Labor Econ 11: Employees Forever vs. Entrepreneurship

Whenever I hear or read labor organizers and leaders complaining of how much businessmen and capitalism are "exploiting" and persecuting workers, I would reply that no one is putting a gun on their heads so that they will become employees and workers forever. There is always a way out, like becoming a micro entrepreneur -- have a stall or shop and sell anything that he/she likes, goods or services; drive a taxi or jeepney and own his time. Be a farmer (vegetables, fruits, chicken, goats, etc.) and grow food and sell the extra. The options are many.

Last Tuesday, April 23, 2013, I have another discourse with a socialist friend, Arcy Garcia, in his facebook wall. Arcy is a friend way back in the 80s when I myself was a socialist too. Copy-pasting our entire, raw exchanges. Posting with his permission.
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Arcy Garcia 

nagpapatawa si herrera. alam niya pala na ang dahilan kung bakit hindi pumupunta rito at nag-iinvest ang mga negosyante ay dahil sa mataas na presyo ng kuryente, corruption, etc. ngunit ang mensahe niya sa manggagawa ngayong Mayo Uno ay: tumanggap tayo ng mababang sahod...basta pumunta lang ang nagosyante sa atin. kapag kumikita na, saka tayo himingi ng taas ng sahod! nagpapatawa...

Nonoy Oplas Ang mga manggagawa ba, dapat habang buhay nakatunganga manghingi ng trabaho, tapos manghingi ng mataas na sweldo, sa malalaking kapitalista? Bakit maraming tao na dating mahirap at hindi ganito ang pag iisip. Nagtayo ng sariling negosyo, maski tindero/ra sa palengke, tricycle driver, waiter, at sa sipat at tyaga, umunlad ang buhay?

Arcy Garcia bro., kapag may magtatayo ng negosyo, dapat, isa-alangalang niya na kaya niyang pasahurin nang makatao ang bawat manggagawa. 2 lang naman ang options bro: kapag manggagawa- kunin sa sahod lahat ng pangangailangan niya, o magtulungan ang negosyante atgobyerno upang tiyaking kayang paaralin , damitan, at paglaruin ang pamilya ng isnag manggagawa. sa ngayon, ang manggagawang sasahod ng minimum wage- walang maasahan sa gobyerno sa transport, edukasyon, medical services (dahil privatized na lahat ) kasama ng kuryente, tubig, etc. etc. paano mabubuhay ang mga 'yan? kung ang usapin ay magnegosyo- nagkalat na yan bro- pati nga mga barker, 3-3 sa bawat terminal...hindi tamad at nakatunganga ang mahihirap. pero ano ang napala nila?

Arcy Garcia trabaho ng gibyerno na atuusin ang bansa niya upang may tamang kapaligiran sa pagnenegosyo- upang lumihkha ng trabaho- hindi yan ginagawa ng ating pamahalaan; ang option mo- kapitalismo! nasaan? wala ngang investors dito. ang mga investors na pumupunta rito, ang alam lang yata, kumita, kahit patayin ang mga manggagawa at sirain ang kapaligiran- basta kumita lang sila- habang pinarurusahan sila ng gobyerno sa buwis at mga walang katapusang red tape.

Nonoy Oplas dictatorship pala ang gusto mo Arcy. Didiktahan ng gobyerno mga negosyante, malaki or maliit, kung magkano sweldo (wage control), magkano presyo (price control), magkano upa (rent control), magkano pamasahe (fare control). Kahit ano basta command and control. Saka mahirap yan puro expectations from the outside like govt. More expectations, more disappointment. Mabuti pa yong mga maliit na negosyante na dating ordinaryong trabahador lang, umunlad ang buhay.

May kakilala ako, 2nd yr HS lang natapos. Naging kargador, nagtitinda ng panggatong, tapos naging trabahador sa construction. Sa sipag at tyaga, naging medium size na negosyante na, glass fabrication and supply, madami sya trabahador, inaalagaan nya. Ayaw lang nya ini-english sya kasi nga di sya nagtapos man lang ng HS. Siguro kung ordinaryong trabahador lang sya, hanggang ngayon nagra rallly at nagmumura lang ng kapitalismo ito, sa halip na maging maliit na kapitalista mismo.

