Mandatory living wage – no more cheap excuses, please

Stephanie Chok

As Senior Diplomat Tommy Koh pointed out in today’s Straits Times (‘Basic pay: Tommy Koh weighs in‘), all advanced economies, including Japan, South Korea, Taiwan and nowHong Kong have a minimum wage. Malaysia is now considering it.

It is therefore frustrating to hear the same tired excuses from our current government against implementing a mandatory minimum wage.

Their key arguments generally run along this vein. Implementing a minimum wage is difficult and problematic. It hurts employment opportunities for the low-skilled. “Artificially raising” workers’ wages makes them uncompetitive. It is better to let “market forces” decide wage rates. Workfare works for us.

Is that the “invisible hand” choking me?

The “free market” argument championed by the ruling party as the solver of social problems is a selective one. When the PAP says, “let market forces decide”, it is a strategic choice, because this is not a hands-off government.

The Heritage Foundation consistently gives Singapore high scores (98.9%) for what it terms “Labour Freedom”, defined as follows:

“Singapore’s labor market is highly flexible. The non-salary cost of employing a worker is low, and dismissing an employee is not burdensome. Regulations related to work hours are very flexible.”

“Labour freedom”, in Singapore terms, means freedom for capital, not workers. And how was this high score achieved? By ensuring that its policy framework prioritizes the needs of capital over the welfare of workers. This is not incidental.

“Invisible” market forces did not morph our labour movement into the “consensual” tripartite framework of today. It was the heavy-handed and consistent intimidation of “non-consensual” leadership, such that only those who did not challenge (too vigorously) the PAP party line have been able to rise the ranks. Fast forward a generation or two and here we have it: a “Uniquely Singapore” labour movement represented by an umbrella union who agrees to wage cuts, does not support a minimum wage and flies the flag of: cheaper, better, faster. (And when you get there, make sure you becomebetter, betterer, betterest!)

What is easy versus what is right

Opponents of the minimum wage say such requirements will increase business costs. The view is that such increases may negatively impact on employment as well as business opportunities and thereby affect unemployment rates as well as “the economy”.

The view that business costs will rise may be true, but also in today’s Straits Times was an interview with Mr. Peter Handel from global training firm Dale Carnegie (‘Keeping employees, and keeping them happy’). In it, Mr. Handel supported Singapore’s controversial wage structure for its ministers, saying the United States should follow suit and pay its President a lot more. According to Mr. Handel, “In any organization, the employees should be paid properly, no question”.

Following on from that logic, any refusal to legalize a mandatory minimum wage is a glaring reminder that one set of business ethics seems to be applied to white-collar workers (including our civil servants), and another to those considered “low-skilled”. It may be debatable what being “paid properly” entails, but surely we can agree that the current status quo, whereby manual labourers/cleaners/service sector workers may earn hourly wages ranging from S$2.50-$3.50, or monthly wages ranging from S$500-$800, is not proper? (I just heard from a friend that some workers were paid S$10 a day for setting up seats along the F1 circuit. That would work out to approximately $1.25 per hour for an 8-hour work day, $1 per hour if it were a 10-hour work day! Honestly – how low do we really want to go?) For a country with a Gross Domestic Product of over $265 billion, this is a disgusting social reality.

Ministers who preach from million-dollar pedestals should contemplate the indignity of being paid S$3.50 for an hour of honest work in a city ranked the 10th costliest to live in the world. Their insistence on Workfare makes it clear the government adopts a “personal responsibility” ethos – can’t earn higher wages? It’s your fault, you need more training. This emphasis, however, is counter-productive when no efforts are made to ensure wages and job scopes will fairly reflect time and money investments spent on “training”. (You can call me a “Sanitation Expert” instead of a cleaner, but what’s the point if I’m still being paid $3.50 per hour on a contract with no annual leave or medical benefits?)

Meanwhile, as blogger Lucky Tan has pointed out: “A minimum wage, if properly set, is the income required for decent living in Singapore. It only distorts the market and hurt the employment of workers when you have an economy dependent low wages and many workers currently employed below the minimum wage.”

