Tan Kin Lian's Blog: Minimum wage and loss of jobs

Saturday, January 15, 2011

Minimum wage and loss of jobs

I am baffled by the argument put forward by NTUC trade union leaders and their MPs that a minimum wage will cause the low income workers to lose their jobs. I find their reasoning to be convoluted and ridiculous. When the low wage workers lose their jobs, who is going to do the cleaning job and other manual tasks?

If the union leaders are really concerned about protecting jobs, they should press the government to stop the inflow of unskilled foreign workers. The manual work has to be done, and business will have to pay a decent wage to local workers to do these work.

There is the argument that a minimum wage will create a black market using illegal foreign workers to do the work at the expense of local workers. I do not agree. It is easy to prevent such abuse in a small place like Singapore. If the authority is serious, employers will not dare to flout the rules.

Some people said that local workers are unwilling to do the manual work. This is also not true. The local workers, especially the elderly poor, are now doing these work now, but are not getting a decent wage. If the wage is increased and the job is made more dignified, more people will do the work.

Some people fear that a minimum wage will increase the cost of living. This is only partly true. Wage is only one factor. A bigger component are the salaries paid to top managers, high rental on properties and profits to shareholders. A higher wage bill will put pressure on the other components and will not raise the consumer prices by the same extent.

There is also the uncertainty. The MPs argued that nobody knows what will happen when a minimum wage is introduced. I also find this reasoning to be baffling.They only need to look at the experience of other countries. The minimum wage policy is not perfect, but it usually does more good than harm. That is why nearly all countries in the world adopt it. Only in Singapore, do we have capable leaders who think in a convoluted way.

Tan Kin Lian

14 comments:

simple said...: I fully agree with your comments.

The fundamental concept of Minimum Wage to provide an income level for full-time employment adequate at least for basic living cannot be faulted. It is sad that even MPs linked to NTUC which is supposed to represent workers' interest reject it. They should at least support Low TK's suggestion to research on it before drawing an ultimate conclusion to kill off the Minimum Wage solution. The issues involved are complex beyond mere logic and should not be rationalised away by the govt without empirical evidence, especially when Min Wage is a tried system in large number of countries, both developed and 3rd world countries.

The Workfare scheme is a form of selective charity and the idea that workers doing menial work are economic lepers unworthy of fair wage destroys their self-esteem and I find this replusive.

The govt's argument for Workfare is to save jobs especially in marginally viable companies which are critically dependent on cheap labour. This is very short-sighted and bad economic strategy for labour-short Singapore. Such companies should move to countries with ample cheap labour,restucture for higher productivity or else fold and do something else. With a limited local labour supply and a large buffer of transient foreign workers, we should have the avenue and confidence to be able to re-deploy local workers to more viable enterprises which can pay reasonable wagees without govt subsidy in the form of Workfare.

Perhaps the govt is bankrupt of ideas in doing so and fear high unemployment as a result. That's also why it broke the sacred cow of no-casinos.

Minimum Wage and Worfare schemes need not be mutually exclusive and I think funds meant for Workfare can be used to help companies convert to Minimum Wage in the first few years of implementation.
As you rightly pointed out, wages is only one element of total cost of doing business. The govt has been a major driver of inflation in many other cost and a beneficiary. Land prices and hence rental and property prices, fuel and utilities costs and GST, to name a few, are within the govt's control and ability to ease off. Why not these instead of perenially making workers accept lower wages and CPF contributions.

sb; January 15, 2011 12:36 PM
Tan Choon Hong said...: "When the low wage workers lose their jobs, who is going to do the cleaning job and other manual tasks?"

I have been following both sides of the argument and your statement above makes a lot more sense to me than the million-dollar views from Parliament.

As long as we leave it to market forces, Darwinism will prevail as one sector of society will always exploit another. If not for activists from the past, labour would not have enjoyed today's paid weekends and annual leave. These rights were won over decades through sheer grit and sacrifice. The minimum wage is labour's right and caring citizens must strive for its implementation.

Just as there is a premium to pay for a scarce talent like brain surgery, there's a price to pay for doing dirty work. In a just and equitable society, there must be an honest day's pay for an honest day's work in any capacity.

There will be short term repercussions and unintended effects, but ultimately a minimum wage will enable employees to work and live in dignity, whatever their station in life.; January 15, 2011 2:33 PM
Wealth Journey said...: Agreed.

Government's role in the greater scheme of things is to protect the citizens and their well-being.

The needy and lower-segment of the society are the ones that really need government intervention and protection. Free market does not work there when its the workers versus the organisations.

I believe we can take a leaf from HongKong's recent minimum wage legislation and find out why it is feasible in Hongkong but not in Singapore.; January 15, 2011 3:06 PM
DareToAct said...: My friends, this is Singapore INC we are talking about. A company does not sacrifice share price, market cap, EPS, CEO and top management pay packages for the benefit of the company's employees. It buys group insurance (medishield ..) to protect the company from moral hazard, it encourages heathy lifestyle (P.A. Activities) in hope that employees take less sick leaves. It outsources to lower labour cost (foreign labor), invests in better equipments to produce more goods (roads). It makes it unbearable in the hope that certain undesirable employees resign from the company (immigration).; January 15, 2011 7:57 PM
CBD said...: what the union may be saying is that if lower level workers do have a minimum wage law, then foreign workers will not be able to come in to singapore to work. no one to do cleaning, build roads and buildings, serve at macdonald's, etc. why not ? i will do these if you pay me $2000 instead of $700 per month. who need foreign workers ? the same people who say you cannot have better qualfied/experienced foreigners like clinton and obama (paid only US$350k pa) to do their minister jobs (currently paid S$2.1m pa) in future!; January 15, 2011 9:58 PM
ron said...: To: Dare ToAct

Good analogy! spot on!
Its so comforting to hear like minded
ideas fromm others!; January 15, 2011 11:12 PM
Tan Choon Hong said...: Re: Wealth Journey's comment,
"Government's role in the greater scheme of things is to protect the citizens and their well-being."

