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Thursday October 23rd 2014

7 Reasons Why We Must Implement Minimum Wage

As employers continued to cope with the  recent unexpected 5% drop in their foreigner dependency ratio causing all kinds of manpower mayhew, there is also alot of online chatter about implementing minimum wages to resolve the pertinent manpower issues.

Moreover, some damning statistics from the Ministry of Manpower on the employment figures recently also made me realised that something is very wrong in our country.

For example. last year, the booming economy created 130,000 jobs but 80,000 of these  jobs went to foreigners!

Introduction

One suspects that the majority of the job creation figured largely on service-related work as a result of the two newly-form integrated resorts (IR).

Friends working inside the two IRs have  told me how thousands of Filipinos and PRC Chinese  so far dominated the employment opportunities there – causing our Prime Minister Mr Lee Hsien Loong to eat his own words that the main reason why he wanted the two IRs is because they can create jobs for Singaporeans.

So far, our government has not talk  much about minimum wages during the latest Committee of Supply parliamentary sitting three  weeks ago – meaning that the idea will probably not be  mplemented in the near future.

Many third world countries like Malaysia, China and Vietnam have recently implemented minimum wages – Hong Kong was one of the last few developed countries to do so last year followed by Taiwan.

Of course, the Malaysian Prime Minister Najib was accused of vote-buying when he implemented minimum wages two weeks ago to shore up sufficient votes in preparation  for the coming general election to ensure that the ruling party UMNO stays in power.

Minimum wages is an ideal pro-worker tool used by many countries to ensure that their workers have earn enough when they put in a fair amount  of  work for the day.

But is it so simple?

Many readers have also emailed me saying that if Singapore imposes minimum wages the country’s economy will nose dive as many small and medium enterprises will fold up leaving  thousands of  local workers in the lurch.

Moreover, inflation will hit sky high as employers try to cope with the manpower cost by raising food prices.

I have nevertheless pen down seven reasons why minimum wage should be implemented here bearing in  mind the adverse consequences it may have on our small and medium enterprises:-

1. Ensure that workers have a fixed decent wage

Minimum wages of course will allow a worker to earn a decent amount of money for a hard day out at work.

If not, he is subjected to all kinds of exploitation by employers who have no clear guidelines how much to pay its’ workers - which is what’s happening here.

Our low-waged workers e.g. cleaners and security guards all earn wages below the poverty line.

For example, some cleaners I know earn $600/month working 8-hour shift for six days a week meaning they earn less than $3 an hour.

If you pay say $7.50 an hour, the  pay of course will automatically jack up to around $1300 a month which is decent.

Moreover, miminum wages hopefully will slowly eradicate any wide gap which is very prevalent here  right now as the top 10% can earn as much as 1,000 times  that of the bottom 10% of our population.

In a wonderfully-written Sunday Times Dec 12, 2010 article entitled “Widening wage gap: does it matter?”, reporters Li Xueying and  Zakir Hussain further commented: -

“Singapore’s growing inequality has been borne out most recently by the UN Development Programme’s ranking of developed economies. It shows Singapore coming in second – after Hong Kong – in income inequality.

Singapore’s Gini coefficient – which measures inequality on a scale of 0 to 1 (0 means that income is shared equally among all; 1 means one person has all the income and everyone else none) – for the decade up to this year stood at 0.425, below Hong Kong’s 0.434.

Tracking the Gini year by year, Singapore’s inequality has increased steadily since 2000. That year, it stood at 0.444, before hitting a peak of 0.489 in 2007. It dipped to 0.478 last year because of the recession.”

Hopefully, with minimum wage, the wage gap will gradually narrow and our low salaried workers could take home a decent wage after  a hard day out at work.

2. Improve class division

I didn’t know that I am so poor till I met up with a group of long lost friends recently. Most of them are in the same age group of early to late 50s but their wealth stood out.

Their properties that they are staying in probably figure in the $5 million valuation mark and since I rent a place from a friend staying in Punggol, I must be the poorest church mosue around that powerful top 10% group.

The 3-hour long conversation would sometimes figure on how much are  their properties worth and their investment portfolio so I guess I am at the extreme end of the equation as I hardly have any investment except for my money-losing CPF inveswtment in funds –  and I don’t even own a property here now.

