Singaporeans need a minimum wage

December 10, 2008 by admin
Filed under: Chief Editor, Current Affairs, E-Jay's Corner, Financial Matters 

Written by Ng E-Jay
10 December 2008

The issue of whether Singaporeans should be entitled to a minimum wage has cropped up from time to time and sparked heated debates.

Fang Zhi Yuan and Lim Yii Tong of the Wayang Party Club have penned a very thought-provoking article entitled “A minimum wage may bring more pain than relief to low income workers“. The gist of their argument is that the presence of a minimum wage may paradoxically lead to an increase in unemployment, due to the fact that the profit margins of companies employing low wage workers will be reduced, forcing them to either close down, relocate their operations, or restructure their business model so as to reduce the need for hiring low wage workers. This is the same argument that the Government has previously offered.

The Wayang Party folks also opine that “in response to larger labor costs, businesses will try to compensate for the decrease in profit by simply raising the prices of the goods being sold, thus causing inflation and increasing the costs of goods and services produced, hence eroding the gains made by the workers.”

Recent research reports published by the Organization for the Economic Cooperation and Development (OECD) and free market think tanks such as the Independence Institute based in Colorado lend support to these points of view.

But in my opinion, economic and socio-political conditions vary so greatly from country to country that it is nearly impossible to apply the same arguments to every country in deciding against a minimum wage. The arguments advanced by the Wayang Party folks may correctly apply to mature democracies like Australia, New Zealand, France and the Netherlands, or even to fledgling democracies like Hong Kong, but they may not apply correctly to Singapore.

Firstly, office rentals in Singapore are very high due to lack of market regulation and the steep rise in property prices due to large inflow of foreign funds into Singapore. High rentals pose the heaviest burden to businesses next to wages, and is in fact a more fundamental reason why the Singapore economy has become uncompetitive over the years. It is therefore in my opinion far more justified to increase the competitiveness of our economy by attacking the incredulously high office rentals rather than allowing our wages to be kept artificially low by resisting a minimum wage whilst importing a large number of lowly skilled foreign workers.

Secondly, instituting a minimum wage in Singapore is not likely to lead to a wage-inflation spiral due to the fact that inflation in Singapore is influenced more by import prices rather than domestic demand.

The wage gap in Singapore has grown very wide over the years. In my opinion, it is truly a lack of social justice for the Government to allow corporations to pay their workers less than would be needed for their families to live a humble but decent life, and yet pay their top executives fat bonuses year in and year out. If corporations refuse to pay their workers a decent living wage, I feel they should also force their top executives to forgo their bonuses.

The institution of a minimum wage in Singapore would not necessarily lead to businesses relocating their operations, because countries like China, India, Vietnam and Thailand have much lower cost structures even without us having a minimum wage. If businesses wished to relocate due to cost factors, they would have done so already, with or without minimum wages for employees.

Ultimately, I believe the question should boil down to the kind of society that we are trying to create and the kinds of businesses and models of free enterprise that we should encourage in Singapore. If a business or a corporation has to close shop simply because it is compelled to pay a minimum wage to its workers, perhaps we should ask if this is the kind of business or enterprise that we would like to see flourishing in Singapore. Shouldn’t we be compelling private enterprise to move up the value chain and reduce their dependence on cheap labour?

The PAP Government believes that it is more practical to assist low income workers through tax relief or direct cash subsidies instead of instituting a minimum wage. However, these measures have thus far been quite ad hoc, and it is not clear whether low income families have been sufficiently helped by the Government in this regard.

Much more needs to be done to help our working class citizens secure jobs and lead a decent life, beginning with eliminating GST for essential items like food and giving them a head start in the job hunt against foreigners who neither have to serve National Service nor support their families in high-cost Singapore. In my view, a minimum wage would also go a long way toward helping them and would not be detrimental to our economy.

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5 Comments on Singaporeans need a minimum wage

  1. Singaporeans need a minimum wage « The Wayang Party Club of Singapore on Thu, 11th Dec 2008 8:31 am

    2. [...] Sgpolitics.net Singaporeans need a minimum wage [...]

  2. The Singapore Daily » Blog Archive » Daily SG: 11 Dec 2008 on Thu, 11th Dec 2008 11:35 am

    3. [...] Discourse – Sgpolitics.net: Singaporeans need a minimum wage – Wayang Party: How the Tripartite alliance undermine the collective bargaining right of Singapore [...]

  3. The Singapore Daily » Blog Archive » Weekly Roundup: Week 50 on Sat, 13th Dec 2008 11:02 am

    4. [...] of Singapore workers (Part 1) (Part 2) – To Fix a Mocking Peasant: Blog Topics – Sgpolitics.net: Singaporeans need a minimum wage – Where Bears Roam Free: Freedom of Expression – The Double-Edged Sword – Anonymous_X: Family [...]

  4. My take on the key highlights of Budget 2009 : Sgpolitics.net on Fri, 23rd Jan 2009 5:56 am

    5. [...] Hence, in addition to directly helping low income households and working class Singaporeans by rebates and budget handouts, the Government must do more to protect their rights and enable them to compete for jobs on fairer terms. The case for instituting a minimum wage in Singapore has been argued here. [...]

  5. My take on the key highlights of Budget 2009 : Ng E-Jay’s domain on Wed, 28th Jan 2009 6:00 am

    6. [...] Hence, in addition to directly helping low income households and working class Singaporeans by rebates and budget handouts, the Government must do more to protect their rights and enable them to compete for jobs on fairer terms. The case for instituting a minimum wage in Singapore has been argued here. [...]

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