MM Lee: Social divide inevitable (ST 20 Oct)

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MM Lee: Social divide inevitable
Global competition cuts wages at the bottom but boosts those at the top

By Jeremy Au Yong

HAVING a minimum wage in place here to narrow the income gap could do more harm than good, Minister Mentor Lee Kuan Yew said last night.

In fact, every country that has set a minimum wage over what the market will bear has found that the move cuts jobs, he noted. Employers who are forced to deal with higher staff costs would simply find ways to hire less people.

That is why Singapore’s approach has been to create as many jobs as possible, while leaving the market to decide the right level of pay. The rationale for this is that having any job is better than having no job at all. ‘Never mind your Gini coefficient. If you don’t have a job you get zero against those with jobs. So our first priority is jobs for everybody,’ he said.

The Gini coefficient measures the income distribution across a country and is often used as gauge of the income gap.

MM Lee was responding to a question about what Singapore could do to narrow its income gap. Mr Elvin Ong, a fourth year social sciences and business student from the Singapore Management University, had asked him what Singapore could do to help its bottom 20 per cent.

The gap between the haves and have-nots is a recurrent political issue in Singapore and there have been concerted efforts by the Government to do more for the low income group.

Singapore’s Gini coefficient fell from 0.489 in 2007 to 0.481 last year, a mark of a narrowing income gap. If government benefits are taken into account, the figure is further reduced to 0.462.

Yesterday, the Minister Mentor stressed, however, that the problem of a widening income gap is one that most countries – not just Singapore – have to contend with.

And it may be that such a split is inevitable in a globalised world. Global competition, he said, both depresses wages at the bottom and boosts wages at the top.

At the low end, he said that salaries of unskilled workers would be kept low because of competition from cheaper alternatives in places like China and India.

Meanwhile, at the higher end, workers being deployed to oversee foreign operations will naturally attract higher pay and perks like expatriate allowances.

An example of this sort of competition can also be seen in the United States, he said, where a lot of lower-end jobs have been outsourced to cheaper nations.

And though there was talk of passing laws to ban such outsourcing during the last US presidential election campaign, he felt that such a law would mean ‘hobbling their own entrepreneurs’.

Said MM Lee: ‘If you pass that kind of legislation and you don’t go abroad, but your competitors go abroad to lower-cost countries, your markets will shrink.’

The inevitability of an income divide was a theme he returned to later in the night when another student asked him if he was worried about a social class divide appearing in Singapore.

That was unavoidable in a maturing society, he said.

Here, MM Lee cited the example of China. The country, he said, started as a classless society but has gradually evolved to favour those who have the right connections.

He explained: ‘The communists started with a classless society. They chopped off the capitalist land owners and so on – literally chopped off their heads.

‘But in China today, you have the leaders and you have the princelings… They’re well-educated, well-connected.’

He pointed to the family of former Chinese premier Li Peng, who now controls the country’s energy sector. His daughter Li Xiaolin is chairman of China Power International Development, an electricity monopoly. His son Li Xiaopeng used to head Huaneng Power, another energy heavyweight.

Said MM Lee: ‘They probably deserve the job. But if they were not well-connected, they may never be recognised. China is a big place, so you need to be recognised, otherwise you’re just one of one thousand and three hundred million Chinese.’

jeremyau@sph.com.sg