Wages: Workfare’s the long-term answer

Dear Ministry of Manpower,

I refer to your Straits Times letter dated 22 Sept 2010.

There is a sizeable segment of our small and open economy that does not compete globally. The coffee shop, the supermarket and the food court are examples of businesses that compete locally, not globally. The argument that the labour market must be flexible for them to stay competitive is thus not valid.

A minimum wage can better reflect the value of the workers’ contribution. For example, let’s say a job used to pay $10 an hour before there were cheap foreign workers. So the work is valued at $10 an hour. Let’s say cheap foreign workers are now available to do the work for as low as $5 per hour. The prevailing wage rate has now gone down to $5 per hour even though the value of the work remains at $10 per hour. In this case, a minimum wage of $10 per hour will help reflect the true value of the workers’ contribution.

So it is not that workers are contributing less than the minimum wage. It is the abundance of cheap foreign workers that is suppressing wages below the value of our workers’ contributions. Rather than worry about our workers being denied jobs that pay lower than the value of their contributions, we should instead worry about ensuring that jobs pay the right wage for the right value.

The threat that companies may move out of Singapore only applies to those which compete globally, not locally. If a coffee shop chooses to move out of Singapore, other coffee shops will take its place. As long as the customer base is local, as long as there are people who wants to drink coffee, there is no risk that a void is left behind and jobs will be lost.

Therefore, in the case of local enterprises, a minimum wage will not lead to a lose-lose-lose situation. It will instead lead to a fair-fair situation. Local companies will have to pay fair wages rather than dirt cheap wages while workers will receive a fair wage for a fair contribution.

Workfare doesn’t solve the problem at its roots, which is the easy availablity of cheap foreign workers. To give an analogy, it’s like instead of plugging the hole through which water is leaking, we try instead to top up the water to make up for the loss through the leak. We end up losing water still. Instead of solving the problem, we may end up creating the adverse effect of employers deliberately lowering wages to get the government to top up.

There is no need to redesign a job to increase its value if it pays the right wage for the right value in the first place. Job redesign should focus instead on work-life balance to ensure that family commitments can be met without compromise to business requirements. One way is to break up jobs into smaller portions to entice more people to take them up. Two 12-hour shifts can be broken into three 8-hour shifts or four 6-hour shifts. There is no loss in productivity as far as output per man hour is concerned. Yet, the shorter hours means that those with family commitments can also consider taking up the job.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: