veiled solution/s

An editorial in the Philippine Daily Inquirer talks about the current situation in the Philippines -- rising costs of rice, oil crisis, wage problems -- provides an insight about corresponding effects if particular decisions are imposed by the government.  It may provide a breather on ordinary individuals like me, but what is needed would be some long-term solutions that should provide an integrated check and balance addressing monetary problems facing majority of the population -- carrying a huge debt, underpaid and underemployed.  

Immediate need 

Philippine Daily Inquirer

First Posted 23:41:00 04/20/2008

MANILA, Philippines - Are we being stampeded into a wage increase? The international Standard Chartered bank seems to think so. An analysis by a bank regional economist based in Hong Kong suggests that the current rice emergency may be forcing both private and public sectors in the Philippines to bite off more than they can chew.

“[The] current boiling climate surrounding food inflation has clearly given teeth to demands for measures to assist low-income families, which spent a larger proportion of their income on food. This plus the timing of the public servant wage hike clearly increase the risk of the government giving more ground than usual,” reads the Standard Chartered report dated April 18.

Set aside the delicious absurdity of the breathlessly mixed metaphors (boiling climate “clearly” giving teeth, resulting “clearly” in lost ground)—is Standard Chartered on to something?

The “public servant wage hike” it refers to is the 10-percent salary increase government workers will receive starting July 1. President Macapagal-Arroyo is set to sign the executive order on May 1. Budget Secretary Rolando Andaya said the other Friday that the cost of the increase will amount to P12 billion; Standard Chartered estimates the increase for the government’s million workers would cost twice that, or P24 billion. Either sum, it must be emphasized, is not a one-off cost, but an annual expense.

The “food inflation” Standard Chartered refers to is the subject of recent headlines: rice prices are going up, and in their wake the prices of other commodities too. But because the Philippines is the world’s biggest rice importer, and a confluence of international realities including a shortage in supply has turned the rice trade into a seller’s market, the country’s own buying is a major factor in the higher cost of imports.

The “boiling climate” the bank refers to describes the current summer of discontent: the sight of the poor queuing up under a broiling sun, a general sense of government’s untrustworthiness feeding a growing sense of panic—and, not least, the impassioned clamor for wage increases, to help counter higher costs of food and fuel.

The President herself has led the chorus of appeals. A week ago, she called on the regional tripartite wage boards to determine wage increases for private sector workers. “Because of the increasing prices of fuel and rice, we are calling for a meeting of the regional wage boards all over the country to discuss how they can help the workers cope,” she said in Calamba, Laguna.

Two big business groups, the Employers Confederation of the Philippines and the Makati Business Club, immediately expressed support for region-based increases. Since then, however, the public pressure for a salary increase for private-sector employees shifted emphasis, to a legislated wage hike. (The last time salaries were ordered increased through legislation was 1989, in the middle of the turbulent post-Edsa transition.)

All this, Standard Chartered fears, may set off a “home-grown inflation spiral.” It noted that “the rhetoric that surrounds this increase [in government workers’ salaries], timed to be approved before the Labor Day, is now closely associated with the latest food price spikes and risks setting off more aggressive demands from the rest of the labor force.”

That, in fact, is exactly what is happening.

What is to be done then? It is crucial to note that local and international experts agree on the short-term nature of the rise in food prices; prices may stabilize later this year, and fall in a couple of years. The rise in oil prices, however, is more worrisome. What these two realities mean is that the immediate need is for non-wage measures, such as an additional rice allowance or income-tax rebates for minimum wage earners, to help tide over those most vulnerable to the higher food prices. The next step is for a proportionate salary increase, implemented nationwide but determined by regional boards to reflect regional conditions, to prepare all wage earners for the continuing uncertainty of an oil-dependent economy. What about an across-the-board increase of P125 per day, mandated by Congress? This proposal looks tempting, but it may well prove indigestible.