Minimum Wage - The Necessity for Capitalism

Recently, there is a discussion on minimum wage in one of the public forums on income disparity/ gap.

Well, the headline put up by Singapolitics screamed "Minimum Wage is not the solution to wealth gap". Within this report, it was reported that Minimum Wage dominates the forum while Nicole Seah reportedly said, "If we were to impose the minimum wage, then what’s going to happen? Are business owners willing to stay put?"

I find it quite disturbing reading the report because apparently, the headline itself is an oxymoron. How could the panelists or the report try to make that special claim that Minimum wage is not the solution to wealth gap when it is NOT supposed or meant to be used as a tool for that purpose in the first place? For a start, wealth gap itself, is not about income gap. The concept of wealth is totally different from income, though they may be correlated. Well that is not the crux of the matter.

It seems to me that either the forum or the report is trying to "discredit" or "write off" the issue of minimum wage in such a ingenious way.

The issue of Minimum Wage is about FAIR WAGES for the lower income group who may have little bargaining power in the labour market that make them more prone to exploitation. It is also called as "Living Wage" in some places.

The fundamental concept is that if capitalism is left on its own unregulated, it will become "exploitism". This is especially true for the vulnerable group of low wage workers.

In Singapore's context, the liberal foreign workers policy has in fact aggravated the situation of pure exploitation. The exploitation happens not only to local citizens but also to those transient workers. PAP government cannot just keep both eyes closed on such issues which are becoming potentially a big time bomb for us.

Such living wage as minimum wage, is to make sure that the lowest percentile of 10% to 20% of our workers would not be exploited and that their honest labour will provide them with an income that could sustain their livelihood in Singapore.

Throughout history, we know that revolts or revolutions will always start with hungry peasants due to various reasons, with ultra feudalistic exploitation being the main culprit most of the time. Thus, in a capitalist system, in order to prevent instability, a living wage as minimum wage for the lowest wage workers are a necessary regulation.

Will minimum wage policy chase out foreign investments? Most unlikely. We must always remember that such policy only affect the lowest 10% to 20% of the workers at most. The fact is that most MNCs do not employ workers at this spectrum of the labour force. The recent implementation of minimum wage in Hong Kong did not create any significant impact on business closures at all. In fact, Hong Kong is negotiating an increment of their minimum wage after one year of implementation.

Will the implementation of minimum wage affect prices? Maybe yes, maybe not. As minimum wage policy will only affect those companies employing low wage workers, not all sectors and prices will be affected. It will also depend on the levels of minimum wage being set as well. If businesses could still earn a decent profit after implementation of the minimum wage, due to market competition, they may not be willing to increase prices. In fact, even if businesses are to increase prices to transfer the higher cost to consumers, it will not be an increase to facilitate full transfer of higher costing.

Will minimum wage be "the maximum wage" for these workers? The experience in Hong Kong's implementation has shown that many companies, especially restaurants, which are thought to be affected by minimum wage policy, have to employ workers way ABOVE the minimum wage. This is due to the shortage of labour. It basically means that even with minimum wage implemented, market forces will still dictate wages as well and it is possible for low wage workers to earn more than minimum wage.

Should we implement minimum wage for foreign transient workers as well? Yes. Else, the minimum wage will lose its effectiveness as local Singaporeans will lose their jobs to foreign workers. I have touched on this point in my other postings before. In fact, a minimum wage implemented together with the foreign workers levy applied would tilt the balance towards low wage Singapore workers.

The implementation of minimum wage will definitely affect local SMEs more than MNCs. However, it would provide the incentives for local companies to increase their labour productivity through various means.

For example, I find that in the construction sector which is more labour intensive and dependent on transient workers, labour productivity can be increased by more investment in machinery.

The crux of the matter is about how to set a FAIR WAGE to reflect a Living Wage, instead of whether we should or should not have a minimum wage policy.

There are many studies and methodologies derived to calculate FAIR WAGE. You can find some examples here at this website. For Hong Kong minimum wage negotiation, academia, various labour unions and employers groupings have gone through extensive discussion with FULL DATA provided by the government. Well, you may not please everyone but as long as consensus is achieved, the policy kicks off with the promise of yearly review.

I hope that politicians (from both ruling and opposition parties) should not confuse the issue of Minimum Wage with Income gap or disparity, least with "Wealth Gap"! And I definitely hope that the usual "bogey man" scare tactic of "business will close down, MNCs will leave Singapore" should be discarded forever as it does not make any sense for such assertion when Minimum Wage only affects 10% to 20% of low wage workers, not the whole spectrum of the labour force. Such bogey man scare talk is only fit for kindergarten politics.

Goh Meng Seng