Model ID: a8b03741-8572-41c2-a0cf-870adde6efee
Sitecore Context Id: a8b03741-8572-41c2-a0cf-870adde6efee;
The lower skilled, lower income segment is the one that needs help the most to participate in this inclusive growth.
To “include” and to “share the growth”, there are 2 key ways – Through earnings and through gifts.
Through earnings is the sustainable way because productive work, whether self-employed or salaried, will generate the additional value-add and resources.
Through gifts – i.e. social transfers – is not a long-term solution for the vast majority – aside from negative impact on employability and morale, it also begs the question of where the resources will come from. Hence, the right way to look at such transfers is as a way to “buy time” for the worker to improve his “Earning power”, just like “Jobs credit” during the recent Crisis helped to “buy time” for workers to keep their jobs longer. Hence, Workfare – an instrument to maximise employment and top up earnings at lower end - annual $400 million for 400,000 workers. If this amount was to be deducted from companies as taxes, imagine what impact that would have on their profitability and hiring.
How does want increase earnings? There are 2 ways – by achieving Best Wages through increasing market value, or by going for Minimum Wage via law.
Singapore experimented with our version of Minimum Wage in the 1980s, when the NWC then issued quantitative guidelines on annual wage increments. The intention was good. The thinking was – make wages rise quickly, that will force companies to increase productivity and go for high value-add, then Singapore can climb the value-add ladder even faster than our competitors. The result was that Singapore became uncompetitive, sank into recession, unemployment and retrenchments shot up, and there was a deep CPF cut made to enable the economy to recover.
And that was when we are talking about guidelines and not law. If the wages or wage increases were mandated by law, we can be sure that there will pressure socially and politically to raise them – and we cannot be sure when the “overkill” would happen either at company level, leading to lowering of hiring, or at economy level in lost competitiveness, revenues and jobs.
So instead of going for Minimum Wage, let us go for Best Wage.
Best Wage through skills upgrading by industry and individuals, best sourcing, productivity improvement (eg IGP) to reduce over-reliance on foreign labour and gain sharing (CBF) with workers. Some examples.
The truth is – there is no magic bullet – neither Best Wage nor Maximum Wage approaches will turn low-skilled, low-income workers into high-skilled, high-income workers overnight. There is a lot of legwork, hand holding, persuasion and encouragement to get companies and workers to participate and take seriously the hard work needed to achieve sustained improvement in competitiveness. Yet, that is the only long-term way to a better earning power internationally as a country and as individuals, to be able to afford a better standard of living.