Arcy Garcia hindi bro. hindi dictatorship. may buwis- dapat inuuna ng gobyerno ang medical services, education at mobility (hindi lang para sa manggagawa kundi para sa negosyo rin...moving supplies and products); sa akin, ang mga CBA na nakatuon lang sa taas ng sahod ay mali. kasi hindi dapat obligasyon ng kumpnya na buhayin ang buong pamilya ng manggagawa- nagbabayad sila ng buwis (ang kumpanya); kaya dapat magkatulong sila na buhayin ang mga pamilya...pero hindi rin katwiran ng negosyo na kahit ano pwede nilang gawin- may responsibilidad sila. ang economy, dapat nasa ilalim ng ecology- hindi baligtad.

oks yung halimbawa mo.. may sister-inl law rin ako ngayon na nagnegosyo, nagsimula sa pakilo-kilong manok- ngayon- malinaw na siya ang may pera sa kanilang magkakapatid- pero hindi yan para s alahat. ang marami- ang mas mayorya- trabaho ang kailangan..

Nonoy Oplas Yes, entrepreneurship and risk taking is not for everyone. Pag negosyante ka, iisipin mo lahat: (a) government (national and local) regulations, taxes, fees and penalties, (b) suppliers who can provide good quality products and services at a good price, reliable supply when needed, (c) consumers who can leave you and stop patronizing you anytime, (d) competitors who will outdo your product quality and/or pricing, (e) overhead costs like office rental, electricity and water, (f) labor who may be good or bad, honest or thieves, obedient or militant, (g) mandatory social contributions like SSS, PhilHealth, Pag-IBIG, HMO, etc., (h) other external factors.

Pag worker ka, isa lang isipin mo, yong inutos sa yo ng boss mo, di mo iisipin suppliers, customers, competitors, govt bureaucrats, politicians, Meralco, etc.

Arcy Garcia tama. kaya nga oks lang sa akin na sahod lang ang tatanggapin ng isnag manggagawa. alam kong mas maraming iniisip ang may ari-o kapitalista, maliit man o malaki. naraansan ko yan sa mga solo-parents na on-organize namin noon. maliwanag na may ilan lang na may kapasidad na magnegosyo. may grupo nga nagsabi sa amin na ang gusto lang nila ay magtrabaho. may sahod araw-araw. loans kasi mula sa isang seed fund yung nasa ngo namin.

Nonoy Oplas Isa ko pang friend, may ari ng Pan de Pidro. Dating aktibista din sa UP, palaging nasa kalsada. kulang na lang mamundok. Naging empleyado, sumubok mag negosyo sa palaisdaan, umunlad tapos nalugi. Sumubok sa consulting, umunlad nalugi. Sumubok sa PR andlobbying, umunlad lumubog. Huling subok sa paggawa ng tinapay, saka umunlad. Puro trial and error. Ang mahina ang puso at dibdib, malulugi, at bumalik bilang empleyado. Kaya pag job creator na, wag naman sisihin at i-demonize ng kung ano ano. Subukan nyo maging job creator para makita nyo.

Arcy Garcia kaya oks lang sa akin na mas malaki ang take home pay ng manager, o ng may ari o ng kapitalista. At hindi ko dinedemonize ang enterpreneur. pero kailangang mabuhay nang wasto ang lahat. hindi lang yung may ari.

sa mga unions, ang lagi kong paalala kapag may CBA nego- huwag hingin lahat sa economic provisions nyo sa kumpanya. yan ang recipe for bankruptcy. ang gobyerno may obligasyon sa inyong buhayin din kayo- singilin ang locakl government sa mga services (educ, medical services, etc)- na mula sa buwis ng mga tao at ng mga korporasyon sa lugar...

 may nakita akong CSR summit- diyan ako hindi bilib. yung panglagay nila sa CSR, idagdag na lang nila sa sahod ng mga manggagawa- mas magging mabuti pa ang image nila... pambobola lang ang CSR...