Most of their peers will probably be of the same group as birds of the same kind flock together and that is  why they exclaimed  in shock when I told them that 440, 000 Singaporeans this year qualified for Workfare Incentive Supplement(WIS) – a welfare fund emant for those who are in the low income group. They have to earn $1700 and lesser in order to qualify.

However, the WIS does not really benefit our  low waged workers  very much as a major component of the top up goes to the CPF leaving behind very little cash for the workers. Our workers need real hard cash to tide over and giving them welfare aid in the form of CPF money is impractical as  they can only touch the CPF when they turn 55 years old.

For example, if you earn $1200 a month and  45 years old, you will receive $1000 in welfare aid out of which only $286 is paid out in cash and the rest of  $714 in CPF topup. The details of the 2010 WIS payout can be viewed here.

Granted that the highest payout is close to $2800 for a 60-year-old and above working at a $1000-per-month job but nothing beats earning your own keep without having to apply for welfare money from the CDCs. It just does not help in boosting up one’s esteem and work ethics.

Thus, the highly-touted WIS – championed by our government to help our low waged workers is merely a propanganda tool which is not effective in helping to  bridge the serious wage gap here.

It is also mind boggling to realise that our government is somewhat wary of our major MNC employers and may even be kept at arm’s length due to serious threats of a pull-out from Singapore if the wages spiral  out of hand.

This happened during 1997 when many MNCs pulled out of Singapore due to our run-away wages and the situation only stablised when the 2001 recession brought back some sanity to our wages.

 However,  since then, our wages did not grow much due to the influx of foreign workers which depressed wages and employer-bias  contractual work terms which further hampered wage growth.

Our wages grew by a mere  0.3% for the past decade and if you factored in inflation, we actually have negative wage growth.

Many have also debated whether minimum wage will help bridge the class division.

If the government decides to implement minimum wage immediately and   if I could earn $1500 a month for any job that I work for, it will help me alot as I am at least assured of having a disposable income of around $1200 after minusing the employee CPF deduction.

But will it help  me to close up on the gap with my multi-millionaire friends? I doubt so…as the gap is just too wide. Moreover, each time my friends bought and sold a property, millions of dollars change hands and property investment may be one of the best revenue making business  in Singapore. It is obscene but it works for many people here so far…and probably thats why many foreigners like to buy properties at exorbitant prices recently.

A HDB 5-room flat changed hands last week in Toa Payoh at $800,000+ and who knows, we may see a million-dollar HDB resale flat in the near future.

Nevertheless, minimum wages  will at least help to ensure that the  wage gap won’t be too far apart – now the top brass can earn at least 100 times more than the cleaner. Most developed countries have a wage gap of less than 20 times between the top and the lowest hierarchy rung.

3. Improve local hiring

Many employers have told me that they couldn’t hire locals so they have to turn to foreign labour.

When they told me how much they are paying, I told them no local worker in their right mind will come down even for an interview.

The wage dynamics are simply too far apart between a foreign worker  and a local one.

For $1000 a month salary, a young foreign worker  will fly down the next day and sweat it out for you 6 days a week clocking 12-hour work a day.

They have nothing to lose as back home they are ideally in $100/month labour work also.

Its paradise world here as they could experience working in a first world setting.

I have told employers that if they want to see more local hirers, they have to up their salary  to at least $1500/month for service crew work.

If not, they will have to improve their  productivity with the current lot of workers they have right now.

All along, employers try to spice up productivity by bringing in more cheap foreign workers.

They ended up doing mono-tasks such as being a cashier, waiting on tables or dish washing.

Hopefully with minimum wages, local workers are encouraged to take up such menial work and double up their productivity by taking on more work tasks.

I sincerely believe that minimum wage will help to improve local hiring if the bosses are also good at people management. people sometimes don’t just work in a place for long because of the money – good bosses and conducive working environment help alot too.

However, good management skills can never make up for the insufficient salaries that our  workers currently receive and thats probably why many service-related jobs have to be performed by foreigners.

4. Improve productivity

 Our productivity has being slipping since we started to hire foreigners to do the tasks that Singaporeans shun.

In restaurants, food counters and petrol kiosks, foreigners have dominated these work stations for the past few years and we are subjected to blank stares and strange lingo when being served by them.

Some PRC Chinese replied in Mandarin when they were asked to serve in English frustrating many non-Chinese local Singaporeans.

Though many of them are being trained in government-led English classes, it is difficult to expect them to fully function in a English speaking dominated environment.

