Why not a living wage?

September 18, 2010

Ian Choo

NTUC Chief Lim Swee Say on the Global Economic Crisis 2008-2010 and Tripartism

There has been significant debate in recent times about whether Singapore needs a minimum wage to help Singaporeans cope with the rising cost of living. Considered in the light of escalating property prices and low labour productivity gains in recent years, this issue is especially pressing.

But is our country really ready to accept a growing legion of ‘working poor’ in our midst? As we ready to accept might be hunger and poverty in a little island of plenty? And is minimum wages even really a feasible solution to all these emergent problems?

The orthoxy since our birth as a nation has thus far resisted calls to institute such a mechanism, which in some strands of economics has been considered to be a ‘market distortion’ with highly undesirable consequences. Supporters of this strand of thinking point to many examples in Western European countries like France and Germany, where minimum wage legislation (and other welfare mechanisms) have been blamed for stubbornly high rates of unemployment, that tended to persist even in times of economic boom.

In addition, such policies has also been accused of making the private sector less dynamic, as employers are less willing to hire when the benefits enshrined in law are too generous – resulting in a stagnant and inflexible labour market and economy. In the words of the current Labour Chief Lim Swee Say, “Job is the best welfare, full employment is the best protection for workers and productivity gain is the best driver for wage increase in the future.”

Detractors however have largely argued for the case in humanistic, if not even moral terms. Work itself – in its content, its environment, and its potential for human development – not just wages, occupies a crucial space in society. It is fundamental for the little material comforts wages can buy, but more importantly it defines the human being. You are what do you.

And for a growing number of Singaporeans, doing an unpleasant job for pittance wages is a double whammy – it is unpleasant, and it adds insult to injury by damaging self esteem. One would not need to look further than the average Singaporean space to see the number of ‘aunties’ who are cleaning tables at hawker centers – and for hardly a lot of money. Would any of us sitting back at our computers like to argue that we would love to do that job – and at those wages?

To the credit of the Singaporean labour movement, they have already implicitly signalled that low wages and low wage workers are an area of prime concern; and pioneering ‘market-friendly’ solutions like the government sponsored ‘workfare’ scheme, ‘up-re-multi-skilling’ approaches have been crafted to address this issue in ways that are considered innovative and unorthodox by world standards.

Truth of the matter is that if you look at the root causes of the situation, they are not ‘exploitation’ by greedy employers unwilling to share their fat profits with workers in the conventional sense, when one thinks about the historical reasons for a minimum wage. They are largely structural in nature – which makes the problem much more difficult to handle. Globalisation and market forces have been the two forces that have been blamed for depressing wages at the bottom of every society, including Singapore.

In a world where unskilled jobs are largely able to be shipped to low wage countries with seemingly endless sources of cheap labour, people who do not have the right skill sets to participate in a knowledge-based economy. Peter Drucker has gone as far as to state that “the disappearance of labour as a key factor of production” is emerging as the key “unfinished business of capitalist society”.

Management Futurist Jeremy Rifkin puts an even more mindboggling twist to the story – the problem IS productivity itself. The better we get at doing more for less, essentially the less wage-earners we have to buy the things we produce. And no society in the world will be exempt from the painful contradictions that emerge from companies go searching for “Cheaper, Better and Faster” ways to do things through fanciful terms like “restructuring”, “off shoring” and “outsourcing”.

Considered, I believe that there is some glimmer of truth in that the Singaporean Labour movement has espoused. Conventional redistributive economics, particularly through putting a price floor on wages will just exacerbate some of the problems that are already being experienced by low wage workers, particularly in the short term.

However, a market-based approach does come with its own far share of problems – particularly in that it gives employers no incentive to invest in the future of their workforce or find better ways to use their human capital. Particularly, if relative to rent and other land-related costs, labour is a relatively low proportion of total costs, it makes investments in human capital management and development seem like a particularly bad idea.

Letting the market depress wages is a vicious ‘race-to-the-bottom’ that seems a bit like a narcotic – once businesses are addicted to the avenues for cheap labour, they just hum along entrenched in a business model that is hardly ‘future-proof’. When costs go up again in the future the temptation is once again to pass off the cost cutting needs to where they can – namely, the low-skilled workers who are easily replaceable. And their numbers will grow, because they have no upward social mobility through their work – the defining feature in their lives.

