Sunday, July 26, 2009

Economics @ Home © Volume 1 Issue 1

Monetary Incentives

I am at it again. Trying to make the world a better place, one person at a time. This marks the launch of another new project of mine, which is to give my three cents worth (more than two cents) of economic analysis based on any topic that interests me at any particular point in time.

Today marks the first issue and many ideas crossed my mind. I thought about discussing the role of the new Prime Minister in Malaysia and what direction should this country move in (obviously forward, but when you're upside down and inside out, which way is forward exactly?), or the 30% increase in the bus and taxi rates, or the change in teaching Science and Mathematics to Malay from English. Maybe I could even talk about Teoh Beng Hock.

Nonetheless, I decided on a much softer topic. How does a country create first world standards of living? Now, there is obviously no right answer to this but I believe we can agree that the goal of high standards of living involve high income. So how can we achieve high income levels? Conventionaly theory would suggest that high income would come with productivity. If you observe the culture in Malaysia, it would almost seem obvious that conventional theory is not very conventional. We see people in high positions (with high income) everyday who fail at their jobs. I can talk all day about the inefficiencies of bureaucracies but that would just be common knowledge.

I want to make your visit to my blog worthwhile. I would like to suggest that minimum wages are increased significantly in selected areas. While this may seem to initially cause cost-push inflation, it necessitates the incentive for employers to be more selective about who they hire. It necessitates meritocracy. Employers would have to select the best workers to make the most bang out of their buck. This would leave all the useless scums jobless (or close to it). That may only be a temporary situation. Now, if the situation is made to be so dire in such a way that people who do not take productivity seriously CANNOT survive in our society, wouldn't they wake up?

It is now rampant that local graduates these days can barely qualify for a job at an MNC, even with the current wage level. I have been taught by graduates with engineering degrees in my secondary school. That was almost eight years ago. The situation is that bad. If you increase the minimum wages in sectors with positive externalities, you could possibly create a productivity multiplier. More people would want to be in these areas. For example, if a teacher's salary were to be increased significantly, more people would want to become teachers. Of course the buck must not stop there. The pay for the people who actually train these teachers have to increase as well. This will result in two things. First, too many people will want to become teachers. Now, this may seem like a bad thing at first. But this is the most fundamental concept of life. Just think about how you were born. Millions of sperm going after one ova. The fittest will survive. In this case, only the best people will get to be teachers. I mean, look at doctors. When you talk to parents, they stereotypically want their children to grow up to be doctors, lawyers and whatever. Why? Because it is a high paying job and not many people get to become doctors.

This competition for survival will push for the selectivity of the people who actually qualify for the profession. Even with the failed-notion of meritocracy in our country (by that, I mean, not all the best people will be selected because of our quota system) there will be an invisible force to select the better few to perform an important job function. The majority of the people who want to become teachers would be sufficiently qualified and so would their trainers.

Now, the second result is where the positive externality comes in. I pause to make an assumption here. I assert that good teachers will increase the number of good students. With more good students who eventually become useful graduates and consequently productive workers in all industries, the economy of our country will be thriving. Think first world thriving.

This of course, may not happen overnight, but it is a positive introduction (who will argue against a wage increase?) that can be accepted by the general public. It is feasible because it is not bias. It promotes meritocracy as well as equality. It does not call for the abolishment of the quota system, which as each day passes, seem even more impossible with the deterioration of lesser beings.

With this, I call for a wage increase in the sectors with positive externalities and the government should start with the education sector. By the way, for those of you who think I am a teacher, I am not. I am a mere student of life who is learning to try to change the world one person at a time.

Please feel free to leave comments or messages in my C-Box or you can email me. To further support my cause, you should probably click the nuffnang ad because that keeps my brain fed so that I can develop more interesting ideas to share with you.

Stay tuned for more issues of Economics @ Home © Copyright 2009

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