Rent

Minimum wage
Taxes
Economic Icon
Mariah Shakira Eviza
October 2021
RENT
The problem of unaffordable decent
housing is the problem not so much of the
middle class as the poor due to poverty.
Lacking skills, they are self employed (e.g.,
vendors) or not regularly employed (e.g.,
construction workers). Thus, they live
hand-to-mouth without employment
record that could otherwise entitle them to
the social benefits provided by the
government. Thus, the poor squat on other
people’s lands or rent squatter housing in
subhuman living condition they can only
afford.
 The poor spend more that their meager income to make both ends meet.
Nonetheless, they can hardly provide even for their basic needs, which include
housing.

Figure 2.12. Family Income Expenditure (2012)

4000

3500

3000

2500
Income
2000 Expenditure
1500

1000

500

0
Bottom 30% of Family Income All Family Income Groups
Groups
 Figure 2.12.
Family Expenditure Distribution (2009)
(Bottom 30% of Family Income Group)
31%

Others Housing

Food

60%

9%
 A typical poor family spends mostly on food and practically nothing on housing
and other consumer items (Figure 2.13). Thus, poverty has isolated the poor to live in
slum areas crowding in shanties they do not even own.

Figure 2.13.
Family Expenditure Distribution (2009)
All Family Income Group
Others Housing
41% 41%

Food

18%
MINIMUM WAGE
 The problem of inadequate wage is intertwined with the problem of
unemployment. Both problems stem from the lack of jobs for our large
labor force.

wages
W2 Labor Supply
Wage is more inadequate
and unemployment rate is
Excess higher as more people cannot
W1 Supply
find jobs that have become
scarcer.
W0

Labor Demand
L0 L1 L2 no. of workers

Figure 2.14. Labor Supply-Demand

 Most wages are still below the minimum standard due to lack of
enforcement. On the other hand, total enforcement may not be
possible with the millions of employers the government has to watch
for violations.
Figure 2.15. Daily Average- Minimum Wage Comparison (2013)
500
450
400
350
300
250
200
150
100
50
0
Agriculture Industry Service

Average wage Column1

  In the long run, it is creating more jobs
that will empower workers to readily
find employment and demand higher
wages. In Figure 2.14, a higher demand
curve raises employment beyond L2
wages and to W2 at Point D. For after all,
W2 minimum wage legislation is just
Excess government’s control tool to prevent
W1 Supply further exploitation of workers.
Making it a long-run solution to the
wage and employment problems will
W0
only make labor more costly resulting
in less hiring and more unemployment
at Point A.
TAXES
 We pay taxes for government to provide public goods and services that empower
and enable individuals and institutions alike (e.g., school, business corporation) to
pursue their dreams. One example of a public good is farm access road for farmers
to transport their produce to the cities for the needed cash income.
 Taxes are yet our burden even as we ultimately benefit from the public goods and
services we get in return.
 Taxes can dampen the incentive to do business for the benefit of society as they
can eat up profit. An example is the usual profit tax that diverts investment from
new and vital products (e.g., cancer drugs) to those we need less of (restaurants).
 Pioneering businesses need some tax reliefs in the early stage of market exposure
when profit is still lean.
 Taxes can also distort savings, investment, and consumption as income earners
shift to substitutes to avoid the tax burden.
 The main issue that hobbles the government to minimize tax benefit while
minimizing its burden is the shortfall of tax collections due to corruption.

16.5
16.1

14.4
13.8
12.9

Korea Singapore Malaysia Thailand Philippines

Figure 2.16.
Tax Revenues as % of GDP
 Figure 2.17. Government Budget Performance (% of GDP)
20

15

10

0
2007 2012 Shortfalls of tax revenues
-5 and government
spending can mean less
road maintenance, books
for the public schools,
medical services, and
medicines for the poor,
to name a few.
ECONOMIC ICON