Saturday, December 18, 2010

The Bentulan Labor-Minutes: A New Comparison Index

In the book Hyperwage Theory serialized in the Manila newspaper BusinessWorld in 2005, Thads Bentulan, introduced the concept of labor-minutes.

This was in Chapter 8 (titled The Mispricing of Labor) published on June 23 2005.

Here is the definition of the Bentulan Labor-Minutes: The duration of work needed by a minimum wage worker to buy goods and services in his area.

For example, how many minutes of work is needed by a minimum wage worker in New York to buy a kilo of pork in New York?

Note that the reference wage is the minimum wage.

What is the use of the Bentulan Labor-Minutes (BLM)?

The BLM will be a very logical index for comparing the economic wealth of countries.

For instance, one of the most tricky conditions to define is how do you define "middle class" in London vs. Jakarta?

Should it be by dollars? Try to compare them in terms of the BLM. And you can see a better picture of the wealth of the Jakarta society vs. the London society.

A basket of goods and services can be better explained in terms of the Bentulan Labor-Minutes instead of the "constant dollar" consumer price index because the inflation rate and the exchange rates are eliminated from the problem.

We can then compare the wealth of the 1911 minimum wage worker vs. the 2011 minimum wage worker by computing the Bentulan Labor Minutes for a basket of goods and services for 1911 and 2011.

We can now easily compute today's basket in Bangkok vs Vienna.

For more examples and discussions read the book Hyperwage Theory (2005).

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