I came across this remark in a movie, the title of which I can't recall:
"Man invents government for his own protection, but now man needs protection from the government."

This more or less sums up the situation some folks are facing here in Singapore.; January 16, 2011 1:26 AM
Unknown said...: We often relate the necessity of a minimum wage law to a successful business exploiting workers and use it as a strawman to advocate the cause. We seem to calmly ignore the mass majority of businesses, the non-McDonalds and non-Googles of SMEs, where keeping the bottomline black is a month-to-month issue. Any rise in payroll expenses may be the tipping point for many of these smaller enterprises.

Treat labour as a market good. How would you feel if there is a minimum price on rice and all staple food substitutes? Exactly how an employer in some industrial park in Kaki Bukit or Loyang will feel if such a law kicks in. Except that they can close shop, but you can't stop eating.; January 16, 2011 8:30 PM
Gary said...: " How would you feel if there is a minimum price on rice and all staple food substitutes? "

I would feel good if this is the case because I will know how much it would cost me to live on basic necessities and employers/govt CANNOT ignore the realities faced by the workers!

It is ignorant to think that a 'mimimum' wage or price is ARBITRARILY fixed - that is nothing further from the truth. By using all sorts of non-reasons against the need for a minimum living wage for workers for an honest day's work, the employers/govt is simply sending this message to workers: They don't care if you live or die. They are not interested in your welfare or well being. They are only interested in your contribution to THEIR (employers'/govt's) benefit. Therein lies the biggest mistake in attitude and logic - they they can simply ignore the based of a pyramid that is holding them up and keeping them in their position at the top of the pyramid.

There is this saying:
For the want of a nail, a shoe is lost,
For the want of a shoe, a horse is lost,
For want of a horse, a man is lost,
For want of a man, a battle is lost,
For want of a battle, a war is lost,
And for want of a war, a country is lost.

Do you get it?!; January 17, 2011 9:56 AM
Alan Wan said...: Incidentally, I just wonder what is the gross amount of foreign workers' levies the govt collects versus the amount of workfare they provide or the salaries that they pay the Ministers.

Which everway it goes, isn't this a sort of robbing Paul to pay Peter instead of the other way ?

The PAP ministers are just simply devoid of human compassion.; January 17, 2011 5:10 PM
Unknown said...: If a minimum price on food is needed to remind the government and employers the realities of life, I think a change in management is long overdue.

A difficulty in implementing minimum wage laws is deciding the "right" number, for too high a level, the fears of high unemployment and inflation are actually real. Having acknowledged that minimum wage does create unemployment, it should not be hard to agree that regardless of the fixed level, someone's going to get fired. It's just a matter of how many. The minimum wage policy is not perfect and I just hope people can spend more thought on the repercussions and unintended consequences as they are often more elusive than the obvious "benefits". If this is "convoluted" thinking, I'm sure many would agree with me that running an economy is definitely not for the simple-minded.

Given the current situation, I'm greatly in favour of a maximum wage law for civil servants though...; January 17, 2011 7:36 PM
Gary said...: wjsim,

So why don't to tell us in unequivocal terms the adverse repercussions and unintended consequences, you seem so sure about?

At least for the pro minimum wage group the 'benefits' are quite clear. So why don't you specify clearly those dire consequences you seem to be hinting at but stop short of openly declaring them? You can call a spade a spade, by all means. Let the rest hear your jewels of wisdom against minimum wage be the judge whether your claim makes sense or otherwise. Since many countries already have some form of minimum wages why don't you use them to make your points, if you have any to make that is?; January 18, 2011 1:49 AM
Tan Choon Hong said...: To understand why government is not in favour of a minimum wage, one needs to see how EDB pitches Singapore labour cost to MNCs in wooing them to set up shop. There got to be something about the low-end wage aspect. Any one got info to share?; January 18, 2011 2:14 AM
Tan Choon Hong said...: "Adverse repercussions and unintended effects" have been widely aired by the anti MW camp. A popular example cited is increased wage cost, leading to staff firings. Those pro MW think this is a red herring to divert attention from the profit cut when the wage component is increased. Naturally the vested interests (namely bankers, landlords, and builders) will rally round the government, which will also suffer lower tax revenue if MW is implemented.

The introduction of GST, ERP, COE, etc. caused some initial hiccups, but the market self-adjusted, and the sky did not fall out. As economics is an inexact science, even the experts are unsure whether "benefits" of a MW would outweigh the "dire consequences". Only a daring try-out, with Plan B on hand, can tell.

What is heartening is that with their basic needs achieved, a section of society has moved up the "Maslow hierarchy of needs" and see helping the underprivileged as a part of life's purpose. This cannot be said of those anti MW whose driving force in life is the pursuit of profits at all costs.; January 18, 2011 9:39 PM

Saturday, January 15, 2011

Minimum wage and loss of jobs

14 comments:

Blog Archive