There are a number of local labour laws that make things inconvenient and less profitable for employers/businesses. These include the necessity to pay salaries on time, to compensate workers for overtime work and ensure injured workers are adequately compensated. Yet these are enshrined in law for a purpose, because we believe certain minimum protections are necessary and important. The questions: “Is this easy to implement?” and “Will it be difficult for businesses” were not determining factors.

Similarly, debates about a mandatory minimum wage should not be a quarrel over what is “easy” or “business-friendly”. It is a debate over what we, as a community and country, believe is a right and ethical policy direction to take.

Are we going to continue with this current economic model whereby a dependency on below subsistence wages are the norm for a certain segment of our population? What is going to happen in the long-term if there is no intervention?

Improve labour standards and wages for all workers

There have been many complaints about the rise in foreign worker numbers on our island; these low-wage workers are often blamed for depressing wages for locals due to their acceptance of lower pay and harsh working conditions.

It is true that there is little incentive for employers to increase wages when there is a ready supply of workers with even less bargaining power they can hire.

What I’d like to address, though, are some misconceptions about foreign workers being hired simply because they are “cheap labour”. Firstly, it is not always true that hiring a foreign worker is “cheaper” for an employer, especially after the foreign worker levies are included. In several newspaper articles, employers have voiced how foreign workers are more willing to work long hours and stay on the job, unlike locals who are said to quit easily. Employers know that foreign workers often arrive debt-ridden (from hefty agency fees) and are highly dependent on their employers/agents (for their employment as well as their legal status, and often for lodging, food and transport). This can shape them into relatively more compliant workers with a higher endurance for low wages and poor working conditions, some of which violate local labour laws. This is a situation that is disadvantageous to everyone in the low-wage labour market – local and foreign included.

Of course, employers also complain that they have “no choice” but to hire foreigners because locals do not want these jobs that foreign workers occupy in the construction, marine and service sectors. Increasing wages marginally may or may not be enough to keep turnover rates low among locals, because there are other things that make these jobs unattractive – unfriendly shifts, health and safety hazards, the generally demanding nature of these jobs and the low status accorded to such occupations among our society.

It is therefore important to strengthen legislative frameworks so that all workers are protected and overall labour standards (including wage levels) are improved. This is something the “free market” will not resolve on its own, not in a competitive, pro-business environment such as Singapore. As Senior Diplomat Tommy Koh said in today’s Straits Times: “… is it not true that the market is not infallible? Is it not true that, when there is a market failure, the state should intervene in order to make the world a fairer one?”

The point, ultimately, is to equalize the labour market and increase not only the earning power but also the bargaining powers of the working poor – powers that were gradually eroded over the years. Ensuring they are paid a fair wage that reflects current living costs is just a step in this direction, but one that should be taken.

Many countries around the world have implemented the minimum wage. In fact, discussions have already moved towards the implementation of a Living Wage which, according to Wikipedia, is a standard that “generally means that a person working forty hours a week, with no additional income, should be able to afford a specified quality or quantity of housing, food, utilities, transport, health care, and recreation”. (Now, isn’t this a beautiful vision?)

As a tagline for a Living Wage campaign site says: “A job should keep you out of poverty, not keep you in it”.


TOC note:

Minister Mentor Lee Kuan Yew spoke about minimum wage in October 2009. An excerpt from the Straits Times report titled, “MM Lee: Social divide inevitable”.

HAVING a minimum wage in place here to narrow the income gap could do more harm than good, Minister Mentor Lee Kuan Yew said last night.

In fact, every country that has set a minimum wage over what the market will bear has found that the move cuts jobs, he noted. Employers who are forced to deal with higher staff costs would simply find ways to hire less people.

That is why Singapore’s approach has been to create as many jobs as possible, while leaving the market to decide the right level of pay. The rationale for this is that having any job is better than having no job at all. ‘Never mind your Gini coefficient. If you don’t have a job you get zero against those with jobs. So our first priority is jobs for everybody,’ he said.

Click to enlarge.

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