It has been reported that Singapore’s Deputy Prime Minister Lawrence Wong had urged caution against solutions such as setting minimum salaries to uplift lower-wage workers and that the country must be careful about “unintended consequences” when working through solutions.
DPM Wong was speaking at a workshop for the Alliance for Action for Lower-Wage Workers on Saturday (24 Sept), where he pointed to the importance of continued career progression throughout their working lives contrary to higher starting salaries.
“This means not just good starting salaries but having the new wage increases tied to a skills ladder,” said DPM Wong who is also the Finance Minister for Singapore.
“Ultimately, what we want to achieve is a compression of wages in our workplace, not increasing wage gaps but wage compression taking place largely by uplifting of lower-wage workers in Singapore,”
“At the stroke of a pen, you can decide that this is the new minimum wage. But what are the consequences of that? Will companies end up hiring less workers? Will you have more unemployment?”
“Or perhaps, in some cases, what other countries have seen is that a number of the beneficiaries of a higher minimum wage are not low-income families but young people from rich families who go out and work at minimum wage levels.
“So these are all unintended consequences that can easily happen if you’re not careful in thinking about the right solutions.”
DPM Wong reportedly said that Singapore has to think through and work together with different stakeholders on the best solutions to improve the well-being of lower-wage workers and that the Singapore government works together with employers, union leaders and workers instead of doing things through a top-down approach.
“Rather disingenuous policy remarks on the “unintended consequences” of solutions”
DPM Wong’s remarks when reported by Channel News Asia, elicited a response from Mr Yeoh Lam Keong, former Chief-Economist for GIC — a Singapore’s sovereign wealth fund,
Mr Yeoh wrote on his Facebook page that while he believes DPM Wong is sincere in his intentions to help the poor, he regarded DPM Wong’s comments as “rather disingenuous policy remarks on the “unintended consequences” of solutions to advance well being of lower wage workers like setting a minimum wage.”
He asked, “What about the simple solution of raining Workfare Income Supplement ( WIS) payouts by another $700 in cash rather than the miserly $300 in cash currently given to the lowest paid working poor?”
“What about raising the Silver Support Scheme (SSS) by a similar amount to help our elderly retired poor with a decent, dignified non contributory pension on a means tested basis?”
“What about a simple unemployment insurance scheme to help the unemployed poor make ends meet while they look for a new job?”
Mr Yeoh explained that the costs of all the above recommended policies are well affordable fiscally and it “will make a huge difference to the working poor, elderly and unemployed poor and their families by raising incomes towards a decent living wage”.
In an earlier presentation made at a Progress Singapore Party seminar, he estimated these reforms would cost the government about $4.5 billion today or about 1% of the GDP.
While this might increase by 0.5% of the GDP as more of the population ages, it will also decrease as the working poor become better off. Mr Yeoh pointed out that Singapore has a structural budget surplus o about 5% of the GDP or about $20 billion.
“So we have $20 billion to spare but we cannot spend $4.5 billion or $5 billion on our absolute poor?” said Mr Yeoh then.
Going back to his Facebook post, Mr Yeoh further asked, “What about the even larger and more damaging negative unintended policy consequences to depressing incomes through excessive immigration and blue collar career prospects?”
“Stronger and bolder remedial policy action on all these fronts would make his (DPM Wong) well intended comments much more credible imho.”