pension fund deregulation,” not “SSS deregulation or privatization.”

SSS can be retained as a government-owned corporation, need not be privatized, but membership with it should be voluntary, not mandatory.

If people have more choices, it is doubtful that SSS as we know it now can get millions of members. SSS officials are always beholden to the high-level politicians who recommended and appointed them there, not to the actual contributors from the private sector.

SSS, GSIS, PhilHealth, and Pag-IBIG business model is so 1950s or 60s: Filipinos are assumed to be non- or less-mobile, they will work, retire, and die here in the country. This is wrong because millions of Filipinos now are very mobile across the globe, and the Philippines also attracts millions of mobile and foreign professionals, some of whom have decided to settle down here.

Global and multinational pension funds should be allowed to compete with SSS. So Filipinos who work here for 10 years or so, then move to other countries in Asia, Europe or north America should have ALL of their contributions from Day 1 in the Philippines counted. These contributions should be portable and can be utilized once they decide to retire whenever and wherever they wish.

The arrangement should be the same for foreigners who contribute to such pension fund -- if they choose to retire here in the Philippines, they can enjoy the full benefits even if they contributed for 10, 20 years in another country.

Governments in many countries are often jurassic central planners. They are incapable of highly flexible policies, they survive only via rigid and inflexible policies, that is why things -- like social security, pension, health insurance, housing insurance -- are made mandatory, obligatory, by force and coercion.

Currently, if a Filipino has worked here for 20 years and contributed faithfully to those funds then move and work abroad, retire there and come home only to visit friends and families, all of their contributions are non-portable and hence, cannot be used in their adopted country. Such contributions only make the Directors and Commissioners (most if not all are political appointees) and employees of SSS become richer.

The same can be said of foreigners who later settled down in the Philippines. Their contributions in their mother countries will not be honored by SSS here.

If membership in SSS is not mandatory, it will become more responsive, more sensitive, more friendly to members. If members are unhappy, they can opt out and stop contributing to SSS and go to another private pension fund.

The Philippine government guarantees solvency of the SSS. Can a private pension fund promise a similar assurance?

Good question, and a multinational private pension fund, or local but in close alliance with international and global pension funds, will have the financial muscle to ensure solvency. It is among the first questions that members who have the privilege to opt out will be asking, and the fund/s who can provide convincing answers will get more subscribers.

Thus, SSS membership will not be made mandatory. What should be mandatory is that ALL people should have social security insurance.

When there is competition, public and private players tend to be more customers-friendly and sensitive. Where there is zero competition, many ugly features and wastefulness of a monopolist can be observed. We see many of such wastes and inefficiencies in the current SSS.

Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers, and a Fellow of the South East Asia Network for Development (SEANET). minimalgovernment@gmail.com

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See also:

BWorld 36, What if the Philippines splits into many new island-countries?, January 06, 2016 

BWorld 37, World rule of law index and the Philippines, January 11, 2016

BWorld 38, Climate change and the need for cheap energy, January 14, 2016

BWorld 39, Coal and renewables complement each other, January 26, 2016

Welfarism 9: Conditional Cash Transfer (CCT), November 12, 2010 
Welfarism 22: CCT, 4Ps and Central Planning, October 14, 2012 

Welfarism 31: More CCT and Subsidy Programs Won't Solve Self-inflicted Poverty, February 12, 2015

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

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

http://www.interaksyon.com/business/48867/fat-free-economcs--why-we-dont-need-the-kasambahay-and-solo-parents-bills
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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. 

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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

Welfarism 22: CCT, 4Ps and Central Planning

More government central planning, more wastes and inefficiencies. This is once more exhibited in the Conditional Cash Transfer (CCT) or Pantawid Pamilyang Pilipino Program (4Ps) program of the government.