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See also:
Labor Econ 8: SWS on Unemployment Survey, June 08, 2012

Labor Econ 9: On 4-months Maternity Leave, June 14, 2012

Fat-Free Econ 38: Jobless Growth vs. Jobless Non-Growth, February 12, 2013 

Labor Econ 10: Voluntary and Involuntary Unemployment, February 18, 2013

Other discourses with Arcy Garcia:
Pol. Ideology 22: Diskurso sa Kapitalismo, Sosyalismo at Gobyerno, November 15, 2011 
Inequality 10: On Urban Congestion, January 10, 2012 
Welfarism 16: Bailing Out Lazy and Irresponsible People, February 27, 2012 
Labor Econ 6: Labor Rights and Employee Forever, May 05, 2012

Labor Econ 10: Voluntary and Involuntary Unemployment

* This is my article today in thelobbyist.biz.
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One of the major sources of skepticism of high economic growth of the Philippines is the persistent high unemployment and underemployment rates. As of the latest labor force survey, October 2012 result, some 25.8 percent of the total labor force of the country were either unemployed or underemployed. See previous discussion here, Rise in unemployment not exactly bad.

There are two main reasons why a person is unemployed. One is that he is rejected due to under-qualification or over-qualification (may demand higher pay later on), and two, he chose not to be hired at a particular job description and pay. The first is involuntary unemployment, outside the control of the job applicant while the latter can be considered as voluntary unemployment, within the control of the job applicant.

One news report, Lots of jobs for college grads, but do they want the work? cited, “more than 40 percent of the unemployed college graduates cited ‘no job opening in field of specialization, no interest in getting a job, starting pay is low, and no job opening within the vicinity of residence.’ as reasons for unemployment.”

This explains the “voluntary unemployment” phenomenon. There are jobs available for many college graduates but they chose not to take those jobs, at least temporarily, hoping that a job related to their course, or a higher paying job, or a job near their house or city, would be available soon.

Here are more numbers, notice the high incidence of unemployment among college graduates.

Table 1. Philippine unemployed by educational attainment, October rounds, 2006 to 2012

Source: National Statistics Office, www.census.gov.ph

Most economic literatures analyzing the unemployment phenomenon focus on what the government should do to improve the employability of the population, the college graduates especially. Thus, the favorite policy interventions and proposals are higher spending in government education from elementary to tertiary. The K+12 education has recently been implemented. This is the mandatory kindergarten + 12 years in elementary and high school, or 13 years of schooling before a student can go to college.

There are several problems with this approach. One is that there is high focus of training students to become employees, to be “more employable” someday and less as entrepreneurs and job creators themselves.

Two, there is lack of trust in self-learning by students with the help of modern technology. Self-learning as augmentation to school education is a good training ground for self-employment and entrepreneurship someday. Instead, students are mandated to spend more years in the schools, in government elementary and secondary schools especially.

And three, there is high additional cost to parents as well as to public spending with the extension of mandatory elementary and secondary education to 12 years. As if there is no huge budget deficit every year and the public debt stock is not rising every year.

Both voluntary and involuntary unemployment among college undergrads and graduates would have been lower if these young people were trained for self-employment and entrepreneurship early on, and if government policies are more business friendly than they are now.

This means that government business permits and bureaucracies, business taxes and fees, both at the local and national government levels, should be reduced and/or made simpler. The high incidence of informal economy or underground sector micro and small entrepreneurs is a clear proof that government business bureaucracies and taxes are simply high and complicated.

Another important policy that the government should undertake to improve domestic labor productivity and employability is to open up the economy more to foreign competition in trade and investments. In a PIDS discussion paper on Philippine Productivity Dynamics in April 2012, Dr. Gilberto Llanto wrote,

“Openness of the economy measured as exports to GDP ratio and the foreign direct investments are significant positive influences on labor productivity. In this regard, the government should… strengthen the export markets and bring in more foreign direct investments. The competition provided by discriminating (foreign) export markets creates incentives on domestic firms to become more productive and competitive, otherwise the export market or destination will be lost to competitors. On the other hand, foreign direct investments bring into the domestic markets new products, new processes, innovations, and a host of complementary institutions, e.g, efficient supply chains, that motivate labor productivity.”

