Minimum wage law works
September 7th, 2010 | 
Author: By Hui Weng Tat, For The Straits Times, 2 September 2010
IN A surprising departure from its usual free market orientation, Hong Kong lawmakers recently voted in favour of a minimum wage law for vulnerable low-wage workers. It may be time for Singapore to consider a minimum wage law; such a policy may be preferable to raising the levy on foreign workers to reduce the country’s dependence on these workers.
A growing influx of low-skilled, low-cost foreign labour has effectively increased Singapore’s overall labour supply. There is an ongoing debate as to whether this has depressed domestic wages at the bottom. I believe the available evidence for this link between the influx of foreign labour and depressed wages at the bottom is compelling.
Between 1998 and 2008, the number of foreign workers employed, most of them lower-skilled, rose by about 438,000 or 48 per cent of total new employment over the period. Over the same period, real wages of employed residents in the lowest 20 per cent of the wage distribution were virtually stagnant while those in the upper half experienced real growth of at least 20 per cent.
If one takes an international perspective, mobility of labour leads to greater efficiency and higher productivity. The national perspective can be different: For example, in response to low wages in certain jobs, some local workers may withdraw from the labour market. Others might prefer to work part-time instead of full-time. In short, the full-time employment rate of local workers may be lower as the result of the influx of foreign labour. This would represent an underutilisation of scarce labour resources, a situation that Singapore can ill afford.
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i am against min wage, it help a small percentage of the workers at the expense of the large majority of middle class.
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it would also be good if the good professor made as study on whether a ‘MAXIMUM MINISTERIAL WAGE POLICY’ would help the MIWs to be caught offguard less often?
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Barrick:
Hope you or your children don’t ever become handicapped.
Because spending on infrastructure for the disabled helps a tiny percentage of the population at the expense of the large majority
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Minimum wage will never work in sgp. With the high competition for a job by the foreigners, many will definitely go ‘below’ to undercut the market rate.
Impose higher levy for foreign labors, at least help to retain real talents.
Coy and employees can’t manipulate the market.
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I support min wage, it helps a large majority of workers at the expense of the minority of the rich and elites.
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The minimum wage has lofty goals of helping the poor. Prominent figures whom I deeply respect have voiced their public support on this policy. I am sure these people have the kindest of intentions. However, it is highly questionable whether the effect of the minimum wage is really beneficial to the poor.
If the minimum wage is set too high, it will create unemployment to people whose value to the labour market is worth less than the minimum wage. No employer (unless he is your father) will pay a worker more than what he thinks the worker is worth. Anything more will be charity. It is not fair to expect charity from bosses because they set up companies to make money, not give away money. In a capitalistic economy, a minimum wage which is set too high will lead to higher unemployment among the young and the old. The young will be hit because they still have not accumulated enough work experience to be worth more than the minimum wage. The old will be hit because their market value has depreciated below the minimum wage over the years. The most seriously hit will be the poor because they are the group with the most number of people whose market value falls below minimum wage. Instead of helping the poor, the minimum wage may end up raising unemployment among the poor.
If the minimum wage is set too low, one might as well not have this rule in the first place. Why scare off investors and businessmen unnecessarily?
Because it is so hard to set the optimum minimum wage, I think we should leave wages to be set by the invisible hand of the free market than the well-intentioned but clumsy hand of bureaucrats.
http://help-your-money.blogspot.com/2010/08/minimum-wage-not-easy-to-get-it-right.html
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“Minimum wage will never work in sgp. With the high competition for a job by the foreigners, many will definitely go ‘below’ to undercut the market rate.” – That’s where enforcement comes in.
“Impose higher levy for foreign labors, at least help to retain real talents. Coy and employees can’t manipulate the market.” – and you honestly think these companies will bear the costs and not increase their pricing to push these costs to the consumer?
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So the comments against min wage is suggesting that we can pay their mum $200/mth for being a maid. (because pinoys cost $300 and $200 is their ‘worth’)
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To those who do not understand what ‘MINIMUM WAGE’ is about, perhaps the following should be read and digested before jumping to form opinions:-
Defination of ‘Minimum Wage’
http://dictionary.reference.com/browse/minimum+wage
“Is raising the minimum wage a good idea ?”
http://www.helium.com/debates/102839-is-raising-the-minimum-wage-a-good-idea/side_by_side
“Interpreting Minimum Wage Effects on Wage Distributions: A Cautionary Tale”
http://adres.ensae.fr/seminaire/malinvaud/0001/09022001.pdf
“Layof Taxes and Minimum Wage. Two complementary public policies”
http://www.ecomod.org/files/papers/971.pdf
“Minimum wage and employment in the fast food industry”
http://www.allbusiness.com/human-resources/700133-1.html
“Minimum Wage Function in Relation to Economic Instability and Poverty”
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1079575
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atobe,i am new joiner at tr.
find your posts neat and interesting.
you should be oppo candidate.
you can be in charge of statistics dept,no joke.
if you are in charge of oppo stats dept,all the papies dogs cannot bluff all the time with eir high gdp and employment numbers when so many sinkies still jobless.
i will vote for you if you stand in my walk and there is no walkover.
pap boasts so mcuh about the calibre of their dogs but at the same time,they dare not come out to challenge the oppo in the open.
they tack along in sure win grcs,no standard.
in army,we have ‘ah kua peng’,in politics,also have ah kua pap mps.
shame ,shame.
