• A weak attempt to resurrect nanny-state stupidity

    Ben D. Kritz

    Ben D. Kritz2106

    ONE unpleasant nocturnal emission from the mind of President BS Aquino 3rd that we thought had been appropriately ignored more than two years ago has unfortunately reappeared in Congress, thanks to the senatorial aspirations of Buhay party-list Rep. Lito Atienza.

    Back in May 2014, Atienza introduced House Bill 4445, otherwise known as the “Profit Sharing Act of 2014,” which would mandate that “All business establishments that made a profit for a fiscal year shall annually distribute 10 percent of their net income to all their employees, both regular and contractual.”

    In a post to his Facebook page this past Tuesday, Atienza cheerfully announced that the bill “has been approved in principle by the House Committee on Labor and Employment,” implying that the measure has taken an important step toward passage.

    In reality, the bill has not attracted much attention in several months and appears to be headed for the legislative dustbin, where it belongs; Atienza, whose political career seems to have been one long struggle for relevance, is evidently bringing it up now because he needs to find ways to at least try to reduce the futility of his upcoming Senate campaign.

    The bill itself is no more than a rehash of the original version, HB 4972, which was introduced in February 2013 by Northern Samar Rep. Emil Ong, who at that time was the chair of the Labor and Employment committee.

    The profit-sharing idea was one that was raised several times by BS Aquino himself during his presidential campaign, and which he claimed was an advocacy he had pursued since his days in Congress, although there is not a whiff of evidence in the legislative record to support that assertion. The only significant difference between HB 4445 and the earlier version is the increase in the mandated profit-sharing percentage from 5 percent to 10 percent. In addition, where the first bill passed off responsibility for developing the actual details of the law through the implementing rules and regulations to the Department of Labor and Employment and the Philippine Association on Voluntary Arbitration, Atienza’s version makes the even more dubious choice of substituting the Bureau of Internal Revenue for the PAVA.

    As far as the concept is concerned, the simple, unassailable argument for dismissing the notion I explained when the mandatory profit sharing bill made its short-lived appearance in Congress the first time is still valid now. Profit sharing is actually a sound idea. It provides employees with a productivity incentive by giving them a personal stake in the company’s performance, and is consequently an option that should be strongly considered by businesses as both a performance management tool and a value-added benefit for attracting new employees. Giving companies an incentive to implement some form of profit sharing is also a sound idea, one that Atienza seems to have had at least a superficial grasp of, by proposing that shared profits be tax-deductible.

    Mandating profit sharing, however, is a terrible idea. What the government would be imposing is a demand that businesses in at least one respect reward all employees equally regardless of the value of their contribution to the business—a Marxist sort of notion that tends to be counter-productive in a real-world economic environment. A more practical argument is that making what should be a performance incentive a mandatory part of compensation removes any effectiveness it has as a tool for encouraging productivity. The evidence for that argument is not particularly obvious now, but will become obvious with the employee grievances that will erupt the first time a business under the profit-sharing mandate declares it has no net profit for the fiscal year.

    It is just as well that Atienza’s measure seems to have fizzled out in the same fashion as the earlier version, because it would likely accomplish nothing more than to discourage some new businesses from even starting, and encourage an increased amount of creative accounting among some existing businesses in order to avoid the cost of the mandate. Nevertheless, with a little time still left in the term of the Aquino regime, and with a profit-sharing law being a tempting populist measure to pursue for election campaign purposes, we should be alert to the possibility it may come up again.



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    1. Thank you Ben Kritz for publishing this article. I wish there were a thousand more of you in Media. Unfortunately, a majority if opinion makers in radio and television believe that marxist and socialist principles are the key to economic prosperity. We have those who believe that it is government’s duty to encourage “wealth distribution,” a popular concept that is very destructive to the economy. We have millions of new graduates who lack a work ethic and join unions, believing that companies should serve them instead of the other way around. Let’s encourage economic freedom, let’s reward those who are hardworking and allow companies to fire lazy employees, and let’s focus on how to encourage businesses to grow instead of increasing their tax burden

    2. Atienza wants his Profit-Sharing-10% to be like what Pilipinas has to do about squatters…. you know, the Lina Law. Vote the Markano for President, woo hoo!!!!

    3. If that is mandated then small business owners will be forced to employ only their relatives. How can it do any good to the economy?

    4. Who of the majority of Filipinos believes mr. Atienza. I hope somebody can check his approval ratings. Please do not run in the senatorial race. I think you will lose badly. Just a friendly reminder. I guess your political life is over. It is time for you to retire.

    5. I agree as well with Mr. Kritz. As a business owner, I believe in rewarding those who deserve it. With that proposed system….the non performers will simply be riding on the coat tails of those who do perform.

    6. Profit sharing is a productivity incentive or a performance management tool? How about a transmission channel for wealth distribution? Too Marxist? Name calling is always resorted to by those who run out of arguments, like the Church calling you an apostate whose access to heaven is now denied because you disagree with her views. Im not a Marxist but Marx was not completely wrong, like all economists except for those who subscribe to the Austrian School he just overlooked (deliberately?) the role of credit and focused only on the class struggle aspect of the economy (while anti-Marxists focus on deficit spending of fiat money). If Marx represents the devil, it therefore must be a mortal sin to even think about income inequality which is just another way of saying that GDP growth is not inclusive and that the long held view about trickle down economics is empirically just plain nonsense, contrarian views which just recently became accepted as part of mainstream economics. If these contrarian views are now deemed acceptable, doesn’t that indicate that mainstream economics is just as incoherent as Marxism, similar to the incoherence of some well-known religious teachings that simplistically boil down everything to just plain good and evil? The question is why must profit sharing be a management tool- meaning its still up to big business to decide when it will be generous- and not as a transmission channel where it GDP growth can trickle down to where it is most needed instead of just endlessly trickling up to the Ayalas and the Lopezes and all the rest of that predatory class? Mainstream economic thinking is overflowing with the conceit that economics is a science like physics. Trickling down in real science is caused by gravity, in the social science like the economy what is the gravity that will cause the trickling down? GOVERNMENT MANDATE, what else? Trickling down to reduce income inequality must be mandated from above because the system is rigged in favor of the predators, is it not? Without the 13th month law, how many of these Top !000 companies will give a 13th month bonus do you think? If Atienza is a Marxist ( Im not an Atienza fan, ha), then ALL the employees of the profitable companies in this country are Marxists who are just waiting for the Bolsheviks to rise to the surface. I guess swimming in a lot of profits thanks to his employees makes a rich man too dense to have sleepless night over this. Well, its his head neck that will be hanging from a rope when the Bolsheviks finally come.

    7. victor m. hernandez on

      I completely agree with the commentary on the proposed profit sharing scheme posed by Cong. Atienza. I guess it is an attempt to be populist in a season of election campaign. It is therefore one Epal proposal. Indeed, a weak attempt indicating a lack of thoughtful effort on the part of Cong. Atienza.