Many local Singaporeans have also wondered whether our foreigner workers have caused productivity to nose dive because of their mono-tasking duties whereby one worker will only perform one task.

This is most apparent in a restaurant whereby 15 to 17 foreign service  staff will hover round the eating place waiting for customers.

One will usher the customer to his seat, another staff will ask for the order and one other waitress will then serve his meal. After his meal, he will then pay to a casher – the fourth person who will serve him for a one-hour meal.

A total of 3-4 staff will have serve the customer during his dinner experience and only Singapore can have this luxury due to the cheap manpower syndrome here.

In Sydney where I stayed for close to 3 years, a waiter normally doubles up as the cashier and even clean up after the restaurant has closed.

He has to be extra productive due to the minimum wage factor as he is paid a minimum of $15/hour.

Some are even paid more if he is told to double up in other functions such as dish washing.

In Singapore, whereby foreign workers can come and go freely due to our lax work permit legislations, employers have the luxury of  hiring a platoon of foreign workers toc arry out menial tasks without even having to bother about productivity.

If minimum wage is being implemented, employers have no choice but to hire less workers and expect them to do more -  improving productivity in the process.

Moreover, you can’t expect your $15/hour worker just to peform a single task, he is also expected to do some other stuff to justify his salary.

5. Improve well being

One of the worst thing that ould happen to a worker is the lack of earned wages – even if he works very hard.

Not only is he unable to work well as he is inadequately compensated but he also lacks the motivation to do a good piece of job.

Many local Singaporeans job hop in the service sector as the renumeration is pathetic and many don’t feel motivated to work.

Lack of earned wages affect one’s well being and seriously dampen the psychology for work.

I remembered dragging my feet to work as a social work asst for a VWO many years back – I was only paid $1500/month handling the entry cases to a sheltered workshop for the physically challenged.

Though its not too difficult a job, the inadequate salary did not motivate me to go beyond my passion to serve the community.

I worked for a year and then left for a better paying job - at $2500 a month. I also couldn’t survive on the paltry salary of $1500/month and often found myself out of money one week before pay day.

It was also a struggle at home as my wife has to pay for most of the household bills as I could  hardly even feed myself on the take home pay of around $1100 after deducting the CPF contribution.

The motivation to work is different when one is compensated fairly – for one’s educational qualifications and work experience.

I have heard of graduates being paid less than $2000/month and a master engineering fresh graduates totally  shocked me with her $2200/month salary working in a SME.

Our young graduates have starting salaries which bordered on the ridiculous and hopefully the minimum wages imposed on our low-wgaed worekrs will have a positive effect on salaries of our graduates here.

6. Filter off low end labour-intensive sunset industries

It still puzzles me why our government is still dishing out foreign work permits to low end industries here as we have spoken so well of being a high-end technological society all along.

There are well over a few hundred cleaning companies in company struggling to say afloat as workers are hard to come by. Some are one-man show trying to survive by bidding at ridiculously low price  for tenders in order to snatch the contract – further driving down the wages of their workers.

The larger ones tend to monopolise the hiring pool as they could provide better terms and conditions for their workers.

One can also see many small food chains dotting our giant sprawling shopping malls – often staffed by young third world countries’ workers.

For example at Plaza Singapura food mall at B2, there are many small food stalls manned by foreign workers working almost ten hour shifts.

They have to stand most of the time working and shifting through barbequed chicken wings in hot-smoked stuffy environment.

It is no wonder that many of these foreign workers will not stay on after their 2-year contract expires.

As Singapore tries to move into a high-tech industria;l environment,  low-waged  labour intensive  jobs must be given a short time line.

Depending on foreign labour to staff our low end industries will not help us much moving forward.

We need to continue to push for a high-productive high-tech work environment.

Though some local labour will be affected and our GDP may suffer a dent in the short term, labour-intensive industries will have to go.

7. Improve social harmony

It is common knowledge that our minor races are at the forefront of all the low end jobs.

From cleaners to security guards, they are all well represented perhaps due to their inability to cope well with the taxing academic system from young.

It is hope that  the introduction of minimum wage will help improve social harmony as it will bring  this group up the social ladder.

While working in CDC few years ago, I was bewildered to see a fair equal proportion of our minorities races seeking aid even though their population ratio is just less than 1/5 of our overall population.

Many were there for financial and employment assistance.

Social mobility between the four races probably will have to come from minimum wages which tend to be fairer and its legislative.

