I'm going to talk about minimum wage today after I have read Gintai's article [
link] and totally disagree with it.
Let me begin with the right settings and the right mindset. First of all, I will like to point out how our government likes to remind us about "context" we bring out the wrong chart about wages.
Singapore's leaders had long justified their high salaries by insisting they were necessary to attract the best managerial and leadership talent to public service. They insisted that it is probably a bad idea to expect that enough good politicians and civil servants will fill these positions even though they can make a lot more money doing something else.
So why are the top earners in the private sector earning so much money? Since Gintai is quoting everyday items, I shall do the same. Let's imagine the amount of wealth generated each year as full pizza, shared among 10 people. The first man sliced the pizza into 4 quarters, gingerly place one quarter of it on a plate, smile at the 9 men and then walks away with the rest of the pizza, still warm and tucked safely in his pizza box. The remaining 9 men were left looking at each other, wondering how to divide the remaining quarter among themselves. That represents how wealth is divided in Singapore.
The above example illustrated that the only way to ensure remaining men gets a guaranteed (however thin) slice of pizza instead of fighting among one another feeding off scraps is to have the first man taking less and leave more behind for the rest. The PAP government's solutions are based on creating a bigger pizza or even a second pizza but only to see the same situation happening each time - the majority of the men left with little to share. In such a situation, talks of implementing a minimum wage is not only unnecessary but impossible. I never understand why members of the public even bother to discuss about minimum wage where they do not understand the big picture. You can argue that creating bigger pizzas translate into higher base for workers, even if they still share that 1/4 but how much bigger is the pizza can become? Is our GDP going to double year-on-year?
I am not quoting examples about minimum wages from other countries here. It is unnecessary because each country has their unique circumstances which does not match our own in Singapore. Why are people arguing for Singapore to adopt a framework because the others were using it. To put it in football terms, a minimum wage structure is just another formation a team can use to win games. Just because the other teams are twating every opponent team using a 3-4-2-1 formation does not mean you will have the same success implementing it, especially taking into consideration we have only 1 star player and 10 other undernourished players who cannot even finish a 90 minute game.
Now we have our tummies filled with pizza scraps, I'll take a few minutes to respond to Gintai's Char Kway Teow's logic. He said in this blog post:
I’ll cite another simple illustration. A plate of Char Kway Teow easily costs $2.50. Why some customers willing to pay more even up to $10 per plate of Char Kway Teow. Consumers willing to pay higher price cuz there are more ingredients and definitely taste better. They feel it’s worth the $10 especially if there is XO or abalone added? So there is a demand and supply even though it’s expensive. What if the government decides to set a minimum price for a plate of Char Kway Teow? If the price is set at $2.50, it serves no purpose since the cheapest Char Kway Teow is already set by the free market mechanism at that price. What if it is set at $5? Now you can only eat a plate of Char Kway Teow at $5 by “legislation”! Many hawkers selling Char Kway Teow will have to close shop unless it is worth the $5 consumers willing to pay. Nobody will want to eat a plate of $5 Char Kway Teow if it’s not worth that amount. Those consumers will just switch to other food instead of Char Kway Teow. On the surface, it appears that setting the minimum price of Char Kway Teow is helping the poor Char Kway Teow hawkers. Do you think it is so?
It seems that Gintai does not understand a minimum wage policy. When there is a policy is place, it will not just across a profession but covers the whole spectrum of every industry in the economy. That actually means your Nasi Goreng, Chicken Rice, Hokkien Mee etc. will have a minimum price similar to your plate of Char Kway Teow. With all things equal, Char Kway Teow hawkers will not suffer due to consumers switching to other food. What will happen is that consumers will try to eat out less frequently and force themselves to come out with productive, clever ideas to cope with their meal needs in spite of their busy work schedule. Translate that into the economic situation , it means that companies will have to push themselves to become leaner, more creative and more productive. No doubt, that will reduce jobs in the short term but when the companies evolve to become quality entities that create wealth by being better instead of exploiting the cheap masses, new quality jobs will be created later on with certainty.
Example 2 from Gintai;
Now let’s take another direct example. Currently security officer is paid at about $5 per hour. 12 hours is about $60. If the minimum wage is raised to $7 per hour, there is no incentive for him to upgrade his skills in terms of his job scope. Why should he? It is better that the security officer made effort to upgrade his skills to earn that extra and hence become more productive. If he is well trained and able to perform his job professionally, most employers are willing to pay the extra dollar. There is also the incentive for him to upgrade his skills to match that extra dollar. From $5 to $7 is about 40% wage rise which also enables him to cope with the inevitable inflation and rising costs of living. The WorkFare Wage Supplement given out every quarterly by the government to low wage workers is another laudable scheme. My mother working as a cleaner in a local supermarket is a beneficiary.
This is a classic example used by the NTUC of Singapore. That workers have to do a lot for a perceived wage increase, masking the fact they have already been underpaid for decades. Let's talk about the upgrade of skills. How do you define skills in Singapore? Certification. It used to be a scenario like what Gintai painted, an incentive to train and upgrade. However these days in Singapore, across all industries, it is almost mandatory for workers to be made to go through courses and be 'certified' to perform their work. As a project manager in construction, I attended many courses that my Bangladeshi workers did. Most of these courses were ceremonial courses that passes the worker at the end of the day so long he turns up for classes and passes a test with plenty of 'tips' given. Among the 40 odd workers under my charge, I can promise you I've never seen any improvement in the level of productivity, efficiency or safety in a single worker after he attended a course. There will be no exception even if you make Singaporeans or Malaysians go through the same courses. This isn't a nationality issue but a fundamental one. So what are with left with? Plenty of money spent but nothing of worth created.
Who pays for the training? Sometimes we pay it ourselves. For example IT professions who need to keep their MCSE updated every few years. In some cases companies will sponsor their employees for the courses. In reality, sponsoring is far from truth because the company will be able to pay the employee more if they do not need to upkeep their regular training. The ridiculous part is not how authorities make training mandatory but the way they profit from it. They force employers to get workers to be certified before they are considered legal to perform work, by doing so create a new training industry and nice jobs count to add to the employment statistics. In reality, that is just dividing the pizza a little thinner for everyone. Always refer back to the main pizza if you are confused about the situation.
On the surface it seems perfect to allow a wage system that has no minimum and maximum limits to allow meritocracy in full flow so that the best people always rise to the top and therefore their talents can be used to push the country forward. (We are not going into how the the best people can eventually turn meritocracy into nepotism today.) Referring to the pizza situation, the Singapore yesterday left 9 men to share a quarter slice of the pizza. Today, with the constant influx of foreign workers to fight for jobs in PMET sectors as well, we now have 15 men to share a quarter of the pizza. NTUC is now telling these 15 men that they have to prove themselves (training, certification) to decide who gets a very thin slice of pizza and who feeds off the crumbs. We call the successful ones 'beneficiaries of the scheme' veiling the situation that never changes:
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