By Yap Shiwen
With a search for measures to mitigate poverty and manage the growing financial inequity in Singapore, collective bargaining presents a viable model and measure, rather than the minimum wage.
Countries such as Germany, Sweden and Denmark make us of this measure. For example, in Denmark wages and conditions are negotiated between labour unions and employer associations;; Sweden determines this through annual collective bargaining contracts and Germany maintains a minimum wage for specific sectors, particularly trades and skilled labour.
Creating a a minimum income threshold for cleaners is progress in the right direction, but still not enough. The minimum wage is not a subject palatable to the pro-business PAP government, for political reasons. Economically, a minimum wage can potentially result in more harms and greater costs than any benefits, due to the:
- possibility of increased price inflation, as a compensatory reaction by business to increased business costs
- high marginal tax on employers via hiring
- exclusion of low-cost hirers from labour markets
- inhibits firms in reducing wage costs during trade downturns
- SMEs unable to absorb costs, costing small businesses more than larger corporations
Singapore’s Market Structures, Political Overlap & Labour Impact
Singapore has different market structures in different industrial and commercial sectors. For example, the public transport and telecommunications are dominated by Government-Linked Companies (GLCs).
Public transport is dominated in an oligopolistic arrangement, or perhaps monopolistic competition by Singapore Mass Rapid Transport (SMRT), Singapore Bus Services (SBS) Transit and Comfort Delgro, who are price makers. They maintain high entry barriers into the sector, have low efficiency, are highly interdependent and are able to generate abnormal profits.
Due to the relative balance of power, this allows them to mistreat their workers, which resulted in a strike, in response to wage disparities. Due to it’s price maker position in an essential sector, the strength of the SGD (Singapore Dollar) and the availability and access to low-cost foreign labour, SBS was able to underpay it’s workers and impose conditions that they found unequitable.
Similarly, NTUC (National Trades Unions Congress) has also engaged in disputes with their NTUC Income Financial Consultants. This was due to changing the status of employment agents from employer-employee to one of principal-agent, removing their benefits and in effect creating a negative impact on worker’s rights.
Through institutions such as Temasek Holdings, GIC and the Singapore Labour Foundation, all of which have had significant stakes in ComfortDelgro, SBS and SMRT, an overlapping web of interests merging government and business dominates critical sectors of the Singapore economy. This has resulted in cartel-like and anti-competitive behaviour, negatively affecting both customers and workers. It has also created a politically sensitive situation that will require years to resolve, in order to restore greater economic efficiency and competitiveness.
Collective bargaining involves negotiating employment terms between employers and groups of workers, typically a labour union representing workers. Conditions such as working hours, base pay, overtime, holidays, medical coverage and benefits are negotiated between labour representatives and the companies. Practiced in Germany for specific sectors, and negotiated through annual contracts within Sweden in the form of continuous bargaining, the practice has proven beneficial.
Research by economists at Cambridge University concluded that union members and workers covered by collective agreements received a wage markup over their non-unionised and unocvered counterparts, in the range of 5% to 10%. They also tended to equalise income distribution between skilled and unskilled workers as whole. Similarly, the deadweight loss or economic inefficiency associated with this was negligible, in the range of 0.2% to 0.5% of the GDP – a figure comparable to monopoly situations.
Using the Gini coefficient as a correlation, collective bargaining may have helped these countries manage income inequality, despite the growth in income equality over the years. However, this increase in wealth happened over 25 years, during which various demographic and socioeconomic changes occurred.
It would certainly be in the interest of policymakers and bureaucrats to take a look at this measure, amongst other alternatives available, as a way of managing the growing income inequality in Singapore. Income inequality equates to social disruptions and stress within society, amongst other social costs. The costs from such situations are not just social, but economic and political. To prevent such problems from emerging is better and more affordable than to start resolving them once they emerge.
“It would certainly be in the interest of policymakers and bureaucrats to take a look at this measure, amongst other alternatives available, as a way of managing the growing income inequality in Singapore. Income inequality equates to social disruptions and stress within society, amongst other social costs. The costs from such situations are not just social, but economic and political. To prevent such problems from emerging is better and more affordable than to start resolving them once they emerge.’
However in Singapore’s context, the overlap between the labour unions and political interests will make equitable collective bargaining arrangements extremely challenging, given the government’s traditionally strong pro-business doctrine conflicting with the need for employee welfare. The lack of independent leadership among labour unions in Singapore, with an overlap between PAP membership and NTUC leadership over the years, will impede discussion and implementation of an impartial and equitable collective bargaining model for the forseeable future.
Resources & Further Reading
DE Statis. (2014). National Economy & Environment – Minimum Wages. Federal Statistical Office of Germany. (source)
Legal Information Institute.Collective Bargaining and Labour Arbitration: An Overview. Cornell University Law School. (source)
Stand, D.W. (2011). An Overview of Growing Income Inequalities in OECD Countries: Main Findings. OECD Report .(source)