Is It Time For Singapore To Implement A Minimum Wage?

Is It Time For Singapore To Implement A Minimum Wage?

Once in a while, a friend or an acquaintance from the developed world asks, “What is the minimum wage in Singapore?” after being visually bombarded with the sight of gleaming skyscrapers and finding out the staggering prices of property in this country.

If you’ve ever been asked the same question, you may have found yourself fumbling with the right words to explain that the government intervenes in nearly every aspect of life, except when it comes to wages.

For the longest time, Singapore has stood by “competitiveness” card in addressing the issue of minimum wage, allowing market forces to run the show.  However, as income inequality has been a key issue in recent years, there have been differing views of whether the country should implement a national minimum wage.

Minimum wage in Singapore

What’s minimum wage?

A minimum wage is the legal minimum salary that an employer needs to pay an employee and this is set by the government. The amount is determined by factors such as the cost of living.

In many developed countries in Western Europe and in the United States, there are minimum wages, which continue to be debated upon. What may surprise some is that the Nordic countries such as Sweden and Norway, who are known for their low income gap and good welfare, do not have a minimum wage system.  However, these countries are also heavily unionised and trade unions are able to exercise their bargaining power with employers.

What are the pros and cons of implementing a minimum wage?

The advantages and disadvantages can be debated upon endlessly.  Here are some of the usual arguments for and against a minimum wage system in Singapore.

Minimum wage and unemployment 

It is often said that implementing minimum wage may cause businesses to hire fewer employees as more funds have to be directed towards increasing the salaries of lower-income workers. In addition, there is also the argument that companies will move away from Singapore to cheaper areas of production if minimum wage is to be implemented.

However, whether or not the minimum wage will impede competitiveness in today’s economy is very much debatable. Singapore’s manufacturing sector has long upgraded itself to produce goods that are higher in value and technology.  Practically everything under the sun is produced in China, and it’s unlikely that there are any multinational companies that are in Singapore purely because of cheap labour.

On the other hand, the minimum wage policy will be most helpful to those employed as cleaners and labourers. It’s not an uncommon sight in Singapore for the elderly to be seen working hard with hunched backs cleaning tables in hawker centres and earning just about S$1,000 a month.

Minimum wage and price increases

Another argument against minimum wage is that businesses will pass the cost to customers with price increases. However, that really depends on how much the minimum wage is and the number of companies that have been paying their workers less than the minimum wage.

Without a proper study to determine a feasible amount for both parties, it’s easy to jump to the conclusion that all companies will be significantly impacted and all price increases will be passed on to consumers.

Minimum wage and the disincentive to improve

Some proponents of the minimum wage system also talk about how setting a minimum wage will dis-incentivise people to upgrade their skills or to be productive if there is a guaranteed salary.

Well this seems to make sense, one can also argue that the minimum wage has a function to prevent the exploitation of labour and to ensure that wages are sufficient to the bare minimum costs of living.

A minimum wage that isn’t set too high will unlikely be a disincentive for employees to strive towards improving themselves. It’s unlikely for any person in Singapore to not work towards a higher pay scale just because he or she is earning the minimum of, say, S$1,200 a month.

As education and healthcare are not free of charge, we will still be inclined to strive towards earning more to cope with living costs.

Progressive Wage Model

The Progressive Wage Model

Is there really no protection for the lowest income earners in Singapore then? 

There is something that helps protect specific sectors that are the most vulnerable, known as the Progressive Wage Model. This model was developed by unions, employers, and the government with the aim of uplifting low-wage earners in the fields of cleaning, security, and landscape sectors, which have stagnated wages and high turnover rates.

The model helps workers by tagging wages to training and improvements in productivity and standards, so that workers are able to progress along in their jobs.

For example, a general cleaner can work towards being machine-operating cleaner and eventually become a supervisor, with each job level commanding a higher wage. Each sector has its own wage requirements and companies will have to renew their contracts that reflect the minimum wages set out by the model.

It seems unlikely that Singapore will adopt the minimum wage anytime soon, but sustainable ways to help low-income earners will continue to be discussed as income inequality continues to be an issue that society contends with.

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