The key to reduce unemployment, both voluntary and involuntary, is more entrepreneurship, more business competition, freer markets in all factors of production – labor, capital, technology, land – and not more government debts and bureaucracies, more stifling taxes and fees.

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See also:
Labor Econ 6: Labor Rights and Employee Forever, May 05, 2012

Labor Econ 7: Unemployment in Advance Economies, May 06, 2012

Labor Econ 8: SWS on Unemployment Survey, June 08, 2012

Labor Econ 9: On 4-months Maternity Leave, June 14, 2012

Fat-Free Econ 38: Jobless Growth vs. Jobless Non-Growth, February 12, 2013

Migration and Freedom 4: Filipino entrepreneur in Germany

There was this interesting news story shared by a fellow listed in one of my various discussion googlegroups, about an entrepreneurial Filipino in Germany.
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LAID OFF PINOY OPENS RESTAURANT IN GERMANY

ABS-CBN News, June 03, 2009

A Filipino cook who lost his job due to the global economic crisis used the opportunity to open up his very own restaurant in Gummersbach, Germany.

Alex Latag started "Pinoy Chawking", the very first Filipino restaurant in Gummersbach, with the money he saved from working as a cook in a Chinese restaurant.

"Nabigla din ako. Ang tao biglang dumadating. Maganda pero alis-dating, alis-dating," Latag said.

Pinoy Chawking attracted not only the attention of Filipinos but foreigners as well as the restaurant offers its clients an "eat-all-you-can" promo for 5.95 Euro.

"Pagka-almusal namin nag-decide kaming pumunta dahil that is very new and it's really exciting to learn and to hear na mayroong Pilipino na mago-open ng Chawking," said a Pinay from Bonn, Lourdes Wobel....
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I went to Gummersbach, Germany, last October 2008. I attended the FNF-IAF "Civil society and local government" seminar at Theodor Heuss Akademie. It's a small but nice city, not far from Cologne and Bonn.

This story above is another proof that nothing beats entrepreneurship. When people are not happy with their jobs, whether in private corporations or in government, the opportunity for them to leave and become start-up entrepreneurs should be there, easily. No subsidies, but no unnecessary bureaucracies and fees either.

And we go back to classical liberal philosophy.

Lean state, limited government, free market, individual responsibility. The rigid labor protection laws that many labor unions seek will ultimately hit them back should some of the laborers decide to quit being an employee and become an employer himself/herself someday.

The threat of good employees leaving them anytime to join other companies or put up their own company (as becoming an entrepreneur is no longer very bureaucratic) will also force many employers to treat their good employees well, pay them well. Only the lazy and irresponsible will be threatened with not being hired or being laid off anytime.

That makes the liberal ideology beautiful. It's just a question of whether liberal parties and liberal political organizations stick with that liberal tradition or not and embrace the populist-socialist philosophy of big and intrusive government that often rewards individual irresponsibility with subsidies and welfare.
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On October 17, 2006, I wrote this.

Globalization = Mobility

I like travel, domestic and foreign alike. Transporting myself from one place to another is very liberating because it allows me to observe other people's culture, economic systems, and natural environment. But very often, I do not have to transport myself to those beautiful or enchanting places. Technology brings those sights in front of me through the internet, magazines, newspapers, and other media. Or friends who have seen those places narrate to me what they have observed, showing photos from their digital cameras or posted in their own blogs and the web.

People want mobility; they aspire for it. The more mobile you are, the more freedom you have. You can escape or avoid unsightly or undesirable neighborhood, residential communities, schools or workplaces, and go to other places. Such mobility is not contained within the country, but across countries.

