Tan Kin Lian's Blog: Fair distribution of work

Sunday, September 27, 2009

Fair distribution of work

In most countries, there is legislation to ensure a fair distribution of work and rate of pay. The legislation can cover the following:

a) Number of hours worked in a week
b) Minimum wage

Take a country with a work week of (say) 40 hours and a real unemployment rate that is close to 10 percent. The official unemployment rate is usually lower, as many unemployed people are not captured in the statistics.

The unemployment rate can be reduced by legislating a work week of 36 hours. This will require employers to employ 10% more workers and give work opportunity to the unemployed workers.

To keep business cost at a competitive level, the wages of employed people working 36 hours a week should be 10% lower than before (when they work 40 hours a week).

It is difficult to cut the monthly salary of workers. But, if they are on an hourly rate, the adjustment is automatic. To create a flexible work environment, we need to change to hourly rate of pay.

Some employers will find it necessary to get their employees to work longer than the legislated work week. This can be allowed, but the employer should be required to pay a tax on the wages paid for the additional hours. This will give the incentive for the employer to employ other people, rather than ask the existing employees to work longer hours.

If the opportunity to work is fairly distributed to more people, we will have a better society. Most people can find work and get a wage that is sufficient to meet their cost of living. They will have more free time, due to the shorter work week. The free time can be converted into leisure activities and hobbies, and create opportunities for other supporting businesses to be developed. Some people can use their leisure time to do part time work and earn a supplementary income. This will create higher economic growth and a better quality of life.

Tan Kin Lian

14 comments:

chris said...: Mr. Tan,

Are you advocating some change in Singapore's population work system or just a direction you hope it will move to?

I think it is a good idea but before talking about a fair/balance/or the more popular term family friendly working environment, we must first tackle the main problem of rising cost, highly competitive mindset, drop of salary for mid and poor workers and increasing foreign talent policy.

It is hard to implement your ideas to the general population if there is another guy (FT) standing beside a prospective hire, and telling the interviewer he will work for 50% less salary, 25% longer hours, weekends, OT, and no ideas of getting promoted. Why is that person willing to do such a thing? It's because of the high exchange rate of SGD to all other currencies and also the low enter barriers to Singapore.

This is just one of my comments. My ideas to move to a better society includes (in no particular order):
1.) Immigration policy changes.
2.) Education reforms - financial education from secondary school onwards.
3.) Move away from manufacturing.
4.) Implement minimum wages.
5.) Lower cost of housing.
6.) Increase taxes for the top 20% bracket.
7.) Return CPF to it's foremost purpose.; September 27, 2009 11:01 AM
Anonymous said...: I agree with Anon 11.01. Sharing of work can only be a reality without the foreign workers coming into the picture. What is the use of asking locals to work shorter hours and create more job opportunities for foreigners. Sounds like cutting the nose to spite the face.; September 27, 2009 4:52 PM
Tan Kin Lian said...: Hi 11;01 AM
I agree with you that the inflow of foreign workers have to be controlled for such a system to work.
All your 7 suggestions are good. Your ideas are similar to mine. How about writing to kinlian@gmail.com, so that we can develop the ideas further.
Actually, more suggetion was written more as a general economic strategy and is not specific to the situation in Singapore.; September 27, 2009 5:27 PM
Anonymous said...: "....3.) Move away from manufacturing......."

All dead if do it!

Sg lifeline now:
Jurong Island, Oil-Rig manufacturing, NEWater, Solar Plant, Pharmacy...; September 27, 2009 5:30 PM
Anonymous said...: Hi Mr Tan
I will be graduating next year and really worried about getting a job. Many people who graduated before me still looking for job and have to accept low pay.

I like your suggestion and hope that it can be implemented soon. At least, I don't have to worry and can be ensure that there will be a job, even though the pay may be lower for fewer hours of work. It beats getting rejected many times, so my friends say.

I also worry that in many countries, young people can be unemployed for many years. So, if everybody work less, there will be more jobs for new entrants etc.

But, we have to stop the entry of FT into Singapore, otherwise there will always face not enough jobs.; September 27, 2009 5:31 PM
Sim Wei Jian said...: I am only supportive of point 2 and 7. I shall be blunt. I am very shocked to see point 3 to 6 being suggested. It is very dangerous for society in general if we are to proceed with such economic policies.

3) Move away from manufacturing

Singapore should not abandon manufacturing. Manufacturing and the production of goods and services is the only way a country can be productive. The US is a case of overconsumption and the economy moving away from production and manufacturing into financials and repackaging of financial products.

