Pilipinas Forum 22: Maynilad Water Rate Hike, 2001

This is an exchange in pilipinasforum@yahoogroups.com more than 10 years ago, sometime in April and June, 2001. I cannot find Part 1 of the exchanges, but this one is good. This is 10 pages long, so as usual, get your popcorn and fave drinks :-)
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Maynilad Water Rate Hike, Part 2

April 2001

Since 1998, Manila Water (Ayala) has asked for an increase in water rates - before Maynilad did. Since I have been studying the water sector, someone from Bechtel, the Ayala partner, invited me to a discussion wherein he presented the company's plans, such as the Laiban dam. The construction of this dam did not push through because of the very high social cost involved. This guy wants me to help him promote the plan as well as the need for the water rate increase because of negative profits. I was told (by a very reliable source) that the Ayala's underbid at P2/cu.m because they want to make it hard for the Aboitiz to enter the market here in NCR. The Aboitiz gave them a hard time in Cebu.

My study where I estimated the full cost of water (= private cost + user or depletion cost + external cost) was cited. I explained to him that the estimate is for the 'economic value' of water and the revenue from charging the full-cost price should go to the owner of the resource, which is the State as indicated in the constitution. The water distributor or the concessionaire should only get the return from the distribution cost, and the user and external costs of water should go to the State or its representative - the government. Dr. Solon, a consultant of MWSS also opposed the granting of the request of Manila Water.

There is really a need to increase water rates in order to reflect the opportunity cost or the social cost from using a scarce resource. Underestimation of the value of natural resources has resulted in over-exploitation and depletion. Just look at our forests, fisheries, groundwater, etc. The lack of valuation of the impact of water pollution – an external cost - has resulted in the use of water bodies as a free dumping ground of wastes. One issue is who should get the revenues if the full-cost price is charged. One can also argue from the equity aspect. Most of the households connected to the Level III service or piped water supply are middle to upper class who can very well afford a higher water rate. Most of the poor (based on the household survey conducted in 1997/98) buy water from peddlers at much higher rates compared to the concessionaires' rates or form a queue to get water from public faucets (very high opportunity cost of time). Before the privatization, the average price of water was P10/cu.m. The issue then was not the price, but the quality of service.

Pilipinas Forum 18: On Minimum Wage Law

Another long discourse and exchanges (13 pages) on legislated hike in minimum wage across the country, made more than 10 years ago in pilipinasforum@yahoogroups.com.

Related articles, readers may also check:
What determines wage?, May 26, 2006
Liberty and choice vs. Dictation and extortion, May 02, 2008
Econ for statists 8: Minimum wage law is wrong, July 07, 2011
Nanny state 5: Extending min wage law to foreign employers, July 09, 2011.
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PILIPINAS FORUM
www.inq7.net/Viewpoints, July 11-15, 2001

ARE LEGISLATED MINIMUM WAGE HIKES JUSTIFIED?


Basically I'm against (1) legislated wage hikes, and (2) "needs of the family of 6" argument. For this purpose, let me focus on no. 2. The "needs of family of 6" argument as basis for high demand for min. wage is wrong because it rests on many wrong assumptions:

(1) It assumes that all workers are married, that there are no single/unmarried workers - which is not true. (2) It assumes that all married workers have 4 children on average, and that they're all dependent and are not working - which is not true always. (3) It assumes that there is only 1 breadwinner in the household, that the wife or one or 2 of the children who are already of working age have no jobs - again, not true always. And (4) It assumes that wage is a function of no. of dependent children, not productivity - again wrong either by common sense or theoretical standards.

Wrong assumptions can lead you to wrong conclusions. And wrong demands. If employers will also jump the gun on this faulty principle, then they will only hire single and unmarried workers, or those with only 1 or 2 children so that the "family of six" argument will not be used against them in the wage hike bargaining.

-Nonoy Oplas

The minimum wage hike refers to increasing the amount by which the law prescribes to be the least that an employer can pay his employee. Hence, as it is the least, we can safely assume that the beneficiaries of this increase would be the least of our working brethren as well. I totally agree that the basis for the legislated wage increase should be the needs for the family of six. However, in lieu of any other alternative I must tend to agree with the legislated wage hike.

No matter what statistics claim, the consumer price index has indeed risen dramatically for the last twelve years. How much can your peso buy now? Did the government try any anti-inflationary measures, any social programs aimed at increasing savings and decreasing family expenses? If the assumptions used for a legislative increase then I suggest that the basis for the legislative increase be solely the purchasing power of the peso. Simple and neat.

However, in lieu of anything else, a legislated wage increase must be given. The price of living in the Philippines has indeed gone quite unaffordable. There must be a break somewhere. If the government could not think of another relevant bail-out then what else is left. Knowing our government or Filipino administrations in general, well, its better to have a legislated wage hike.

-Mel Velasco