The case for minimum wage

May 4, 2010
Singapore Democrats

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Singapore Democrats

Mr Lee Kuan Yew says that paying Minimum Wage is undesirable because introducing such a legislation will cut  employment (watch video below). This, he concludes, will undermine the competitiveness of an economy. Such a view is simplistic and, unfortunately, not more robustly challenged in the public sphere, thanks to the control of the media.

The Minister Mentor says that “market forces” should determine the wage levels of workers in Singapore. Paying workers $3 and ministers $1,000 for an hour’s work is not “market forces”—it is exploitation at its ugliest.

Paying indecently low wages in high-cost Singapore not only dehumanises our workers, it also creates insecurity in the workforce which works against productivity. A wage structure that is out of kilter with productivity is inimical to long-term growth.

Legislating minimum wage, the lowest amount of wages an employer may legally pay to an employee, will ensure that workers will not be exploited.

  

Of course, employers and businesspeople instinctively fear a Minimum Wage policy because such legislation would drive wage costs up, cutting into their profit margins. But such a view neglects to take into account that higher wages increase the spending power of workers in general which stimulates consumption and ultimately benefits business.

Minimum wage also increases the productivity as financially secure workers can focus on their jobs instead of being distracted with having to find supplementary income because of low and inadequate wages.

It also reduces poverty and want which can breed mistrust and resentment towards management thereby lowering quality output of work.

At the state level, Minimum Wage decreases the cost of welfare programs by increasing incomes for the lowest-paid. Such legislation is also relatively easy to enforce because the enforcement agencies only need to act on reported cases of wage violations instead of setting up large bodies to monitor a programme.

Most of all Minimum Wage prevents workers from being exploited and allows prosperity to be shared by all.

Today over 90 percent of countries across the world have Minimum Wage in one form or another. The few countries that have no laws or regulations on Minimum Wage are Bahrain, Qatar, UAE, Tonga, Brunei, Somalia, and, of course, Singapore.

Even Hong Kong is doing something about its income inequality. A minimum wage bill was introduced in the Legislative Council in 2009 and is expected to be passed and enacted in 2010 or 2011. The city even has a Minimum Wage of HK$3,580 (approximately S$650) per month for its foreign domestic workers.

Most economists today agree that the negative effects of such a policy to employers as well as employees are relatively minor.

The Singapore Democrats propose a Minimum Wage of $6.80 per hour. This amount is computed based on a weekly salary of $300 which is necessary for an individual to subsist in Singapore. The amount is divided by the standard of 44 hours of work per week. This amount would be applicable to the lowest of the low-wage income earners.

Given the growing income divide in Singapore and the fact that those on the lower end of the economic ladder continue to face crushing financial burdens, the idea of Minimum Wage is becoming increasingly compelling and urgent.

For a more indepth account of the SDP’s alternative proposal on how to narrow the income divide in Singapore, click here.