Professor Lim Chong Yah, whom you probably remember for writing your A Level Econs. textbook, is flexing his (intellectual) muscle. He’s proposed a wage restructure, to narrow Singapore’s income gap. And what a gap that is; economists investigating it can practically kayak across it. In this article, I contemplate the impact of the professor’s restructure. Bear in mind, it’s just an opinion: I don’t measure up to the Professor, who knows his economics better than an ah beng knows the inside of Zouk.
The Changes Proposed
Professor Lim Chong Yah, one of the big names in the 1970’s wage restructuring, wants another shake-up. The reason is Singapore’s GINI Index, which is hovering at 0.47. Just so you know, above 0.5 is when we start reinforcing the front door and extinguishing Molotov cocktails.
The professor also worries about our dependence on cheap foreign labour (He was not specifically referring to me, and how I can’t do my laundry without my maid).
The changes he proposed are:
- A three year wage freeze for people earning $15,000+ per month
- Gradual pay raises for people earning under $1500 a month, also over a period of three years
- For middle-income earners, a pay hike of 25 – 33% of that received by low income earners
I suspect “mass execution of investment bankers” could join that list, but SAF won’t waste bullets. Let’s look at the possible impact of these changes, should they happen:
1. Prevents Potential Social Problems
You probably know it takes money to make money. The rich deal with amounts of money so huge, most of us have a snowball’s chance in hell of joining their game.
I mean, do you have enough money to develop a condo? Can you lend enough to fund a start-up? Precisely: You’re not in the picture.
The bottom rungs of our economic ladder are made of soggy cardboard. They don’t permit your climbing. And if it gets worse, low income earners will get sick of it. They’ll decide there’s no legitimate way to compete with the rich; and then our police officers had better have good medical insurance.
When the income divide gets too huge, we open the doors to a whole host of social problems. Gambling, drugs, fraud, Vanilla Ice fan clubs, you name it. Professor Lim’s drastic solution might be a painful electrical shock; but it’s being delivered to an ailing heart patient.
2. Fewer Frequent Revolvers
There are good reasons we’re seeing more frequent revolvers (people with out-of-control credit card debt). Financial discipline and education are key amongst them; but so is income disparity.
Barring freak occurrences (grunge in the 90’s), high income earners set lifestyle trends. They’re the ones who decide the status of iPads, overpriced jeans, and cars that compensate for impotence (e.g. Ferraris). The other classes are trained, almost from birth, to idolize and emulate high income lifestyles.
Now, add our income disparity and easy availability of credit cards, and you’ll see the problem. This is why most banks love income gaps: It causes low income earners to buy on credit. And because they’re buying what they can’t actually afford, they’re putting themselves in perpetual debt.
By making products a bit more affordable, we put a slight dent in this debt problem. But of course, narrowing the income gap is not the sole (or even the most crucial) solution to this issue.
3. Greater Fairness in Housing
In my opinion, there is nowhere the income gap is more obvious than in housing. Even in hospitals, means testing for children is based on where they live (based on the Annual Value of their guardians’ property).
The big worry is that, when the rich get too rich, they’ll start snapping up every piece of property. Hey, they’d be the only ones who could afford it. And since there’s always more poor people than rich people, the minority of the populace will own the majority of the land space. That would be a disaster. It’d be…oh, totally like it is today.
Well in that case, the restructure can stop it from worsening. If this keeps going on, we’ll be in a situation where everyone’s practically a slave to a rich landlord. The only thing lacking would be collars around our necks with names like “Fifi”.
In short, narrowing the income gap will make homes more affordable. And the poorer aspects of society will get a bit more choice when property shopping.
4. Helping the Poor Without Robin Hood Measures
Robin Hood measures are when we take from the rich, and give to the poor. A considerable upside to Professor Lim’s proposal is that, unlike a welfare system, the rich don’t transfer any of their wealth (via taxation).
Now I’d derive great joy from kicking the ass of some Corona sipping trust-fund baby and rifling through his wallet… but that’s bad for business. Overtax the rich, and they might pack up and live elsewhere…taking their cash with them. And I do like their cash, even if I could care less about the actual rich people.
This wage restructure would provide for the needy, without giving them hand-outs.
How do you think the wage structure would affect you? Comment and let us know!
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