Minimum Wage

Posted: 28th September 2010 By Admin

Since I became leader of the Reform Party in April 2009 I have made the introduction of a minimum wage in Singapore one of our main policy pledges (see the link below for RP’s 19 main policy pledges):

Since 1998 the average incomes of the poorest 20% of households have fallen by around 20% after inflation. However this is undoubtedly a substantial underestimate of how far real incomes have fallen for poorer households.

The government measures inflation by the change in the consumer price index (CPI). This measures the change in the prices of a basket of goods consumed by the average household. This basket represents the items that the average family buys in the course of a week. However the basket of goods consumed by the poorest 20% is very different from that consumed by the average household. Food, transport, housing and other basic necessities represent a much bigger percentage of household income for poorer households. These items have risen in price much more than the average over the last ten years.

Also the CPI fails to capture the rise in housing costs because in Singapore our statistics department uses a notional equivalent rent for owner-occupied housing. The UK and other countries have moved away from this to a method measuring the change in the costs of an average mortgage and also incorporating a measure of depreciation costs. Since all HDB flats are on 99 year leaseholds and the life of an HDB block may be no more than forty years this needs to be reflected in the CPI. If we take an average HDB property then it loses one year of the remaining lease with each year that passes or 1/x where x is the number of years remaining on the lease. As the prices of HDB flats rise and the average lease gets shorter depreciation costs rise as well.

Taking these factors into account, average incomes of the poorest 20% of households may have fallen by up to 30% since 1998.

Why has this been so? Here the blame must be laid on the PAP’s open-door policy towards the employment of foreign labour. What should have been a way of attracting workers with special skills that Singaporeans lacked instead turned into a means of preventing wages from rising as rapid economic growth used up the pool of available workers. As a deliberate result of PAP policy, Singapore’s potential labour supply increased from our population to include most of Asia’s unemployed and underemployed masses. Far from rising, real wages of the lowest 20% were significantly depressed. Price signals were prevented from working as they should have in a market economy and there was no incentive for employers to invest in raising the productivity of the workforce. As a result our productivity performance over this period was one of the worst in the developed world. Real GDP per hour worked grew by only 1.1% p.a. over the period 2000-2008 while US GDP per hour worked grew by 2% and South Korea grew by 4.2% over the same period.

By adopting a minimum wage the Reform Party is ensuring that there is a floor below which real wages cannot fall and that employers focus on boosting productivity rather than relying on ever cheaper labour. Asia has a huge pool of underemployed and unemployed workers and without this protection real wages of unskilled labour in Singapore could continue to fall for years, if not decades. As leader of the Reform Party, I also want to couple a minimum wage with caps on the number of foreign workers, who compete directly with Singaporeans for jobs. Exceptions will be made for those with special skills that Singapore lacks. My own philosophy is pro-market and pro-business, as is the Reform Party, and we are certainly not opposed to economic growth. The Reform Party just wants to ensure that we are focused on the right measures, e.g. growth in real median incomes or in output per hour worked, rather than just on a crude GDP measure which has no relationship to the welfare of ordinary Singaporeans.

What sections of the population would it cover?
The Reform Party intends that the minimum wage should cover everyone, with the exception of foreign domestic workers. We may have a lower minimum for students and young workers and for those over the age of 55. The incomes of the latter can then be topped up through our proposed Guaranteed Minimum Income, just as they are now by Workfare.

What level would it be set at?
The Reform Party would want to conduct further research and consultation before it set the level. A possible initial level is around $5-$6 per hour though this could be raised over time in line with the CPI and the growth in average wage rates and taking account of broader measures of unemployment among the resident labour force.

Arguments against the Minimum Wage
Recently there has been a lot of discussion in the Main Stream Media of the arguments for and against a minimum wage. Again this follows a pattern that has been established since the PAP government’s Productivity Budget of 2010. Since 2009 as leader of the Reform Party I had been pointing out the productivity problem and stating that it was to a large extent due to the PAP’s cheap foreign labour policy. When the Budget came out it ignored what we had been saying and presented it as the government being aware of the problem all along and now moving swiftly to correct it. As usual there was no credit given to the Reform Party or acknowledgement that without political competition or an Opposition mistakes by the government would never get corrected.