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@dun be a pappy dog
Am also new but I like what atobe posts too. Much more factual and of substance.
Passing thought : How do weu know he isn’t planning on becoming one? Yes, if he is in my ward and there is no walkover, I will vote for him too. (Apologies if it is a lady : him applies to her too OK.)
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to Fact is Fact:
September 8, 2010 at 8:19 am
“Minimum wage will never work in sgp. With the high competition for a job by the foreigners, many will definitely go ‘below’ to undercut the market rate.” – That’s where enforcement comes in.
why would you wish to enforce a minimum wage and then follow by another rule to enforce it? Does it solve the problem from the root cause?
“Impose higher levy for foreign labors, at least help to retain real talents. Coy and employees can’t manipulate the market.” – and you honestly think these companies will bear the costs and not increase their pricing to push these costs to the consumer?
companies may or may not bear the cost, when the market is free and especially in singapore with a market share of only certain proportion, would you think that companies will past onto the consummers? even so, do you not think that companies will be putting themselves at a disadvantage? such will be left to the market to decide isn’t it? Another point, comparing to a minimum wage, over the overall headcount of the company, do you not think that the minimum wage is much costly? A tax levy affects foreigners but puts them on equal contention of locals, the rest is up to the market to decide.
If you base on minimum wages, please bear in mind you never solve the issues cause where is your benchmark? How long? Able to keep up with the inflation of the economy? Do you not think that workers will be disgruntled when companies play with the rule and maintain your minimum wage as that? It may solve for awhile but how long?
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Let’s have an open mind here for discussion.
As mentioned above, minimum wages may do good but does it solve the root of our issues?
Think harder, foreigners coming in will be subjected to minimum wage as well. Of course various levels will also voice their disapproval. Market forces remain stagnant, long run can this minimum wage keep up with inflation? Will workers not complain again then? Talents will leave the country when they realise that effort or skill does not return rewards. Salary scale will be independent of market forces and demand. Meaning also standards of living will also be affected.
A higher tax levy on foreigners is a better suggestion in my opinion. The issue here lies with the foreigners coming in without proper control and there it is not easy to justify as the market is vast and wide. Why not leave the selection to the companies to determine who is a much valuable talent, locals and foreigners alike? Locals will be able to compete on fair grounds, talents either locals or foreign can be recognised. Most importantly, wages will be competitive as market can freely decide. In future, wages will not lag behind GDP or standard of living. Isn’t it a fairer competition for the locals and foreigners?
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Dear All,
Please allow me to express one of my thought here, just for the purpose to offering more viewpoint on this minimum wage issue.
Some may argue that the minimum wage might not truly benefit the locals here and instead most of the foreigners will benefit because they have already dominated jobs in the lower income range. But try to think this way: As an employer, would you hire a local or foreigner if their wages is the same? The main reason for the employers here to hire foreigners is because they are cheaper than the local. So, if the wage for local and foreigner is on the same level, wheres the incentives for employers to hire foreigner over the locals?
One of the main functions of the minimum wage law is to actually put the locals into level playing field in terms of wage.
Of course, theres a lot of other details(exclusions of certain industries, wage level, revision in wage level annually etc etc) involved here in order for the minimum wage to work. But if we can remember and hold on to the concept/function above when working out details of the minimum wage, then it might just work.
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If you want to set up minimum wage law, you must have good enforcement of the law. Otherwise, honest, law-abiding businessmen would suffer, as unscrupulous businessmen flout this law, undercut the competition. The dishonest businessmen would be like weeds, crowding out the growth of other plants.
Currently, the enforcement (for the minimum wage of $2500 for employment passes) is pathetic. And the biggest abusers, guess what, are businesses set up by PRs from India and China. They can be so gungho cos even if they are caught, they can buy air ticket and run away back home. This is unfair to law-abiding local businessmen.
The best way is to ban businesses/ companies set up by PRs from employing any foreigner, whether FWs or FTs. Or better still, ban PRs from owning any companies.
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Another way is for the manpower authorities to pay special attention to these work pass applications by the PR owned companies. Make it so complicated and tedious for them to apply their FWs, that they need to pay money to engage law firm/ employment agency to process for them (just like in Australia). This way they would not make frivolous applications and be forced to employ locals.
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