Pogi Points

You would think that a presumably mature democracy like the United States with over 200 years’ experience in the art of governance would have a Congress that puts primacy on the national interest. Yet, we find the majority Republican Party in the US HOR denying a compromise agreement that would help fix their border problems with Mexico because it would remove one strong issue working for Donald Trump.

And here we are, the US-installed democracy in Asia, with a Congress that is also pretty much all about winning pogi points and never mind the high cost of negative consequences. Many in the US and here in our country are increasingly frustrated by our flawed democracies and this is how democracies die. It takes very little for a charismatic autocrat like Trump, or in our case, Duterte or maybe Robin Padilla in the future, to feed on popular frustration over the failure of governance even if they contributed to it.

Unfortunately, discussions about public policy are about winning pogi points. Never mind the all but certain unintended consequences of adopting a flawed policy. The devil is in the details and no one reads the fine print or listens while it is read. A catchy headline or slogan is more important than the details of a proposal. The digital age only made things worse because attention spans are shorter than ever and a well-produced TikTok video is more persuasive than a scholarly study of an issue.

Take the current debate on raising the minimum wage by a hundred pesos nationwide. Congressional proponents are after votes. Labor leaders are after keeping their leadership positions. Leftist organizations are after creating disturbances in the capitalist system to cause its early demise. None of them are really after putting more money in the pockets of the poor if it doesn’t serve their purpose. They are ready to sacrifice the greater majority of the poor to claim the dubious credit of fighting for them.

The government’s economic think-tank, PIDS, once published a paper that raised points that should be discussed in the current debate on raising the minimum wage. Briefly, the PIDS paper made these observations:

“It is commonly believed that mandating higher legal minimum wages (LMWs) is needed to help the poor earn a level of income that would allow them healthy and dignified lives. It is also seen as a tool to protect the weak against exploitation. This popular belief motivates and justifies the recurrent demands for hefty increases in LMW. But what is the empirical evidence behind this?

“In the Philippines, higher LMWs: (i) are likely to reduce the work hours of average workers; (ii) can be disadvantageous against the very groups that LMWs are intended to protect; (iii) decrease the employment probability of the young, inexperienced, less educated and women laborers; and (iv) tend to ironically reduce average income and raise household poverty rate…”

The PIDS paper describes the environment where we operate.

“Poor households do not have much valuable physical assets to depend on. For their subsistence, they rely on the labor of their household members and their productivity in employment and other income-generating activities. Social assistance is often needed from the government, such as the Pantawid Pamilya Pilipino Program (4Ps) otherwise known as Conditional Cash Transfer (CCT) program… Other sources are cash or lending assistance from relatives, friends and other private entities.

“To get themselves out of poverty, they need to increase their work hours and productivity, a key factor for higher wages. The problem, however, is that the Philippine labor population is not fully employed…For workers who are underemployed they only work, on average, less than 40 hours a week. Furthermore, their wage rate is low …

“The Philippine minimum wage is relatively higher compared to neighboring countries in Asia and the Pacific with low poverty rates like Thailand, Indonesia and Vietnam…

“That the Philippines gives a higher minimum wage to its workers as compared to economically advanced countries like Thailand is something the World Bank 2013 Report took note of. This begs to rethink the common belief of having massive employment expansion with rapidly rising wages as the key to increase the incomes of poor households and to change their poverty status. Demanding the government to impose higher minimum wages to move the poor out of poverty requires deeper thought. While keeping in mind the persistent appeal for rapid minimum wage increase, how effective in reality is minimum wage legislation as a tool for improving the standard of living of the poor and other disadvantaged population groups?”

What’s the story in the Philippines? Hours of work significantly declined, and the probability of gaining/retaining employment fell by about 8% to 22%, following an increase in LMW, a study suggests.

“The average real income of households would have grown faster by about 20 percent – and household poverty would have been lower – if the LMW had increased more slowly over time. The total income of a household with just one minimum-wage earner is likely to be smaller than a household where the wife and perhaps the older children too, can also work but at lower, market-determined wages…

“Interestingly, the study finds that a faster rise in LMW significantly increases poverty incidence by 1.7 to 3.0 percentage points.”

Scoring easy pogi points? Esep esep muna!

Boo Chanco’s email address is [email protected]. Follow him on X or Twitter @boochanco.