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The
damage to a nation from poverty is difficult to quantify
but very real. The reduction of the incidence of poverty
must be a national priority. However, there is no clear
answer as to the best method for sustained poverty
reduction.
Those
who often call themselves “propoor” argue that all that
is necessary is to redistribute wealth from the richer
to the poorer. This, in effect, makes one economic class
the dependents, not unlike children, of another class.
Those
who believe in the “teach a man to fish” theory reason
that poverty relief is a long-term process and that
better education, a better work ethic and learning basic
employment skills will eventually reduce the number of
poor people.
Strong
capitalists and entrepreneurs believe that overall
economic growth of the country will raise the poor from
the economic depths given enough time.
Through
several years of increasing economic activity, the
question constantly arises that confounds the social
economists: Why has increased economic growth had so
little a relative impact on those in poverty?
It is
wrong to say that very substantial amounts of money have
not been directed at the problem. Likewise, you cannot
make the excuse that it is simply a failure of
government and political leaders. Even private
benevolent and charitable groups are at a loss to
explain why their efforts have only limited success and
little far-reaching results.
All
political ideologies, from the far Left to the far
Right, agree that high levels of employment are
ultimately necessary to eliminate poverty. It is a
truth; more jobs means less poverty. The method of
achieving that full employment is the point of
disagreement.
The
Global Competitiveness Report (GCR) 2007-08 from the
World Economic Forum ranks the United States as the most
competitive nation in the world, followed by
Switzerland, Denmark, Sweden, Germany, Finland,
Singapore, Japan, the United Kingdom and the
Netherlands. The Philippines ranks 71st.
The
report measures 12 different “pillars” of
competitiveness, including institutions, infrastructure,
macroeconomic stability, health and primary education,
higher education and training, goods-market efficiency,
labor-market efficiency, financial-market
sophistication, technological readiness, market size,
business sophistication and innovation.
The
Philippines’ lowest ranking was in labor-market
efficiency, which is all about job creation. If a
nation’s labor market operates inefficiently, fewer jobs
are produced and there are several problem areas that
limit Philippine job growth.
The
Philippines falters in these areas: cooperation in
labor-employer relations, flexibility of wage
determination, rigidity of employment, hiring and firing
practices, firing costs, brain drain and female
participation.
From the
GCR: “The efficiency and flexibility of the labor market
are critical for ensuring that workers are allocated to
their most efficient use in the economy. In a productive
economy, workers are allocated appropriately and
provided with incentives to give their best effort in
their jobs. Labor markets must allow for wage
fluctuations without much social disruption. Efficient
labor markets must also ensure a clear relationship
between worker incentives and their efforts.”
Businesses, not government, create jobs. Businesses that
are more productive create more jobs because they are
better able to grow and expand. One of the most
important components of productivity is the ability of a
business to reward more productive employees and to
replace less productive workers. And yet, in these two
most basic areas of business management, the Philippines
is inefficient.
Employees must be able to grow professionally with and
within the company. Start at the bottom, and maybe
someday become president or chairman of the board. Yet,
a large portion of our work force at entry-level
positions does not have that opportunity. Labor rightly
criticizes the widespread use of contract employees.
Contract employees have no future with the company they
work for, which limits incentive and commitment.
Also
very important to workers must be the knowledge that
better job performance means higher compensation.
Nevertheless, the mentality of our labor is that all
employees should be treated equally, depending on
position and seniority, regardless of productivity. But
all employees are not equal, and the better performers
should be making more money.
However,
every owner of a small or medium-sized business knows
the costly nightmare of firing a bad employee. The same
owner knows the potential problems when trying to
increase the salary of a less senior employee over one
who has worked longer, but is not as good at their job.
Workers
must be able to reap greater rewards for more
productivity. As their performance skills grow, they
need to be able to move up the company value chain,
creating more open positions at the entry level.
Further, a company that must retain less valuable
employees are financially burdened by these employees,
which, in turn, limits the company’s ability to grow,
expand and create even more employment, particularly at
the bottom.
Under
this kind of labor system, even as the company grows
over time and becomes more profitable, that growth is
not evident in the compensation of its more productive
workers because all employees are “equal.”
If the
Philippines lacks an efficient labor-market system, then
it is not able to produce the number and quality of jobs
needed to put a substantial dent in the poverty levels.
Companies cannot be expected to and will not fulfill
their full capabilities of job creation if the labor
market is not efficient. Maybe that is a reason we are
not seeing the rewards of economic expansion at all
levels of society.
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