Thus it is no surprise to see discussion of the merits of a minimum wage in the MSM given that I have made it one of the Reform Party’s main pledges since last year. It is also not surprising to see Minister of State Lee in his blog on the Ministry of Manpower website rejecting a minimum wage on the grounds that it may hamper the employment of low-skilled workers. However I find his arguments misleading given the fact that the labour market in Singapore is not restricted to Singaporeans but in fact encompasses much of low-wage Asia. On our house to house visits we meet many older workers who are unable to find jobs anymore because of competition from younger cheaper foreign workers and reduced to driving taxis. These people may not be directly helped by our minimum wage proposal though they would be by our proposed curbs on foreign workers where their skill set is already readily available in Singapore. Many Singaporeans who have been discouraged from looking for work may come back into the labour force once wages stop being artificially depressed by the foreign labour influx. And employers will have a greater incentive to use labour-saving machinery and automation, thus raising productivity.

The Minister says that low-skilled workers are better helped through Workfare. However the Workfare scheme is not only costly for the taxpayer. It is not related to need as it increases directly with earnings from employment in an effort to preserve the incentive to work. Most of it goes into CPF so it does nothing to help lower-income workers immediately who may be struggling to get by. The Reform Party prefers a minimum wage which preserves the incentive to work and puts a floor under wage costs for employers rather than perversely providing an incentive for employers to cut wages further. The Minister also mentions the Workfare Training Scheme. The Reform Party has put increasing spending on education and training at the forefront of its policies and we would continue to expand schemes for the retraining of low-skilled workers provided they could be shown to be of real benefit.

Without a minimum wage the real incomes of the bottom 20% of households could continue to decline. In addition the effects of the PAP’s liberal foreign labour policy are being felt only by this group but by all those below the top 20-40% of households.

The Reform Party is committed to the introduction of a minimum wage. We also want restrictions on the entry of foreign labour where Singaporeans already have the necessary skills.

The coming election will probably be a watershed. Which vision of Singapore do you prefer?

    • The PAP vision which increasingly seems to be of Singapore as a low-cost low-wage economy run as a company where the population of foreign workers outnumbers substantially the Singaporean element. Though the government talks about a limit on total population size of 6.5 million, it is clear that the dynamic of the PAP model requires that our population continue to expand indefinitely; or

    • The Reform Party vision which is of a high-wage high productivity economy where less emphasis is put on GDP growth and more on increasing GDP per hour worked. A country not a company where the welfare of Singaporeans comes first. It‘s up to you to decide. Vote wisely.

7 Responses to Minimum Wage

Anthony Ho on

Yes, it is a wise decision to introduce minimum wage because Singapore workers have for many years been exploited by employers in broad daylight. Cost of living have outrun wage increase. An Indonesian lady said to me her husband told her the rich is getting richer and the poor is getting poorer in Singapore. I asked how did her husband to come to such conclusion. She reply her husband is doing business here and everyday he mix with businessman here and from the way the rich people spend their money compare to the salary the lower income Singapore workers receive. Fews years back someone wrote to Straits Times forum page and that person calculate taxi drivers here actually earn $3.50/hr. On average a taxi driver in Singapore earn about $1.5k to $2.5k/month working 9 t0 12 hours per day. If take into consideration taxi drivers have to work 365 days/year, no 7 days annual leave, no 52 Sunday off, Saturday work full day, no 11 days public holidays and no sick leave, i think that person calculation is correct. Hereagain, few years back a group of 20 chinese national got their diploma but chose to stay and work in Singapore as kopitiam helpers and they were paid $1000/month. This is exactly why so many Singaporean is out of job. Easy available cheap labours so much so that many were caught hiding in our forested areas. Recently a man from Bangladesh came to Singapore in 2000 as an engineer. His was paid $2.7k. He said compare to engineer salary the $2.7k is much higher here. In year 2004 he decide to take up Singapore citizenship and the government offer some kind of scholarship but i have forgotten what type of job he work as after graduation but definately a much high post that engineer and his salary now is $4k. But i am surprise why he is not happy with his present salary of $4k. He later explain to me and it goes like this: Globalisation have brought many western country to invest in India, China and Bangladesh. Technology transfer have improve the quality of engineering job and so is the pay. Today the engineer pay in Bangladesh is $4k, the same as his present higher post salary but for him to go on a holiday with his family in Thailand he has to think twice. His engineer friend back in Bangladesh can holiday in Dubai without problem. I again why. He reply it is because of the different cost of living. I therefore support Reform Party minimum wage policy.

