Saturday, December 13, 2008

Layoff, expectation, and wages

One article in this month's Esquire takes the plummetting immigration to US as a real indicator of how bad the current (and arguably the foreseeable future) is. The logic is clear. Low wage workers come to US with great expectation. As the economy shrinks, that expectation falls.

Two days ago I chatted with an official from Blitar local government. That is a district in East Java. He told me that they were so worried with the massive homecoming of Blitar people who otherwise work in Surabaya and other business centers in East Java. The number keeps increasing from day to day. Thus far in East Java about 10,000 workers have been laid off. Almost 15 percent of it come from Blitar. And now they have no choice but to come home. Majority of them become dependents of their families who used to be the beneficiaries of their remittances.

I was thinking about the minimum wage regulation. Of course we can't blame all this on it. But inability to cut wages surely affect employers' decision to fire workers.

Expect more layoffs. But that might slow a bit if wages and compensation are made more flexible.

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