Right now, the government makes up for the shortage in wages given by our employers by dishing out Workfare Incentive Scheme (WIS).

There isn’t any statistics showing the racial break down of WIS recipients but I am pretty sure that the minorities races will tend to dominate.

In 2007, however, our Prime Minister Mr Lee Hsein Loong highlighted the widening wage gap between the Chinese and Malay communites:-

Many critics, especially those from the Malay community,  preferred  that the issue be seen as a national one than simply labelling it as  a uniquely Malay problem.

Perhaps, by implementing minimum wage, it will help to alleviate the serious social immobility issue affecting the minorities races.

If not, it will be really tough for someone belonging to the poor minorities  races to come out of the poverty  gap as there are simply too many barriers preventing him from being social mobile.

Minimum wages will hopefully  encourage people to work in all kinds of blue collared jobs that currently are being shunned by local  Singaporeans as you don’t need to have proper educational qualification to take them on.

In Australia, the wage gap between the white and blue collared workers are blurred and moreover in some blue collared jobs such as electrician or plumber, they could earn far more than  those belonging to the whilte collared ones.

A licensed electrician could earn close to A$100,000 per annum by virtue of the sheer lack of such skilled labour and also not many Aussies like to take on such laborious work. If you contact a electrician for service, he will charge close to A$200 for a home visit and thereafter  charegable  per hour excluding spare part cost!

The same thing goes for gardener who charges close to $150 per hour excluding  the plant  cost. I used to help a gardener in Sydney when I was staying there and he paid me A$15 an hour (minimum wage)  for assisting him around.

Right now, our minorities races are being strangled out by the meritocracy rat race which does not help them much as academically they are always lacking behind due to various reasons.

Conclusion

It is hope that our government will seriously consider implementing minimum wage soon.

Yes, some small and medium enterprises will have to close shop especially if they have all along over-depend on cheaper foreign workers to staff their positions.

However, Singapore has no choice but to slowly wean off it’s tradtional dependency on low-waged workers to fuel its GDP growth.

It does not promote productivity and worse of all low-waged workers do not have the motivation to work hard as after all they are inadequately paid further dragging down productivity.

Our wage gap for a developed country is unusually high and as many as 440,000 local workers qualify for our Workfare Incentive Supplement (WIS) – close to 22% of our workforce earning $1700 and below.

It is generally accepted that the average Singaporeans can only survive comfortably if the household earned income is close to $2500 and above – without any  leftover which  impedes retirement saving

The government has chose to top up the low wages paid by our employers to the tune of $3,900 through WIS – annually incurring a  budget of around $300 million for the country.

This year, the government also chose to provide a one-off special workfare bonus equivalent to half of the WIS worker payout.

As WIS is a welfare scheme, many have expressed the reservation that perhaps our country may have slowly gone down the path of welfarism without realising it.

Moreover, it is difficult to envisage how a couple of thousand dollars in welfare  - most of them translated into untouchable CPF money, can help to alleviate the plight of our low-waged workers.

Many will not be able to come out of the bottomless pit – not help by the fact that the country is unwilling to implement minimum wages and thus send the wrong signal to unscrupulous employers out to pay the lowest of wages for it’s workers.

We may also have invariably  created the modern-day George Orwell’s version of Animal Farm here.

Written by: Gilbert Goh

 

Reader Feedback

5 Responses to “7 Reasons Why We Must Implement Minimum Wage”

  1. J Y says:

    Only people over 35 years old are entitled to WIS. Can WIS be implemented to low-income earners below 35? Those at the lower end would need to build up their retirement savings once they start work. If not for the age criteria, I would have receive WIS for the past few years. Though the amount is small, a few years of WIS will add up to a substantial sum for those who are most in need of cash to offset inflation.

    Can low-income earners get Medisave top-ups as well without waiting till they are over 40? Why the govt only focus on older low-income earners and not the younger ones? It is the main reason why many low-income earners are remaining single as they are already struggling to feed themselves, don’t mention about having a family.

  2. I Voted For Kodos says:

    I agree fully with the need for a minimum wage, and it’s advocates need to ensure several specific provisos in the debate.

    * It needs to be based on an HOURLY pay rate – this will ensure that part time workers also fully benefit, and also acts as a disincentive to employers to simply extend even more the long-hours culture that ruins the work-life balance of many Singaporeans.

