Minimum wage

The government leaders have been telling the people that a minimum wage will cause the jobs to be lost. This is only partly true; largely, it is false.

A minimum wage is necessary to ensure that the worker earns enough to pay for the cost of living by doing a full day's work. If the wage is below the minimum, the worker has to work longer hours. This will cause other people to be unemployed. For a stable society, we need to have most people, who are able and willing to work, to be able to find a job and earn enough enough to raise a family and be a contributing member of society.

A decent wage, as opposed to a sub-minimum wage, does not cause the loss of jobs. Wages are only one component of the total cost of production. The other components are cost of property (i.e. rental), government taxes and shareholder profits. If wages are too low, more of the cost goes towards rental and profits. The imbalance, between wages and rental, is one factor leading to the high property prices in Singapore.

Many of the jobs in a country are in the service sector. They are part of the domestic economy. They have to be done in the country and cannot be lost. Examples are education, health, transport and personal services. A minimum wage to these sectors affect all businesse and will be added to the cost of providing the service. It can be kept low, if the other components, such as rental, taxes and profits, are kept at the fair market levels - and are not inflated due to the failure of the market, e.g. if there is a near monopoly.

Many global businesses come to Singapore to enjoy the low wages contributed by foreign workers who work in Singapore. The social cost of these foreign workers have not been properly factored - i.e. the overcrowding and the strain on the public services (i.e education, health and transport). If these are properly accounted, the strategy of low wages, i.e. no minimum wage, in creating jobs in Singapore is not compelling.

I believe that it is time for a minimum wage to be introduced in Singapore and for the market in labour to find its new level. I believe that we are among the few developed economies that do not have a minimum wage.

Tan Kin Lian