Despite the government’s repeated rejection of the possibility of implementing a minimum wage in Singapore, one look at that wizened old grandpa wiping off your table at the food court, and you start to ask yourself if it really has to be so unfeasible an idea.
Most recently, prominent economist Lim Chong Yah revived the debate when he stated in an interview granted to Channel News Asia that he still thinks Singapore should have a minimum wage.
On the other hand, Singaporeans seem to believe there will be a heavy price to pay if a minimum wage is implemented. But are things really as bad as we’ve been led to believe? We examine several factors:
The key argument Singaporeans make against a minimum wage tends to be the inflationary pressure it could have on the economy. Nobody wants to pay $15 for a plate of chicken rice.
But will this really happen? While there is no doubt consumer prices will rise in the short run as businesses pass costs on to the consumer, studies have shown that a higher minimum wage doesn’t necessary mean higher inflation.
It’s a controversial point, but still worth noting that if minimum wages are implemented to increase at the same pace as inflation, they won’t necessary push up the inflation rate further.
Another argument the government often dishes out is that unemployment will go up if a minimum wage is implemented.
The rationale is that companies will lay off workers or be less competitive if they have to pay their workers more. European countries with high unemployment rates are often cited as an example, but that’s not accurate—these countries’ unemployment rates could be due to other factors, such as pro-employee labour laws that make it difficult to fire people.
What is more, many of the sectors which pay workers dismally low wages are the very same sectors which are suffering from a labour shortage—cleaning, F&B and security, for instance. Raising wages would actually increase the number of willing candidates for these jobs.
Some economists point out that there is no direct link between the minimum wage level and unemployment. Rather, if the minimum wage is too high then in bad economic times this raises the likelihood that jobs will be lost. This can be combated by carefully calibrating the minimum wage to ensure it never becomes unsustainable.
Domestic goods becoming less competitive
Singapore’s domestic market is extremely small, which means we have to rely on overseas markets. We’re the world’s 19th largest export market.
Domestic goods and services would become more expensive to the outside world and therefore less competitive should the cost of labour go up.
Many Singapore businesses are being run very unproductively and use cheap foreign labour as a crutch.
A minimum wage would force businesses to innovate and raise productivity in order to stay relevant. And those businesses that don’t survive might be better off being removed from the market so worthier players can take their place.
There is evidence to suggest that implementing or raising a minimum wage can result in increased taxes. This has been observed in the US and the UK.
Many middle income Singaporeans tend to take tax increases very seriously, so it is understandable that they’d oppose a minimum wage that wouldn’t have any short-term effects on their own incomes, but would increase their tax burden.
It might be unfair to draw a parallel between Singapore’s situation and those of the above countries, though, since the rises in taxes they observed occurred when they raised an existing minimum wage to a level that could have been been unsustainable.
Despite the drawbacks, perceived or otherwise, of a minimum wage, there are many who argue that it is downright unethical to pay a full-time worker anything less than a livable wage.
Even if a country was built on the backs of slaves, that doesn’t mean slave labour should be condoned.
So… is there middle ground?
While we can only try to predict the precise impact a minimum wage would have on Singapore’s economy, given the fact that the economy isn’t looking so hot these days, now would probably not be the right time to make any sweeping changes.
What the government has been trying to do is to help lower-wage workers survive either through handouts, or by raising wages in a targeted, industry-specific manner.
For instance, the Workfare Income Supplement Scheme helps Singaporeans aged 35 years and above earning $2,000 or less get top-ups, 40% of which is received in cash and 60% of which is paid out as CPF contributions.
A 35-year-old would qualify for a maximum of $1,500 a year. $600 of this would be received in cash, which works out to $50 a month. While this is a meagre sum, it enables workers to get a small wage boost without affecting their employers.
The Progressive Wage Model has also tried to push up wages in the cleaning, landscape and security sectors. Entry level security officers now earn at least $1,100 (which, considering their ridiculously long hours of 12 hour days 6 times a week, is still a pittance and would likely be below any proposed minimum wage).
While these measures have gone some way towards alleviating the suffering of Singapore’s low wage workers, there is still a lot more that can be done.
Instead of dismissing outright the notion of a minimum wage, the government might want to start thinking of how to implement one incrementally and sustainably.
Do you think Singapore should implement a minimum wage? Share your views in the comments!