    * It needs to include foreign workers. This has three benefits. Firstly, it will ensure that jobs current done by Singaporeans are not simply farmed out to foreign workers to evade the minimum wage. Secondly, it will actually improve the employment situation for Singaporeans, since there will be no cost advantage in hiring foreigners over Singaporeans. Whilst some companies may decide to simply close that job down, most will realise that they will still benefit more in the long term by simply paying the minimum wage. Thirdly, it will go some way toward ending the exploitation and abuse of foreign workers, which is not only the ethically right course of action, but will also improve Singapore’s standing in the eyes of the world.

    * It needs to be index-linked. I.e. raises in the minimum wage should be automatic and based on an agreed formula based around an index, to avoid politicisation of the amount, as has happened in the USA in the past. This will ensure the wage will continue to ensure a decent basic standard of living, and that the lowest paid do not continue to fall behind the rest of society. Ideally this should work on a formula of inflation+x% to not only allow those on the minimum wage to keep up, but also do something to gradually narrow the pay gap. An alternative would be have the minimum wage track the salary increases of the top x% of the population. This would have the dual effect of both narrowing income inequality and likely also have a moderating effect on top incomes as well – at least in the private sector.

    * It needs to be age inclusive (i.e. cover workers of all ages) to ensure employers do not simply dump workers of one age group to replace them with another.

    As for forcing SMEs out of business, I would like to see the evidence backing up this position. The same dire predictions were made with the introduction of the minimum wage in the UK in 1999, an economy with similar issues relating to a low-pay/long-hours culture amongst a large group of low-paid socially excluded workers which resulted in a similar “lopsided” growth. However, the dire predictions there were utterly unfounded. The effects on business closure and overall unemployment were negligible, and there was no great leap in inflation.

    In fact the overall economic impact is often positive. The poor put their income directly back in the local “real” economy, since they do not invest overseas or pump money into investment vehicles. They spend it quickly on local goods and services, in shops, on transit, utilities and the like. Thus any increase in their income from a minimum wage will also mostly go straight to work in the “real”/productive economy. This increases government revenue from GST (unlike high income increases, which mostly go overseas or into savings/investments) and also directly benefits local small businesses such as shops, hawker centres and the like, improving domestic, productive economy. Furthermore, workers with a living wage are more attentive, healthier and less-stressed than those preoccupied with managing to scrape together enough money for a bag of rice. Thus they will more productive, attentive, and all round happier and more content employees.

    A minimum wage would also lead to improved quality of life all round. Higher wages mean more money going into CPF accounts, meaning people will feel more confident about seeking medical treatment, improving well-being. It also reduces the pressure to put additional overtime, meaning workers may spend more time with their families, reducing stress related illness and improving their children’s educational chances (and thus, their own chances of escaping generational poverty). It will also reduce the demand for programs such as WIP, meaning more attention and resources can be dedicated to helping the unemployed get by until they can find another job.

  3. jj says:

    Many businessmen would complaint business is poor & they didn’t earn much profits but many still owned car(s) & propertie(s).

    If many SMEs will fold up leaving thousands of local workers in the lurch then long ago when those countries that imposes minimum wages their many SMEs would have already folded up causing these countries with low or zero GDP growth & the street full of homeless beggars.
    Inflation is unlikely be hit sky high alone with rising food prices factor, it could be largely due to rising oil price & property price.

    Businessmen are usually shrewd & calculative. They only cared about maximize the profits & minimise the cost. They will try to pay the workers as less as possible & want them to slog. If few or no Singaporeans want the job then they will try to hire foreigners. When employing the foreigners, these employers always have the mindset that they are giving them a rare chance to work in S’pore & the foreigners will be rich after converting SGD to their own countries currencies, this might not be very true.

    Some might offer you a higher gross pay but it is actually inclusive of CPF contribution & allowances with no CPF contributions. E.g. CBM security. Some will only offer offday instead of OT pay when you do OT, in order to cut cost. When you are on off, your colleagues will have covered your duty despite hectic workload. E.g. Watsons.

  4. [...] I Voted For Kodossays: March 24, 2012 at 1:44 am  (Edit) [...]

  5. sal says:

    The richer will get rich in Spore, they can open a shop n employ a worker for 800 dollars / month. From the cost of living, what is the possible minimum salary for a person to live comfortably… with the current situation most Sporeans don’t have any savings after paying their bills n food.

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