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I read an article a few days back about the dilemma of small and medium size companies having to cope with the rising labor cost. An old argument was presented ” cheap labor cost generates more jobs to the unemployed”. Because of higher wages, the Philippines is becoming a less preferred investment destination

On the labor side, year in and year out, groups representing this sector has been consistently pressing for a wage hike. The present minimum wage, according to them, is not aligned with the rising cost of living.

These opposing mindsets have its own merits. A healthy debate, though, may help form a new paradigm that will be beneficial to all concerned. Herewith are my thoughts on the issue:

  1. Effect on Family: With minimum wage that cannot help you live decently, chances are both parents will work or one will have to work abroad. In this way, parenting is focused on providing the financial needs and less attention in molding the character of the next generation. Kids are influenced by cable TV, internet and peers. A strong family is the backbone of progressive society.
  2. Effect on Investment: With cheaper labor cost, we lure investors and more jobs are created. But the workforce will have to find other means to meet their needs. A few will venture into questionable, if not outrightly illegal activities. A modest wage, however, will help ordinary people live decently and not depend on Gov’t doleouts. This may also reverse the effect of diaspora. However, as they say, higher wages means fewer investment and jobs, cheap wages generates employment.
  3. Effect on Education: If the population cannot afford quality education, they will end-up in public schools. When public school teachers are not paid well, the good ones will likely venture into another country or career. And guess what will happen to the quality of education? and the future of a nation?
  4. Effect on Governance: With a higher cost of doing business in the country, gov’t. will have to offer more incentives and let go of some revenues needed for basic services. Governing a population, however, that only understand “lack and need” is harder. Furthermore, a bigger budget is needed for basic services.
  5. Effect on People: People who only understood lack may most likely (1) become insensitive (2) necome a problem to society (3) become dependent (4) develope a slave mentality (5) have a low self esteem. A few may be motivated to work and study hard to break out of the poverty. On the other hand, people who are earning modestly lives a respectable and decent life, not necessarily fancy. And may not need the basic services provided by the Govt.
  6. Effect on Economy: With people having more money to spend is beneficial to the Philippines, being a consumer based economy. However, with limited budget, spending is reduced. Spending may still be sustained through debt. Paying the debt, however, is another story in itself.

How do we add value to one without sacrificing the other?


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