Social disparity: Not a Piece of Cake

~ By Elijah Pear ~

There is no doubt income disparity is escalating in Singapore. Debate about implementing a minimum wage law is becoming heated. Nonetheless I think we should take a step back to rethink our positions. First we should reflect on the reasons behind it. Why do we need minimum wage laws? To what extend will such regulations benefit society? How will minimum wage change our lives? Some contend that to reduce income disparity, implementation of a minimum wage law can boost productivity (raises incentives to work) and allow better quality of life for low-income workers. But this brings us the question; where will this increase in wages come from?

Simply said, a business is similar to baking a cake. Consumers spend money on goods and services provided by business. This revenue provides the firm with “the cake”. Top management usually consumes the biggest portion while leaving smaller ones to lower level workers. If regulation demands an increase in wages, what are the possibilities that the top management would give their slice to others? Considerably they would prefer finding ways to increase the size of the cake; increasing the cost of existing goods and services and passing the cost to consumers. Furthermore they might even result to giving away lesser slices of cake by reducing employment, resulting in higher unemployment; exacerbating social disparity.

Nonetheless minimum wages can increase growth as it may put an end to reliance on cheap labour, encouraging firms to discover more efficient allocation of resources. Moreover, minimum wage laws are seen as a standard for employment rights and can promote fairness in wages. Perhaps this reflects conventional views on human rights and liberty. Certainly some countries have implemented such regulations and are ranked high in income equality; however there are others which have yet to solve this crisis.

Basically this is not a simple ‘cut and paste’ strategy towards equality. Singapore is already well-known for its rules that govern the everyday lives of Singaporeans. Do we want more regulations to dominate our lives? Just like baking a cake, plainly adding more ingredients might not promise a unique taste. Instead it is important to look at other factors that may contribute to the flavour. Countries like Finland for instance have no minimum wage laws; on the contrary laws govern the rights of employees to enter collective bargaining agreements with their employers and the government[1]. Unions in Singapore are arguably not as strong, and employees have limited privileges in bargaining power. By just implementing minimum wage, businesses would simply find other alternative means that may infringe on social welfare.

This is not a sole remedy which can be handled with the same poison that framed it (以毒攻毒). Economic measures are important, but this income disparity drives deep into the heart of society.  The income gap is an economic issue with significant moral disputes. We complain about inflation and condemn the government’s culpability. For the same reasons we fancy inexpensive meals; cheap labour, services, fares……etc.

Balancing income is merely an economic aspect. It also involves us making significant sacrifices. Perhaps we may need to assign part of our income to cheap labour we already take for granted; pay more towards a meal for the opportunity cost forfeited by the hawker uncle and aunts. As the saying goes “Egalitarianism requires a moral recovery as inequality is a spiritual crisis”. A good thought to ponder this ANZAC day.