Coping with unending price spiral

By Herbert Vego

THE month of January is about to end, but for most daily-wage earners, the time to settle debts incurred during the Christmas and New Year celebrations has only just begun. This is also the month when we who think of ourselves as “middle class” grimace over sudden rise in prices of food and other basic commodities.

Vendors predictably defend themselves, “No choice.  We buy our merchandise at higher prices.”

The retailers who impose higher prices for bigger profit eventually see the erosion of their own gains whenever they buy their own needs at higher prices, too.

Sooner or later, whatever money we have saved in the bank, even if it earns interest, devaluates due to inflation. Incidentally, the average inflation rate in 2021 was 4.5 percent.

More often than not, we respond by pinching pennies. To make both ends meet, we buy less of our basic needs – say, a half-kilo of meat instead of the previous one kilo at the risk of our family going undernourished. But it’s really a losing game because the value of our money has diminished.

The phrase “A penny saved is a penny earned” no longer means what it says because it sheds its true value over time.

Therefore, why not make the most of it now?

Hasn’t the Great Book told us? “The love of money is the root of all evil” (1 Timothy 6:10).

Unfortunately, taken out of context, that “philosophy” could do more harm than good. A devalued peso has more value than no peso at all. So, why find a way to earn more to beat inflation?

If you find it impossible, why not try cost-cutting instead?

Alas, cost-cutting hardly compensates, especially if it means scrimping for three budget meals a day. While we can cut and slash expenses to the bone to conserve our bottom peso, the fact remains that we could get sick and unable to afford medical expenses anymore. Going into debt would then be unavoidable.

The only way to keep pace with inflation is to earn more, which is an elusive dream for the average Filipino wage earner; or have a “sideline” or small business in which to prosper.

Those who demand wage increase but don’t get it are doomed to sink poorer.

Let’s take a look at the wage earner making P15,000 monthly. If this were his income in the early 1980s when pork cost P15 per kilo, he might have lived like a prince. Today, he has to endure a spartan existence (no TV, no ref, no air-con) to have a roof over his head, and to feed, clothe and educate his children.

When my neighbor Tony suffered business reversal, he literally hooked his children into moving from private to public school to save on tuition by offering them bigger daily baon.

Indeed, the better challenge is always to beat inflation by outracing monetary inflation. There are cases, however, when getting it from increased income could aggravate the workers’ problem. For when laborers ask for wage hike across the board, their employer would need to hike prices of their products – which further fuels inflation.

The better alternative would be to stimulate demand by keeping prices low and thus produce more products.  With more products selling like hotcakes, both the producer and the consumers benefit. This is the “secret” behind the success of small but export-oriented countries.

The phenomenon is known to the economists as the economies of scale, where the average cost per unit of output decreases with the increase in the scale or magnitude of the output being produced by a firm.

Working abroad for better pay used to be an option for Filipinos who no longer see the “future” in the local job market.

But with the Covid-19 pandemic dictating travel restrictions today, that option has become elusive.

It makes more sense to advise a provinciano “stranded” in the city, “Go home and plant camote.”