Let’s make no mistake about it – contrary to the rhetoric – this situation in the long term is neither ‘pro-business’ nor ‘pro-worker’, whichever way you look at it. Businesses just need the right mix of incentives to look slightly further than usual. Perhaps business models that cannot continue to be feasible without cheap labour just simply fail the ultimate test of market Darwinism – and don’t deserve to exist in the first place. After all, allowing them to exist in the short term just delays the inevitable.

I strongly believe that a ‘living wage’ is one of many such measures, amongst a whole suite of others that should be considered even to the most pragmatic of economic minds. And this is as ‘pragmatic’ as it is ‘humanistic’ or ‘idealistic’ – coming from a country which loves to accentuate the difference. I use the term ‘living wage’ because it is in no one’s interest that anyone who has a long term stake in Singapore be unable to earn a wage that doesn’t allow them have a decent standard of living, in particular because the liabilities of entrenching a generation of Singaporeans who are ‘barely have their heads above water’ have dire social and economic consequences for the next generation.

Children with parents who are low-wage workers often carry the burden of having to enter the work-force earlier rather than choosing to pursue a tertiary education – however beneficial it is to their (and the country’s) long term success. Wealth distribution and trans-generational opportunity structure are undoubtedly more closely intertwined than the currently ‘pragmatic’ ideology of the Singaporean model of economic and social governance will care to admit. Can ‘meritocracy’ itself survive?

Figuring out what this “living wage” will be over time will be one of many hard questions taken in tandem with broader economic architecting for constant change. Though perhaps not harder than answering whether there is really should be more to (Singaporean) Life than making a Living.

This article was first published on 17 March 2010.


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6 Responses to Why not a living wage?

  1. The Singapore Daily » Blog Archive » Daily SG: 19 Mar 2010 on March 19, 2010 at 11:01

    [...] 2010 Debate – New Asia Republic: Why not a living wage? – Gerald Giam: Tackling income inequality should be Govt’s top priority – Ian On The Red Dot: [...]

  2. The Singapore Daily » Blog Archive » Weekly Roundup: Week 12 on March 20, 2010 at 12:55

    [...] ..”the liabilities of entrenching a generation of Singaporeans who are ‘barely have their heads above water’ have dire social and economic consequences for the next generation.” Ian Choo [...]

  3. Anthony on March 28, 2010 at 02:28

    Interesting piece, if not at all rather elusive and irrelevant many areas. But you’re suggesting something which the late Milton Friedman already championed 50 years ago in the USA. It didn’t work then, and it seems doubtful it will now.

    Some sort of living wage sounds socially desirable though. Perhaps you might venture to suggest some measurement by which this definition should be defined? It certainly seems interesting to see how this can be calculated.

  4. Donaldson Tan on September 19, 2010 at 00:51

    Ravi Philemon suggests:

    The living wage should be tied to the price of renting a room from the open market (cost of average room rental in the open market – divided by 30 – multiplied by 100). Why? Because, nobody should spend more than 30% of their income on accommodation, as then they become cost burdened and may have difficulty affording necessities such as food, clothing, transportation and medical care. In the current context of Singapore, with the open market rental for common rooms hovering around $400 – $450, an appropriate living wage would be $7.95 per hour; or $1400 per month for a 44-hour work week.

  5. Truble on September 20, 2010 at 18:27

    Another issue with implementing a minimum wage is that it would raise the very difficult question on the welfare of National Servicemen: Why is Singapore conscripting young men while paying them a pittance to risk their lives, when the rest of Singapore, construction workers included, are paid a proper living wage?

  6. J Petersen on October 4, 2010 at 23:11

    I agree with the other comments. This article offers no insight and is largely irrelvant and vague. The article raises some interesting but meaningless speculative idea. The author provides no facts nor draws any conclusions. The idea of a living wage sounds nice in a utopian world but unfortunately we don’t live in such a world and we never will.

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