Some people tend to associate "globalization" only with capital movement across countries, and the perceived exploitation by foreign capitalists of local workers and the environment. Hence, the opposition to "corporate globalization". The implication is hard lobbies and political pressures to their governments to control and minimize the inflow of foreign capital and foreign technology into the country.

But globalization is mobility not only of capital, but also of labor, music, dances, sports, education, technology; activists, capitalists, professionals, entertainers, athletes, and so on. When cable tv and the web brings us exciting races in Formula 1 or Tour de France, or the triumphs of Michael Jordan and Roger Federer, or the live concerts of Eminem and Shakira, or the latest bombings in Iraq and Israel, that is globalization. When many of your countrymen move abroad to work or study, or the famous white sand beachs and mountain resorts in your country attracts lots of tourists and vacationers from abroad, that's globalization.

Many people on their own want free mobility as much as possible. But governments, backed up by certain protectionist interests, dislike free mobility of people, goods and services. Visitor visa system, high import tariffs rates and other import restrictions, not only restrict freer mobility of said people and things, but also bring in cash to the state for the official and/or personal expenditures of politicians and bureaucrats of such countries.

Mobility means freedom. Freedom or liberty means the absence of external coercion on men and women by others. Various forms of restrictions to mobility of people, goods and services constitutes varying forms of government coercion. People should assert their inherent right to mobility. Only the threat of a potentially harsh environment (economic and natural) in destination place should prevent people from moving away, not government.

(See also, Migration and Freedom 3: Remittances and Guest workers, March 25, 2008)

Spontaneous Market 4: Entrepreneurship, Community and Property Rights

Entrepreneurship and free market, in the words of Adam Smith, Friedrich Hayek, and countless other intellectuals, lead to human welfare. People who want to be useful to society and at the same time become rich, invent things and services -- or facilitate the introduction and marketing of those inventions and innovations -- that improve human lives. From new rice varieties that can improve nutrition to new cellphones with cameras that improve communication among people, to new cars that are more fuel efficient, to new medicines that are more effective in fighting diseases.

We can add therefore, that only useful things get the attention of the people, and they buy those things and services, making the inventors and sellers of those things rich. Useless things like nuke bombs and more powerful killing machines are bought mostly by governments and military generals. If you have doubt about this, you can ask the Myanmar generals or Robert Mugabe or Fidel Castro, etc. why they bought hundreds of thousands of assault rifles for their troops.

One example of the fruits of entrepreneurship, is a first ever Oceanarium in the Philippines, that will open up less than 2 months from now. This means that Filipinos who want to see different marine animals and fishes need not go to Singapore or Hong Kong -- and pay thousands of pesos in travel tax, petroleum tax, terminal fee, security fee, to the state -- to see these marine creatures in style.

There is also an ocean park in Subic, about 130 kms. north-east ofManila, but there is corresponding or additional travel costs in going there. This oceanarium will be right in Metro Manila.

When people, children especially, can see live fishes and other marine creatures in front of them, and not just on Discovery or Animal Planet or National Geographic channels, or other documentaries, their appreciation of the marine environment will increase. Because who would want the destruction of marine environment if they will know that those colorful and beautiful, not to mention gentle, marinec reatures, will also be destroyed and killed?

(See the news report here,
http://businessmirror.com.ph/10232007/headlines013.html
First Philippine Oceanarium to open in December
By Louise M. Francisco

MANILA Ocean Park (MOP), the P1.1-billion joint oceanarium project ofChina Oceanis Philippines Inc. (Copi), and Singaporean and Malaysian investors, has set the opening of the first phase of its live aquarium facility on December 15, unveiling plans to exhibit more than 20,000 marine inhabitants of approximately 300 marine species. The oceanarium is divided into six sections named to evoke national pride....
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My two related papers in recent months:

(1) Markets, Government and Community

August 22, 2007

A friend defined these 3 concepts as follows:

Market - by competition
Government - by coercion
Community - by cooperation.

In my book though, I define them as:

Market = voluntary exchange
Government = forced exchange
Community = voluntary co-habitation.

