Professor Rappa discusses the hot topic about minimum wages in Singapore.
Lee Kwan Yew (LKY) would not have approved of the Minimum Wage. He believed that public policies that move the country and its people towards a Welfare-type existence will result in citizens ending up the poorer. In fact, as late as November 2020, when more than 90 per cent of countries had long adopted a minimum wage, Singapore continues to lag behind. In place remains the 2012 Progressive Wage Model (PWM).
In the early 1980s, we had to study Lim Chong Yah’s books for the A levels, and he is still making the same arguments, perhaps quite rightly. For example, in 2012, Lim argued that “the Singapore economy to be put through “shock therapy” to address the widening income gap. His proposals then included freezing the salaries of top earners for three years and instituting the minimum wage system” 1
Whose economic arguments would Singaporeans at large support, Professor Tommy Koh or Manpower Minister Josephine Teo? Professor Koh argued in 2018 at the IPS Dialogue with the Minister that other Asian countries had implemented minimum wage without negative consequences of unemployment. Had she listened to him; less money would have been need to have been drawn down from Singapore’s national reserves.
The Minister did however note that employers may prefer to pay minimum wages instead of higher wages for more experienced workers. But surely employers do not only take lower wages into account when hiring employees. Her belief is definitely not new.
Professor Milton Friedman the liberal American economist once said that for "minimum-wage laws to have any effect at all, their effect is clearly to increase poverty." Does minimum wage cause poverty? Clearly, as I discussed this at a Security Studies Seminar at SUSS. In fact, I said: “Minimum wage does not cause poverty. Poor planning and lack of foresight added to those who greedily desire excessive salaries causes poverty. Yet, when labour costs rapidly exceed business costs, the market tends to allocate cheaper workers to perform the same jobs while more expensive workers are forced to exit the market”. 2 But should we only rely on the invisible hand of a market economy that may cause more long-term harm than good?
There is no scarcity of labour in Singapore as some economists believe. Indeed, according to Linda Lim and Irene YH Ng, the “PWM, through which the Government has chosen to do this, has so far proved too little, too late”; 3 while more MPs are calling for a faster implementation of the PWM. But would it be a case of too little, too late?
Nevertheless, there are several PAP government Support Schemes for various Singaporeans at different stages of the Life Cycle. These include Workfare Income Supplement (WIS) Scheme, Comcare Support, and Silver Care Support. There is also the monthly pay-out for those aged 65 and above from the CPF as well as various occasional subsidies based on household type. Those living in private properties receive much less than those living in two to five HDB government subsidised flats. Hence, the PAP government has not sat on its laurels and for the most part can be said to be doing well in terms of assisting the poorer and lower waged-workers. But can they do better? Would the PAP government willingly support the Workers’ Party’s suggestion to have a universal minimum wage of S$1300 for all workers?
Three positions present themselves in this article: compassion, LKY’s work for pay only axiom, and the living wage. Should Singapore’s economic policies be tinted with compassion for the poor as MP Jamus Lim has argued or should we retain the old Lee Kuan Yew model of pay for work, and work for pay. No work, no pay. This leaves workers in non-essential jobs and older workers in a sand quarry.
Does the PAP government have a heart in formulating and implementing economic policies? And has the government not already done more than other Southeast Asian countries? Only time will tell. The gap between the richest rich and poorest poor is insurmountable. Some spend thousands of dollars on blue ribbon cuisine while others eat Maggie Mee and char kway teow on a weekly basis.
For me, I would prefer if there was a living minimum wage of $2,200 or about half the average wage of most Singaporean workers. Such a living wage would certainly lead us into a welfare-state like situation: it is better to have most Singapore workers living at a decent, civilised level, rather than waiting for ad-hoc payments and handouts without predictability.
Such a living minimum wage would in effect only cost the government less than ½ billion Singapore dollars for each year over the next five years before we overcome the full blast of COVID19.
1 Lim, Chong Yah. 09 April 2012, "Shock therapy II revisited". Address to the Economic Society of Singapore.
2 Janice L and Yong J Y, 13 June 2020, Today Online, "The perennial debate in Singapore on minimum wage". Accessed via: https://www.todayonline.com/big-read/perennial-debate-singapore-minimum-wage
3 Linda L, Irene N, 14 October 2020, Channel News Asia, Commentary: Singapore’s poorest earners will benefit from expansion of Progressive Wage Model but some conditions must be met. Accessed via: https://www.channelnewsasia.com/news/commentary/progressive-wage-model-minimum-versus-singapore-low-income-13271802
Antonio L Rappa is Associate Professor and Head, Management and Security Studies, School of Business, Singapore University of Social Sciences.
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