Why The Fight For Minimum Wage in Singapore is Pointless

561
8698509567_6fc3770c1e_n

The minimum wage is an issue that just won’t die in Singapore, even though MPs have “killed” the issue on numerous occasions by raving about how great Workfare is for low-income workers. Unfortunately for them, the minimum wage seems to be the Freddy Krueger of social issues – it just won’t die.

 

Why is that?

It’s partially because politicians haven’t done a very good job of explaining why our current system is so superior to the minimum wage models used by most other nations. And it’s also because many people don’t know too much about the minimum wage to begin with, or if they do, it’s only one side of the argument.

What Is the Minimum Wage?

In short, the minimum wage is a law stating the lowest possible amount an employer can legally pay an employee, whether it’s on an hourly, daily or monthly basis. In theory, it’s also supposed to prevent employers from turning the workplace into a gulag/sweatshop full of underpaid workers by punishing them with fines and prison time if they break the minimum wage law.

The idea behind the minimum wage was to create a system that reduced worker exploitation by establishing a “minimum” wage that allowed workers to afford life’s necessities (food, housing, clothing, etc.) without having to work beyond the standard work week.

What’s interesting is that even in countries without a minimum wage law (Finland, Austria, Denmark, etc.) it’s still possible to get an “informal minimum wage” for workers in certain industries. How? Because of a little thing called “collective bargaining,” where unions negotiate with employers and even strike for minimum wage.

Note: About striking for your rights in Singapore, unless you’re looking get first hand prison experience for a prison-themed drama you want to pitch to Channel 5, read the Trade Unions/Trade Disputes Acts.

What Are the Arguments For a Minimum Wage?

Proponents of a minimum wage in Singapore believe that it’s the only way to protect workers at the lowest end of the labor spectrum – those making $1,000 or less every month. This includes cleaners, retail staff, food and beverage (F&B) workers, construction workers, airport baggage handlers, etc.

Those in favor of the minimum wage also argue that the market exploits the lowest-wage earners, who no matter how productive they are will not see their wages raised because market forces only affect certain jobs/industries.

For example, we can look at the wages of hawker center cleaners, although one employee might perform much better than another, there’s no guarantee that he/she will be paid better.

Here are the three of the most common arguments for a minimum wage:

  • Reduces Worker Exploitation: Proponents believe that with a minimum wage, employers who blatantly exploit the labor of the most vulnerable of workers (the elderly, young adults, women, and foreign workers) will think twice with fines and jail time as penalties.
  • Reduces Reliance on Foreign Workers: Proponents believe that if you raise the minimum wage of low-income workers (such as foreign construction workers), it will tighten the salary difference between foreign and local workers – making it more difficult for employers to rely heavily on foreign employees.
  • Boosts Worker Productivity/Morale: Proponents believe that increasing the pay of workers making low hourly wages ($3.50-$5.00+) not only improves the ability of workers to afford life’s necessities – it improves their productivity and morale as well.

What Are the Arguments Against a Minimum Wage?

Opponents of a minimum wage in Singapore believe that it’s actually more harmful than helpful to low-income workers because it’s not based on employee performance, but a government-determined value that doesn’t take into account an employee’s productivity.

Those against it also argue that paying everyone a set minimum does a disservice to workers who earn more per hour because they do more, and that pay should always be determined by both the market and work performance.

Here are the three of the most common arguments against a minimum wage:

  • Increases Inflation: Opponents believe once you raise the hourly pay of employees, it will cause employers to raise the cost of their goods and services to make up for the additional overhead expenses – increasing inflation.
  • Increases Unemployment/Decreases Demand for Employees: Opponents believe that if employers are forced to hire employees at a higher hourly wage, they will freeze hiring and reduce their number of existing workers to maintain their profit margins in order to stay competitive – increasing unemployment and decreasing demand for employees.
  • Decreases the Competitiveness of Domestic Goods: Opponents believe that if a minimum wage drives up the cost of locally produced goods, it will be foreign competitors who can undersell their goods an edge in the market – decreasing the competitiveness of domestic goods.

Does Singapore Need a Minimum Wage?

That’s a question that will still be fought over well into the future without any real resolution until voters either clamor for it or National Trades Union Congress (NTUC) members request it unanimously. But the odds of that happening are about as likely as the President inviting me to the Istana for a cup of tea. It ain’t happening!

Some argue that Singapore already has a minimum wage in the form of Workfare, an income/CPF supplement for Singaporeans earning less than $1,900 a month. Depending on your age and income, you can receive up to $3,500 additional each year (40% in cash, 60% in CPF contributions).

This can technically be considered a minimum wage of sorts, but let’s say you’re 35 years old and qualify for the maximum yearly allowance of $1,400. Most of that amount will go towards your CPF (60%=$840) with the remainder being disbursed monthly (40%=$560) – or an additional $46.66 a month.

But to qualify for Workfare, you need to be at least 35, so this isn’t really a universal “minimum wage” because it excludes one group of low-income earners – adults aged 18-35 who work low-paying jobs. And next to our elderly workers, are the most in need of wage assistance.

If Singapore adopts a minimum wage, the 18-35 group might be the one that has the greatest impact on the hourly/monthly wage set – as a wage increase that is too high has been shown to increase unemployment of that group in particular. There are plenty of developments happening on the employment front, so make sure you follow us on Facebook as we keep you up to date on new developments

Do you think Singapore needs a minimum wage system? Share your views with us on here!

Image Credits:
CT Senate Democrats

Source: http://www.moneysmart.sg/money-talks/why-the-fight-for-minimum-wage-in-singapore-is-pointless/