Minimum wage: The problem or the solution?

(Part 2 of the Singapore Census 2010 series)

by Leong Sze Hian


I refer to the recently released key findings of the Singapore Census 2010.

What is arguably the most glaring change in this census, relative to the previous ones, is that over the last decade, the number of permanent residents (PRs), foreigners and citizens grew by 88, 73 and 8 per cent respectively, to 541,000, 1.3 million and 3.2 million respectively.

In other words, PRs grew 11 times more than Singaporeans in percentage terms!

What does this mean for ordinary Singaporeans?

One major implication, may be that the huge influx of non-citizens may be a significant contributing factor to the trend of declining wages for lower-income Singaporean workers.

Minimum wage

Obviously, one possible solution to mitigate this trend, is to have a minimum wage.

In this connection, I would like to refer to the article “NTUC chief opposes minimum wage” (ST, Jan 13).

In the article, labour chief Lim Swee Say was reported as saying, “How would a minimum wage lead to job losses? He gave this example:

Take a worker who says he needs to be paid $1,400 a month, an employer who says he can afford to pay the worker only $1,000 a month, and a government which sets the minimum wage of $1,200″.

“When that happens, a less-skilled worker who is paid $800 a month is more likely to lose his job than a higher-skilled worker earning $1,100”, he argued.

Minimum wage means no-wage?

I fail to see the logic of the minister’s remarks, because when the minimum wage is set at $1,200, both the formerly paid $800 and $1,100 workers would be paid $1,200. So, why would the $800 workers be more likely to lose his job?

Unless the company’s business requirements result in laying off one worker – which has nothing to do with the setting of a minimum wage.

Even if there is no minimum wage, the worker would have been laid off anyway.

Minimum wage means maximum wage?

Mr Lim also claimed that if minimum wage was implemented low- wage workers can ‘forget about’ annual increments.

Can the minister give us data from any countries that have a minimum wage, to support his argument?

In this connection, since the real wages of the bottom 30 per cent of Singapore workers have generally declined over the last decade, and even the median real wage has only increased by about 1.1 per cent per annum, I believe countries that have a minimum wage, have generally had higher wage growth than Singapore.

Mr Lim also said:

“The employers will adopt the position that actually, you are worth only $1,000, but under the law, I’m forced to pay you $1,200. Since I’ve already met the requirement of the law, there’s no way I’m going to give any increment. So, a minimum wage will always end up being the maximum wage for low-wage workers.

But where is the data from other countries to support this statement?

Interesting, any employer in other countries who does what the minister says, may end up with low productivity, low morale, and possibly less business as consumers may be less inclined to buy from such companies!

In this connection, it may be precisely the fact that Singapore does not have a minimum wage, that may have contributed to our negative productivity growth in recent years.

Take years to implement?

Mr Lim also cited fellow MP Madam Halimah Yacob’s speech earlier that some countries spent several years reaching a consensus between workers and employers on raising the minimum wage for their sector.

“By the time they’ve agreed on the increase, the cost of living has already gone past them”, Mr Lim said.

Lim Swee Say contradicting himself?

Didn’t the minister say almost in the same breath in his earlier remarks that “it’s a solution that can easily be implemented by a stroke of a pen, but actually, we don’t believe it will serve the interest of the low-wage workers?

Is the minister contradicting himself?

Good or bad examples?

The two examples given, of two cleaners who managed to increase their pay from $650 to $800, and $800 to $1,050, respectively, after skills upgrading and training, may be the exception rather than the norm, especially for the second worker who was given wider duties to coach other cleaners.

Contrary to the argument that the above two examples show that a minimum is not necessary, what they may actually highlight is the plight of low-wage workers – that many are getting only about $650 a month, down from around $800 about five years ago.

Taiwanese worse off than Singaporeans?

In the article “Why Workfare is Better Than Minimum Wage” (ST Jan 13), Manpower Minister Gan Kim Yong claimed that:

Next in Taiwan, the adjustment of the minimum wage level has been a contentious issue. Between 1997 to 2007, the minimum wage in Taiwan remained constant for fear that higher labour costs would affect economic competitiveness.

The manpower minister’s above remarks, ignores what I believe to be that relative to Singapore, Taiwanese workers’ wages have increased more than Singapore’s in the last decade or so.

Manpower Minister Gan Kim Yong

Maintaining the minimum wage does not necessarily mean that low-wage workers’ wages remain stagnant. After all, even if one’s wages remain stagnant, it is still better than Singapore low-wage workers’ declining wages.

No minimum wage – the root cause of problems

As for Mr Gan’s claims that workers may end up receiving less because employers will not want to pay a salary “that is higher than what is justified by the productivity and skills of their workers”, in my view, this is one of the primary reasons why employers in Singapore may not focus on productivity improvement, and workers are not motivated to re- train because the end result is perpetually declining wages despite skills upgrading – because there is no minimum wage!

Mr Gan also said that if businesses cannot compete, they may choose to move to another country. Shouldn’t this argument apply to rentals, COEs, electricity tariff, and other business costs too, instead of just labour costs?

Finally, the problem with Workfare, is that it does not apply to those below 35, only 28 per cent is in cash (72 per cent to CPF), and 100 per cent is to the CPF Medisave account for the self-employed.

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