My economist friend from UP, Jhiedon Florentino, rode a taxi and engaged the taxi driver to a fruitful conversation. Well, it’s more of probing the mind of one of the average persons in this country on what they think of certain government policies like the CCT. Jhie is down to earth enough to listen to the man’s frank ideas and witty remarks. Then he posted their conversation in his facebook wall last October 12-13, 2012. One more reason why fb is both an entertaining and educational platform in the planet today – at zero politics, zero taxes involved.

“Me” here refers to Jhiedon. The taxi driver is from Malinta, Valenzuela City, Metro Manila. Jhie posted this in a 4-parts installment in his fb wall. There are comments after each part. I put all the comments and exchanges after part 4. I also made short English translation to some points, for the non-Filipino readers of this blog. Thanks to Jhie for allowing me to post this in my blog. Six pages pages long, enjoy!

Part 1:

Manong Tx driver: ...d naman namin hinihingi maging 4Ps, pero binigyan kami...

Me: lahat sa sitio ninyo 4Ps manong?
Manong: Di ko nga maintindihan, yung mga taong dapat makaavail, hindi nakakakuha, yung mga nagbabasura...

Me: sa tingin ninyo manong, bakit....
Manong: sa katamaran na pumunta, di nila alam, at iyong iba mga wala namang mga IDs. Tapos aatend ka ng mga meeting, malayo...

Me: nakaatend na kayo manong ng mga meeting
Manong: oo, nung minsan nagkasakit si misis

Me: anong pinagusapan ninyo nung FDS manong
Manong: naku, FAMILY PLANNING ang pinaguusapan nung pumunta ako....

(Translation: Driver said they did not ask for the 4Ps but government gave them the money. He did not understand why the less poor got the money but the very poor like garbage scavengers got nothing, they are lazy to walk long and attend meetings, or they do not have any ID. He attended one meeting, the topic was about family planning) 

Welfarism 9: Conditional Cash Transfer (CCT)

Yesterday, there was a big forum on the conditional cash transfer (CCT) for the poor, sponsored by the Department of Social Welfare and Development (DSWD) and the Asian Development Bank (ADB), at the UP School of Economics, Quezon City.

It was a big forum in the sense that many of the top guns of such program -- like the DSWD Secretary Dinky Soliman, NEDA Secretary Cayetano Paderanga, top officials of the ADB and WB, and "CCT expert" -- were there.

The forum was supposed to "foster public debate" but I think about 80 percent of the invited speakers were pro-CCT. Besides, the budget for 2011 has been approved in the House of Representatives already, along with the P21 B for the CCT alone.

The WB and ADB made huge lending for the program. Whcih means more public debt, more interest payment in the future. Borrow and borrow, the usual thinking of government bureaucrats and officials, upon the prodding of the foreign aid bureaucrats themselves, of course.

Meanwhile, what happened to: education for the poor, healthcare for the poor, seeds and credit for the poor, housing for the poor, agrarian reform for the poor, nutrition for the poor, rallies for the poor, etc.? Now, CCT for the poor, and soon, DCCT (double CCT) for the poor, with double the loans from WB-ADB?

Isn't controlling, if not stopping debt addiction, also pro-poor? How about "stop debt addition for the poor"? Or this is imposible to happen?

If government and foreign aid debt pushers want new programs for the poor, then they should stop and discontinue some old programs for the poor that did not work. There are so many programs and subsidies for the poor that only benefitted the non-poor. The bleeding of public funds that go to endless debt payment (principal + interest) should be reduced if not stopped.

They always say, "save the poor" or "save the economy" or "save the planet". What they really mean is "save ourselves", them central planners and debt pushers. Most of them just live off on tax money, on money forcibly and coercively taken away from the pockets and savings of the productive sectors of society.
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See also:
Welfarism 5: Germany's Tax Hikes, June 28, 2006
Welfarism 6: Obama and US Entitlement, November 11, 2008
Welfarism 7: Squatters in the Univ. of the Philippines (UP), February 23, 2009
Welfarism 8: Send All Monthly Salary to UK Govt First, September 21, 2010