Tan Kin Lian's Blog: Minimum wage in Malaysia

Thursday, August 26, 2010

Minimum wage in Malaysia

Read this article.

My view
I am in favor of a minimum wage in Singapore. We should pay more for our services and labor. When other people can earn a decent wage, they will have more money to spend, which is good for other types of businesses.

If we pay more for our services, we will have less money to spend on houses and cars. The prices of these items will not escalate out of proportion. We will have a more balanced economy. People will have more money to spend on art, culture and sports, instead of expecting freebies to be given by the government.

We will not have the uncertain situation that was experienced with the ticket sales for the Youth Olympic Games, F1 and many other events.

6 comments:

JRT said...: If a minimum wage is imposed, it will inevitably increases business costs. People will have to pay more for the goods and services, assuming that the increased business costs can be transfered to the consumers

However without a min wage structure, business can be more competitive and that can perhaps be translated to cost savings to the consumers

Unfortuantely, i don;t see that happening in Singapore. We get to engage cheaper foreign labor and foreign talent, but the costs remain the same and in many goods and services, price actually increase.

The winners are eventually the businessmen, the company, the foreign labour, foreign talent and the government; August 26, 2010 5:14 PM
AB said...: My view is that the root of the problem is not just the wage of the low level workers but more importantly is the income gap between the top and bottom.

Having a minimum wage is one step towards helping the bottom, but will be ineffective if the top income increases much more and the income gap keeps increasing.

Hence I think we also need a maximum wage, or some policy that directly acts on the income gap.; August 26, 2010 9:05 PM
Tan Kin Lian said...: Hi AB
It is not possible to impose a cap on the maximum wage. Many decades ago, there was a high tax rate, say more than 80%, on income at the very high levels. This effectively placed a cap on the top incomes. I believe that this type of high tax regime is necessary to ensure that the income gap is kept at a reasonable level, and that property and asset prices do not reach sky high levels.; August 26, 2010 9:09 PM
Unknown said...: Minimum wages in every country have improved business by increasing the market.

When you have more people who can afford to buy your product, your company will do better and the trivial increase in cost will be offset by the huge increase in sales; August 27, 2010 12:14 AM
C H Yak said...: Interesting opinions from AB & Mr Tan.

I think minimum wage at the lower end is an absolute "yes".

I do not know what AB meant by "maximum wage" ... the real top end or say around the 80th percentile.

There was an interesting article by Thomas Friedman in mypaper (19 August 2010). Someone also sent me a link here :-

http://www.nytimes.com/2010/08/18/opinion/18friedman.html?_r=1&hp

There is also a critic here :-

http://www.cepr.net/index.php/blogs/beat-the-press/does-thomas-friedman-have-to-talk-to-qsenior-economic-policy-makersq-to-get-so-many-things-wrong

I had put up a related post in my blog :-

http://de-leviathan.blogspot.com/2010/08/property-bubble-investment-trap-part.html

There is an interesting point in his article about how to solve one of the 3 structural problems facing the US economy ... as carried in Mypaper.

"There is only one way to deal with this challenge: more innovation to stimulate new industries and jobs that can pay workers US$40 (S$54) an hour, coupled with a huge initiative to train more Americans to win these jobs over their global competitors."

I think this is generally where the 83th percentile is.; August 27, 2010 10:47 AM
hyom said...: I am sorry this is another issue that I disagree with you.

I am sure you have the best of intentions for the poor. However, I do not think it will be effective because it is very hard to set the right minimum wage.

If the minimum wage is set too high, it will create unemployment to people whose value to the labour market is worth less than the minimum wage. No employer (unless he is your father) will pay a worker more than what he thinks the worker is worth. Anything more will be charity. It is not fair to expect charity from bosses because they set up companies to make money, not give away money. In a capitalistic economy, a minimum wage which is set too high will lead to higher unemployment among the young and the old. The young will be hit because they still have not accumulated enough work experience to be worth more than the minimum wage. The old will be hit because their market value has depreciated below the minimum wage over the years. The most seriously hit will be the poor because they are the group with the most number of people whose market value falls below minimum wage. Instead of helping the poor, the minimum wage may end up raising unemployment among the poor.

If the minimum wage is set too low, one might as well not have this rule in the first place. Why scare off investors and businessmen unnecessarily?

Because it is so hard to set the optimum minimum wage, I think we should leave wages to be set by the invisible hand of the free market than the well-intentioned but clumsy hand of bureaucrats.; August 31, 2010 10:59 PM