Minimum wage, maximum attention

Dear Straits Times,

I refer to the 13 Jan 2011 report on the parliament debate on the minimum wage.

It was reported that almost all who spoke argued that the minimum wage would diminish the economy’s competitiveness and lead to unemployment for workers. That is not necessarily true. Wage related competitiveness applies to export industries, not to food courts, coffee shops and supermarkets which serve the local populace primarily. The minimum wage when applied to service industries catering primarily to the domestic market will not decrease our competitiveness or lead to unemployment since service jobs like waiters or cashiers cannot be outsourced to other countries.

The diversity in any one sector should not prevent us from asking ourselves what is a fair wage for more homogenous sectors. Categories within sectors like supermarket cashiers, food court cleaners are reasonably homogenous for minimum wage to be considered.

The supposed high wages preceding the 1985 recession has too often been blamed for causing companies to close down and for unemployment. But Page 208 to Page 212 of the book “Management of Success: The Moulding of Singapore” attributes Singapore’s 1985 recession to other factors such as the fall in global demand and fall in regional trade. Other explanations include the appreciation of the Singapore dollar and increased competition in petroleum refining and ship building from the Middle East.

The fact that Workfare is paid for by the Government doesn’t exempt us from asking ourselves what constitutes a fair wage for the respective low wage job categories. How do we know if low wage workers are currently being paid a fair wage? If not, do we continue to let companies underpay them and for the government pick up the tab. Is that right?

It is not hard to imagine a minimum wage that is 25% above the current wage. Using Mr Lim Swee Say’s example of a worker being paid $800 by an employer who is only willing to pay $1,000, a minimum wage that is 25% higher than $800 would be $1,000, exactly what the employer is able to pay but is somehow not paying.

Even if no one is confident that minimum wage is better than Workfare, it doesn’t mean that minimum wage is therefore worse or Workfare is better. Unless we can prove that minimum wage is indeed worse than Workfare, we have no basis to rule it out.