Tharman is wrong

January 13, 2014
Singapore Democrats

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Singapore Democrats

Deputy Prime Minister TharmanShanmugaratnam said lastweek that “a minimum wage system has crippled countries in Europe and the United States, particularly in worsening employment conditions.” Such a statement demonstrates a careless disregardfor facts.$CUT$

The economic crisis which led to the high unemploymentrate in the US and Europe was not brought about by the minimum wagesystem but by the criminal acts of Western bankers who played fast and loosewith the financial system.

It was the buying and selling of creditdefault swaps and the subprime loans in the US that triggered the financial collapse in 2008. This – and not the minimum wage system – caused the destruction of the economy which led to massive unemployment.

If minimum wage has crippled economies, how do we account for Switzerland and Norway which have unemployment rates and economic performances similar to Singapore’s? The minimum wage in both countries is set through collective bargaining.

Australia’s economy, which includes one of the highest levels of minimum wage (A$16.37 per hour) in the world, has been out-performing ours. In the last 5 years, the annual GDP growth averaged 3.4% for Australia and 1.3% for Singapore.

Perhaps, the most significant indicator is that the citizens of these countries enjoy a quality of life and experience a sense of well-being and happiness that Singaporeans can only dream of. 

Another case in point is Hong Kong which introduced minimum wage in 2011. The territory’s Minimum Wage Commission (MWC) found that since the introduction of the law, the number oflong-term unemployed persons (i.e. unemployed for six months orabove) actually fell in the period after the implementation of minimum wage. The Commission concluded that

In sum, local enterprises did not seemto cut down recruitment significantly after the implementation of theinitial [minimum wage] rate. On the contrary, with the expanding economicactivity, the number of establishments increased in tandem.Incentives for business start-up stayed positive generally.

Then there are the so-called breakout TIP nations (Turkey, Indonesian and the Philippines) which havebeen singled out as economies that show the most promise going forward. They all have minimum wage.

To give the idea that minimum wage isthe cause of high employment, as Mr Tharman (who is also the Finance Minister) does, is to cherry-pickinformation and present the case in a manner that is devoid ofintellectual rigour.

The truth is that minimum wage is not the magic pill that causes economies to excel. But neither does it cause them to fall apart or unemployment rates to go up.

Minimum wage is one of the many measures that, if designed and implementedintelligently, protects workers in low-income groups and helps a society to progress in asustainable manner.

While the PAP government has taken a step in the right direction by mandating that cleaners be paid no less than $1,000/month, it is disappointing that, given the dire situation of our wide income gap, the Government continues to refuse toimplement a national minimum wage law. Worse, itresorts to using dubious analysis to support its position.

By refusing to do what isalmost universally accepted as an essential economic measure (joining countries like Burundi, Tonga, Somalia, UAE and Yemen), the PAP Government continues to hurt the most vulnerable in our society.

The SDP will present a comprehensivecase for minimum wage for our workers in our forthcoming alternativeeconomic plan.