4) Implement minimum wages

This will encourage unemployment and create inflation. A worker is selling his labour hours and his hours and his price cannot be determined by a separate body. Imagine a worker produces $5 of goods and services an hour and you pay him $4. All fair and square for the employer to earn a profit. However, the worker's hours are not magically worth $10 just because the state says so. The employer will simply fire him and look for more productive workers. I'm glad that Singapore has no minimum wage laws. If minimum wage laws are to be implemented, you'll see a rise in umemployment among the lower paid workers, the elderly and part-time workers. You'll be effectively denying the part-time fastfood kid a job to supplement his family's income or the old granny who clears your table at the kopitiam. I seriously hope our society does not go down this path.

If people think they are earning too little, they should improve and upgrade their skills.

5) Lower cost of housing

You can accomplish this by denying or lowering the use of CPFOA or increasing interest rates. Be careful what you wish for :) If you're talking about fixing prices of homes, that's a worst case because it will cause production to slow down and prices will go even higher. I would think the best solution is to increase interest rates. Prices of many things, not just housing will come down...

6) Increase taxes for the top 20% bracket

If you want to improve a society, no taxes. Income taxes encourage the lazy and punishes the hardworking. A large percentage of Singaporeans don't pay taxes after deductions. The sad fact is we should be encouraging the rich and affluent to stay and do business in Singapore. Like it or not, they are the ones that generate employment, why chase them away? Who do you think the IRs and Sentosa Cove are built for?

If you have read to this point, I thank you for your patience. Do voice your disagreements as my economics may be flawed.; September 27, 2009 11:28 PM
Tan Kin Lian said...: It is flawed to say that taxes will discourage people from working. The entrepreneurs will continue to work hard and pay their taxes. Look at the high income earners.

Some top earners will tell you that taxes will discourage them from working. Some people will believe them and make them pay less tax - but this is not true. Do not be fooled by this type of argument.

The disparity of income is so great in many societies that life is so unfair. Higher taxes will help to reduce the impact.

The cost of social services, e.g. education, cleanliness, safety has to be paid, and the higher income earners can bear a larger share of the burden.; September 28, 2009 3:21 AM
Tan Kin Lian said...: When Anonymous 11:01 AM said "move way from manufacturing", he does not mean to discontinue it entirely.

When he meant (if I interpret him correctly) is not to over-rely on manufacturing but to develop the service sector. I agree with this point.

We do not need to increase our manufacturing sector, and bring in more foreign workers at low wages to run these operations. These foreign workers add to the congestion of life in Singapore.; September 28, 2009 3:23 AM
Chris said...: Wei Jian,

3.) yes i mean what Mr. Tan has explained. (sorry if you were mislead as there is a word count limitation in comments).

4.) The minimum wage is important for low wage workers and does not affect mid or high wage. I am not supportive of high minimum wages but something reasonable. Minimum wage has been affected in many 1st world countries without the affecting the so called older workers and teenagers. You can see this if you visit Japan or Australia and know what i mean. Japan is a good example. Even if goods and services are expensive by our standards, the total salary, tax and overall benefits are significantly higher. Please check it out.

5.) Remember, when i say housing i refer to HDB. I have posted a comment separately on housing survey in Mr. Tan's blog. You can read my suggestions there. HDB's role is to provide a reasonable and affordable housing. Imagine that the lowest earner in Singapore (<1000SGD). How can he/she afford a home? The cheapest home is worth > 100k (hdb studio). Is this meaningful? Once again you only need to look at Malaysia which implements low cost housing for the underprivilaged (please dont comment on other corruption problems in Malaysia on this regards as i am just highlighting what other countries are doing). A low cost 3 room flat in KL cost only 30-40k RM about 800-900sq ft with good locations as there are laws of social integration. And YES, i have been into one of those low cost flats...it is about the same quality as some older HDBs in Singapore.

On a separate comment, increasing interest rates has its other issues. You may read it from some Business Economic text books.

6.) You will be surprised that the very very rich hardly pay taxes...they may tell you they pay taxes, but there are many ways for the rich to escape paying them. One very simple example is to register a company and pay yourself very low wages of about 1500 per month. The real profits are kept in the 'firm' and co-operate taxes are about 15%? But 'firms' have other expenses such as wages, bills, overheards, entertainment expenses, etc. Most are non-taxable expenses. This is known as fraud, but in the real world widely practiced.

On another note, rich individuals and co-operations main goal is profit to the higher level shareholders and stakeholders. Do you really believe they are here for the layman?