Chan on

My suggestion was on topic :
a) $16 billion for R & D.How many jobs are given to 100% Sporean,PR and FT
b) The Malaysia transfer of PRIME land-who is given the green light to suck the funds out from SPorean–NO body check n question whether it is the puppet or human being.
c) The extension of retirement age , why lock up Sporean funds till they are poor and dead?
d) The infracstucture are public money, the PAP has taken these many years from the people into the pocket of their MINISTERS as CEO or Directors of so many companies
e) As a MP, why they are holding other Corporate positions fully paid and yet have highest number of MP in a small city.
f) Why the Minister allows neighbour country man to work without permits daily at varies checkpoint has NEVER STOP them.
g) Hawkers are FT,what is the Minister doing about it.These FT are increasing the prices so why are we Sporean force by their cultures

Meganathan on

I strongly agree with the above said. I am Singaporean with a family of 5. Myself, my wife, son and mother & sister. I am working as a relief guard. But my perm job is Safety professional. Due to the employment of foreign talent and their lower wage its difficult to get a job in my industry. The bosses of the companies told me during interview to adjust to a lower pay if not he will rather employ an indian from india or bangladesi. For my job the market value is from $4k – $4.5. But now they are paying $2.5k. If i go to other country to work i might get more than $10k. But i have no choice cos my stays here. I took up all the necessary courses to upgrade myself to get a higher pay but end up jobless. A bangladehesi or INdian from india has only 1 or 2 certs relaTING to the job gets the job with a lower salary. If this is the case why do PAP encourages Singaporeans to take courses to upgrade ourselves. Its unfair to us Singaporeans. Since i have no choice i worked in a company with a pay of $2.2k only. All my management staff were foreigners. Mostly does not have the necessary qualifications to work as a safety but they were my superiors. Imagine take wrong instructions from them and i have correct it myself and they got angry for not following instructions and got fired. When complined to Ministry of Manpower, there was not a proper answer given. I really hope for a political change in Singapore. I trust Reform Party as respect Mr. J.B. Jeyarethinam. He is the idol of politicians. I show the respect to his son. I hope Singaporeans wake up their ideas of politics and vote for the right person!

Cheryl on

I doubt that minimum wage alone will raise productivity. It risks being viewed by companies and investors as a form of protectionism, and this will hurt Singaporeans in the long run when they depart for greener pastures overseas. Rather, I feel that minimum wage policy needs to be combined with some sort of incentive to make industries and individual companies’ systems more technology-intensive.

Tay on

Manpower chief also said the same thing, min wage will drive up costs and companies away from Singapore. Bearing in mind that labor is not the only cost, the govt could look at reducing taxes, land or rental costs. Importing foreigners and keeping wages down is a step BACKWARDS for Singapore!

man_on_street11 on

Dear RP,

Well done! PM Lee has finally acknowleged PAP is not perfect!!!

To drive home the point about foreign labour to our voters, please ask them to look at their own dept and company to compare the number of singaporeans vs

foreigners including malaysian PRs & contract workers. Could your website add a poll to gather statistics from the public about foreign labour?

Eg: In my IT Section, there are 13 foreigners including 5 malaysian PRs and 8 singaporeans = 8/21 * 100% = 38%. That means only one third is Singaporeans!

Are our local Poly and University not producing ‘good enough’ IT professionals that they have to hire foreign labor? I don’t think so as companies only

prefer to hire cheap foreign labor which thus drive our singaporeans’ salaries and values down!

I think foreign labor should only be considered for skills not available in singapore! Many countries like australia and nz are already practising such

scrutiny now to safeguard their citizens’ value!

As for the worth of outlandish minister’s pay, could you compare the average Singaporeans’ pay with the minister’s pay?
Eg: if average man’s pay = $2000 and minister’s pay is $100,000 (conservative estimate),
That means % of average singaporeans’ pay = 2000/100,000 * 100 = 2%.
Thus, we can measure the ROI in paying so much to our Ministers!

Does our minister really deserve the high salary we are paying them!!! Are they really worth what they claim?
Are we getting value for our investment on our ministers???
How can we justify paying such a high salary to them?
There must a benchmark for us to measure their worth to see if they deserve the high salary they are being paid.

Please keep up your good work!!!

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