For many years, I have always been against a Minimum Wage in Singapore. Govts shouldn’t set wages, that should be left to the private sector to pay a salary that’s reasonable, effective and fair, in relation to their ability to profit. And indeed it has worked here for many years.
Unfortunately once the Govt here opened the floodgates (circa 2002-3) and allowed the private sector to go for cheaper foreign labour, all hell broke loose. Salaries of the average Singaporean instead of keeping up with times, have instead decreased. In fact when I employed cleaners and dishwashers from 1992 through 1997, I paid them higher or equal to the same pay now – between $1000 – $1400. So why are people today earning the same as nearly 20 years ago? Because of the floodgates! And all the while costs have gone up. $1200 on average in 1992 could go rather far for most people, even last the whole month and have a bit of savings. $1200 today, can probably only last you 2-3 weeks each month.
So is Minimum Wage needed here now? Personally I hope not, but unfortunately because of the dire situation caused by the influx of cheaper labour, it does seem necessary. There’s no way the average Singaporean can survive on salaries as little as $35-40 a day, even perhaps at $50 a day or at $5-6 an hour. I’m shocked to learn that some in the very bottom rung, like cleaners, road sweepers and garbage collectors earn even less, barely $1000 a month or lower. How can they cope? Even if they get some form of benefits from the Govt it’s not enough. Transport, health, the cost of living, and most ominously – the prices of HDB flats have gone up. So yes, something must be done to assist them and the Minimum wage looks like the only option left.
But in reality, this will again create problems. As the article suggests, a Minimum Wage or salary increase has to come from somewhere. Inevitably this means that prices for goods and services have to go up. And for smaller firms and even small businesses like hawkers, this means their profits will go down. The only way to maintain their current rate is to increase prices, or they have to absorb and sustain the dip themselves. This Minimum Wage will likely have adverse effects also, a price increase could very well mean that sales will go down, as people decide to go for cheaper alternatives, buy less frequently or forgo altogether. This can lead to the next likely outcome – these smaller firms and businesses will fold. Lesser profits and higher employment costs, means that lesser investment will go into these sectors.
And who suffers in the end? The poor and those at the bottom! No doubt a Minimum Wage is prescribed, but jobs will be harder to come by. And for those who can find work at this new wage structure, they will also find that costs in correlation with the Minimum Wage have gone up. It could very well all lead back to square 1, and they find themselves no better off than before when there was no Minimum Wage. Worse, because of the effects it has on the labour market, they cannot find work, even though a higher wage than before is mandatory.
So what’s the solution? Principally, since it all started because the Govt interfered in the private sector to increase their taxation revenue from new businesses and investments, by allowing cheaper foreign labour, it falls back on them to solve the mess that now exists. They have to re-introduce the previous policy of ensuring and protecting jobs for Singaporeans by only allowing foreign labour into areas where it’s absolutely necessary. For other industries, it has to be very stringent, not just MOM’s toothless policy of making firms advertise in the “Jobs Bank” for a month or so for Singaporean workers, or just a token show of trying to find local workforce. But it’s not going to be easy, once you’ve allowed companies ‘to taste and get addicted to’ this cheaper foreign labour ‘drug,’ it’s going to be hard to wean them off it.
Secondly, they got to find other ways to increase/retain taxation revenue or rent collection/levy taxation, from the current policy of encouraging businesses and investments to set-up shop here and then allowing them to hire cheaper foreign labour at will in order to sustain a profit. A Singapore first policy must not only be encouraged but enforced. The Govt has to still encourage investment and businesses, maybe tweak tax breaks or some other measures, but they must make it clear that profits through cheaper labour is frowned upon, if not disallowed.
Lastly all these will take time to bear fruit, or to return to the pre-floodgate policy, where the private sector themselves set the prevailing market rates for salaries. It was rising in correlation to rising living costs all the while until the Govt intervention. In the meantime, a short period of Minimum Wage has to be at least encouraged if not enforced. The standard should be set at a minimum $6.50-7 an hour or perhaps a base salary of at least $1350-$1400. Once enough job protection is provided for Singaporeans, the Minimum Wage can be scrapped or not enforced officially, only encouraged.
So to answer the title question – yes if things remain where they are – a Minimum Wage is necessary, but it’s also a very double edged sword. It will inevitably affect the labour market, industry and investment. So it cannot in my view be sustainable in the long term. It’s only a measure to protect the Singaporean worker. Eventually it has to be recalled once its usefulness is no more. Because as the Forbes article suggests, it will eventually drive up costs and cause many smaller firms to fold, even remove the very jobs for lower paid workers, that it’s supposed to benefit. Those at the bottom will be happy to note that jobs they normally work in, all have higher salaries than before. But their joy will be short-lived, because these jobs are now much harder to come by, and instead of at least having a job at lower pay, now they don’t even have one.
This commentary was first published on Anyhowhantam.
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