Once again, all my points are in support of the low - mid level population. So please think in this aspect.

Anon 1101.; September 28, 2009 7:47 AM
Anonymous said...: Hi Kin Lian.

The cost of hiring an additional person does not only come from the wages. The company will have to pay the extra workers compensation. Unless of cause the company reduce the compensation of the other workers.

Regards; September 29, 2009 12:08 AM
120584ltyb said...: Hourly rate of pay is good as it allows employers to adjust payrolls in a flexible manner according to their work output needs, but wouldn't reducing the work hours thus reducing overall salary affect the financial capacity of the affected workers? How then are they going to develop new hobbies (recreation is not cheap in Singapore), upgrade through courses (education here is not cheap either), or spend more family time (aforementioned: recreation is not cheap, more so if the entire family goes out, unless one intends to stay home and basically stare at each other and wait for conversation topics to run out)?

Moreover, everybody has financial commitments like housing loans, education loans, utilities, bills, maintenance etc etc... so it may seem fair to those who get a job because of this, but is it "fair" to those who then suddenly have to worry about handling these pre-existing commitments on a reduced income because their employer decides to "create" job opportunities? Especially those who already live from hand to mouth/house/kids/school.; October 16, 2009 5:36 AM
120584ltyb said...: I agree that FWs and FTs have to be reduced, except for some sectors like construction, because there are just some fellow SGs who are not "unemployed", but rather "don't want to be employed" because the job is tough/dirty/unglam/whatever excuses. IMHO, a lot of jobless people out there do have unrealistic expectations and a grossly inflated view of their own qualifications, experience and abilities (e.g. The retrenched PSLE holding IT goods salesman who fancies himself to be Bill gates, Sim Wong Hoo, or Steve Jobs).; October 16, 2009 5:36 AM
120584ltyb said...: Personally, i would say:

1. Implement minimum wages to ensure even the lowest paid workers get to retire graciously and not like an overworked dog left to die on minimal subsistence. Keep it at a reasonable level that allows the worker to live in relatively comfortable circumstances, though, and it will not deter investors. SGP is not that uncompetitive and wages are not the only standard for measuring that. When did most of us have really low wages anyway? Look at Canada, high taxes but the people earn enough to cope, plus comprehensive and high quality retirement and medical security for even those who are genuinely poor. Don't even begin to tell me about our medifund. here in SGP, we "can die cannot fall sick" and have no retirement to speak of (work till you are 62!).

2. Tighter FT employment measures. Bring in only those who have proven track records as genuine one-in a million top performers and have probably even achieved iconic status in their fields, and not every tom, dick, or harry who holds a degree. What's the point of bringing in so called FTs who work for higher pay, better benefits, all kinds of allowance, yet only performs as much as a local in the same job?

3. Restrict FW use to only menial labour and very low skilled jobs (these jobs are generally shunned by SGs anyway) that are critical to societal needs and keep their wages to no higher than 10 or 20% better than their home countries' circumstances.; October 16, 2009 5:36 AM
120584ltyb said...: 4. For HDB loans, slash minimum income requirements and interest rates, and do away with any need for a guarantor. Increase the repayment period. This should only be available for those buying three room or smaller flats. Limit the scheme to only first timers and increase the period of time that has to elapse (perhaps 20 years or more) before the unit can be sold to prevent and discourage abuse of the system for profits. Don't tell non-home owners who cannot afford one to rent a room or flat outside. Rental rates in SGP are no cheaper than servicing a housing loan, and many home owners don't expect their tenants to supplement the loan repayment. They practically expect the tenant to be paying for their house (e.g. a cheaper three room flat that costs, say, 200K with interest would have a monthly loan repayment of about $555, and that is about how much it costs to rent the average common room in such a flat in SGP).

5. Give us back our CPF. Getting paid a few hundred dollars each month with money that is essentially ours is ridiculous. Some people may not even get to withdraw everything before they die, and what happens if they have no family or beneficiaries to inherit the remainder? Getting the money in a lump sum will also allow retirees to start small businesses if they want and work at a leisurely pace, not slog like slaves for peanuts at their age. It is their business if they want to splurge their entire CPF on ludicrous expenses. The Government should be duty bound to care for every single citizen who had contributed to the economy in their prime years, regardless of how they landed in poverty. A democracy is elected to take care of the people, not micromanage their finances and throw the ball of surviving back into their courts. Who would want to work hard if they cannot truly enjoy the fruits of their labour?; October 16, 2009 5:37 AM

Sunday, September 27, 2009

Fair distribution of work

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