Examples:
1) Market: I can only have your money if you like my hair-cut services, then you come back, you tell other people that i'm a good barber. The moment I become a lousy barber, or my barbershop stinks like a dumpsite, there's no way I can have you and your money.

2) Government: I will have your money even if you think policeman X is the most extortionist law enforcer, even if Congressman Y is the most corrupt politician, even if Mayor Z is the most arrogant mayor around. They are your public servants, so give me your taxes.

3) Community: I will live in this community (or village or condo building or barangay) only if it gives me peace of mind for me and my family, at a price that I can afford. The moment the peace and order deteriorates, or the cost of staying in this community becomes unaffordable for me, I and my family will be out of here, and we'll look for another community.

Market competition is only a means, not an end. The end-goal is choice. With choice, comes freedom. More choices, more freedom. In the process of voluntary exchange, some guys will lose out to fellow sellers as the buyers and consumers become choosy. So sellers are forced, even coerced, by circumstances, to be competitive, to produce goods and/or services that will be wanted and bought by the public. So in the process of giving consumers more choices, competition was born.

Government coercion is also a means to pursue a purported goal of public welfare. Oftentimes, the result, in the perspective of consumers, is lesser choice. Lesser choice means lesser freedom. When you have less take-home pay because of high income taxes, then you have less freedom to buy or consume certain goods and/or services that you deem important for you and your family.

Community cooperation is part of voluntary exchange. That is why builders and leaders of private villages and communities incorporate lots of amenities like good peace and order, garbage collection, street lighting, etc. to entice more residents and locators in their communities. More residents, more profit for them. Less residents and less buyers of their residential units, less profit, even losses for them.

Choice through voluntary exchange is a sacred goal to be pursued if one is to ensure individual and community freedom.

(2) Property Rights = Freedom

JUNE 12, 2007

A friend from Sri Lanka, Ms. Mala Gunasekera, wrote a short essay, "The conversion of bad title into good title by acquisition and vesting. This process has empowered governments and impoverished the poor."

In her paper, she observed:
"In Sri Lanka we had legislation called Waste Lands Ordinance to take over their lands. Successive governments fluctuated in their opinions whether the lands should be government owned or privately owned. From time to time cultivated lands were taken over and controlled by government, land laws were randomly altered thus creating many doubts in the minds of people. This created a political cultural ethos where entrepreneurs looked to their respective governments to obtain land for their industrial establishments. They never looked to willing sellers to purchase land for their projects."

What Mala wrote is so true. Property rights means Freedom. And zero property rights means zero freedom. If you can't say that you own your tv or refrigerator 100%, that is, somebody can always come in and he says that he also owns your tv or refrigerator and takes it away from you, then your life is a mess.

If you extend that analogy to lack of property rights to your agricultural land, or the lot that your house is sitting on, then you have 24 hours of absence of peace of mind. You come home from work and somebody else has already fenced your agri land, or your house has already been demolished and someone else is putting up a new house or shop in your lot.

I think that the absence of secure, well defined property rights among citizens is the single biggest GOVERNMENT FAILURE ever created. But if you look at the literature of those who always cry "market failure" to anything and everything around society, the concept of "government failure" never comes to their minds.

Governments around the world have many tools in their disposal to discourage private property rights. Among them are multiple and high taxes, multiple titles and requirements (and signatures and regulations) to secure, unstable and unpredictable legal and judicial system, and so on. A combination of all these and life can be chaotic. I think people in Zimbabwe, Congo, and many other African countries fully understand this.

The big challenge for free marketers, is how to remind governments to focus on that very important function - to ensure property rights, whether intellectual property or goods/lands property, of the people. By extension, governments should be discouraged from dipping their dirty fingers on endless regulations of business and entrepreneurship, on providing endless subsidies to things that are better relegated and administered as personal and parental responsibilities.

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See also:
Spontaneous Market 1: Profit, Trade and Personal Responsibility, May 22, 2006
Spontaneous Market 2: Market Failure vs. Government Failure, June 07, 2006
Spontaneous Market 3: No Nurses' Brain Drain, June 21, 2006