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Minimum wage cannot work

  • Lianhe Zaobao (27 January 2011): Minimum wage cannot work
  • Lianhe Zaobao (23 January 2011): Should have a more precise remedy for minimum wage

Minimum wage cannot work
- Lianhe Zaobao, 27 January 2011

ZB contributor, Ms Hu Aini, suggested that a minimum wage can coexist with the policies that the Government has put in place to help low wage workers (最低工资制还需要对症下药, 23 January 2011).

2.   While we agree with her good intentions, a minimum wage is incompatible with our measures to help and support low wage workers, and goes against what we aim to achieve. As recently discussed in Parliament, a minimum wage policy would compromise the principles of preserving our strong work ethic and culture of self-reliance, as workers will be disincentivised from going for training and upgrading since they are guaranteed a minimum wage regardless of skills, capabilities or productivity. This is against our broader strategy to improve productivity at all levels.

3.   Ms Hu argued that a minimum wage would protect workers from exploitation by employers. We do not agree with this as a minimum wage does not eliminate exploitation. Instead, exploitation will be minimised if we adopt a win-win approach through Workfare, where both workers and employers benefit from better skills and higher productivity.

4.   Ms Hu also expressed concern that employers may pass on rising business costs to customers; this is exactly what could happen if a minimum wage is legislated. Companies which bear the additional manpower costs may pass them on to customers or choose to leave Singapore entirely, taking jobs away from Singaporeans. Instead of a minimum wage, the very workers whom we are trying to help may end up with no wage at all. In contrast, Workfare is paid for by the Government and does not add costs for businesses or customers.

5.   We are glad Ms Hu agrees that current Government initiatives such as Workfare have worked. The well-being of low wage workers has been and will continue to be a focus of the Government. Workfare is a key pillar to help enhance the employability of low wage workers to secure better jobs and better wages as part of a sustainable, long-term solution.

Should have a more precise remedy for minimum wage
- Lianhe Zaobao, 23 January 2011

The Parliament finally started a debate on the minimum wage policy, and came to a consensus. According to media reports, the time spent on the debate and the arguments put forth by over 20 MPs demonstrated the deep concerns of the people on this issue.

According to media reports, Minister for Manpower Gan Kim Yong made clear the Government’s stand that it does not support a minimum wage. The Government is concerned that implementing a minimum wage will discourage workers to go for skills upgrading, increase the manpower costs of small businesses, and result in unemployment.

The crux of the problem lies in the level which the minimum wage should be set at. The objective of a minimum wage is not to raise workers’ wages, but to legislate the protection of workers from exploitation by unscrupulous employers. Hence, majority of the workers and companies will not be affected. In fact, I believed that the debate went on a wrong track when the arguments were focused on raising workers’ wages. It is as if the head was throbbing, and the discussion was on whether the eye drop would help alleviate a headache. If the expectation for minimum wage is to raise workers’ salaries, the minimum wage will have to be set above market rates, and the shortcomings of minimum wage will reveal themselves.

I believe the minimum wage is no miracle pill. It will not resolve the difficult circumstances faced by low wage workers, but it can prevent vulnerable workers from being exploited by employers. Minimum wage is not without merits, it can co-exist with other measures. The Government has rolled out various initiatives to help low wage workers, such as the WIS Bonus. We should see detailed statistics every year, proving that these programmes are indeed working to help low wage workers raise their workers and skills, and benefiting more low income families.

Companies will always strive to lower manpower costs. Regardless of whether there is a minimum wage, companies will try their best to lower their business costs. When operating costs (such as rental, administrative overheads, fuel and raw materials) rise, companies will give marginal pay increments or even freeze workers’ pay in their bid to protect profits.

As Singapore imports most of its resources and raw materials, our companies are susceptible to global price fluctuations. The Government should take measures to control inflationary pressures and help employers cope with rising business costs when the market is over-heating. At the same time, the Government should take the lead in promoting a fair trading environment, be reasonable and transparent in its administrative fees and cut down red tapes to help reduce business costs. When faced with rising costs, employers will charge customers higher prices while lowering their workers’ pay. During such difficult times, vulnerable low wage workers will suffer a double whammy of rising costs of living and lower wages.

The Government has always encouraged its young people to embark on entrepreneurship. However, the businesses it supported generally involves high technology. This poses a high entry barrier for middle-aged low wage workers who are keen to start their own businesses. The high rental cost has already put many small businesses at bay. Saving jobs and drawing a low wage is not the only way to help low wage workers. Have we explored other possibilities – such as helping them start a business to create more jobs opportunities for Singapore?

The difficult situation faced by low wage workers is a global phenomenon, but this does not mean that we should allow the income gap to continue widening. It is impossible for our society to achieve wage equality. However, the wide concerns and assistance different segments of our society have shown that low wage workers illustrated the strong cohesion of our society. This is not an easy balance to strike, but it is a necessary lesson for a responsible Government and society.