Minister restates stance against minimum wage

Sep 14, 2010

By Rachel Chang

THE Government has restated its stance against a minimum wage in a blog post by Minister of State for Trade and Industry, and Manpower Lee Yi Shyan.

The blog post joins a debate in local newspapers on whether Singapore should follow in Hong Kong's footsteps, by legislating a minimum wage to protect low-wage workers.
Hong Kong did so in July.

Mr Lee's post was uploaded onto the Ministry of Manpower's blog (www.momsingapore.blogspot. com) yesterday.

In it, he referred to two opinion pieces by National University of Singapore (NUS) economists published in The Straits Times two weeks ago.

Mr Lee expressed his support for the arguments of Dr Lim Chin of the NUS Business School, who wrote that a minimum wage would make the labour market more rigid and hurt employment opportunities of low-wage workers.

Mr Lee cited as evidence the fact that in European countries with a minimum wage, the unemployment rate was typically close to 8 per cent, even in pre-recession 2007.
In the second opinion piece, Dr Hui Weng Tat of the Lee Kuan Yew School of Public Policy, argued for a minimum wage law.

He wrote that an influx of low-skilled and low-cost foreign labour had kept domestic wages at the bottom, stagnant.

Dr Hui argued that a minimum wage would encourage employers to invest more in technology, so as to raise the productivity of their workers.

Mr Lee said that calls for a minimum wage as a way to incentivise investments in productivity were 'well intentioned' but 'no silver bullet'.

The Government's approach is to let market forces determine wages, he wrote. It supports low-skilled, low-wage workers by helping them raise their earning capacity by raising their employability.

It does so through two Workfare programmes: the Workfare Income Supplement, which provides such workers with regular payouts as incentives to hold onto jobs, and the Workfare Training Support (WTS) scheme, which encourages them to upgrade their skills through training.

'What we are trying to do through Workfare is also to preserve work ethic and personal responsibility,' Mr Lee wrote.

'The basic and long-term solution to helping low-wage workers earn higher wages is productivity improvement, which means enhancements to workers' skills, business innovations and value creation,' he added.

The National Productivity and Continuing Education Council is in charge of building a system to develop a productive workforce.

Ultimately, Singapore's economy is dependent on and integrated with the global economy, Mr Lee stressed.

'We've to accept competition as it is and carve out our own niches,' he wrote.
He concluded that though the concept of a minimum wage policy is 'appealing politically', its implementation is 'not without pitfalls'.

'We'll stick with Workfare as a better policy option,' he wrote.

[One comment about Workfare is that the govt is subsidising companies so that they can hire low wage workers. I believe this was the view put forth by Mrs Ann Wee, a prominent figure in the Social Work circle. This is one point of view. Another way of looking at it is that the govt recognises that there are market rates for certain jobs which cannot pay even a subsistence rate, and workfare tops up the income.]