Minimum wage is one hot topic …


Minimum wage is one hot controversial topic. Whether in the NSM or MSM, there will be robust and sometimes emotional discussion on this topic. I’ll attempt to give my two cents worth. I’ve been thinking about this topic for quite some time since it affects most of us – directly or indirectly.

I am no economist nor an expert on wages. I will just use some common sense to say my piece here. When I was in school more than 30 years ago taking Economics at A level, I was quite impressed and persuaded by the concept of “Price Mechanism” or “The Law of Demand and Supply” in the market place. “The Law of Diminishing Returns” is another interesting concept I learnt in my Economics class. Until today with so much changes in our modern society, those economic concepts still hold true irrespective of political ideology or thinking.

The fascinating thing about the Price Mechanism or The Law of Demand and Supply in the marketplace is that it’s an universal eternal law throughout human existence. This fundamental economic theory remains one of the most fascinating concepts since the dawn of civilizations when man started producing and trading openly in the market whether it’s within their own community or across borders. Tons of literature have been written about this subject. The concept is especially pertinent in modern times where the world we are living in becomes much more compact and globalized with the advent of modern technology and instant communications.

I’m not going into the details of the Price Mechanism or The Law of Demand and Supply. I may end up writing a textbook! Suffice to say that our economy is plugged into the global market place. Hence whether we like it or not, we are subject to it. We are literally at the mercy of those inhuman economic laws. We can’t change those laws or control the invisible hand of the price mechanism where everything and everyone is subject to.

Let’s say that in a desert where nothing is produced at all. Vast empty useless lands with nothing to offer. If those natives living there start printing money will it make any sense? Money in itself is useless if it can’t buy or exchange for any goods or services. Money is only sought after if it can buy you lots of stuff. Only if your money you print can buy lots of things, then other people outside your community will demand for them in order to buy your things or services from your community. Imagine this empty useless land suddenly found lots of oil underneath. Since oil is a much sought after item by people all over the world, obviously others will demand for your money to buy your oil. Your money becomes valuable.

Why some countries’ money is worth much more than others? Why our currency (money) is worth so much even though we do not have any natural resources at all? (like oil in the given example). We are even worst than that barren desert country. That is becuz our 710 sq km is able to produce so much goods and services in the economy that others demand for our money. Our GDP – total of goods and services produced in our tiny country that make our currency (money) so strong. What if one day, we no longer able to produce so much goods and services like before, will the value in our money remain strong and much sought after? If you think it is a God given and an unchangeable fact, then I’m afraid you are making a big mistake!

Different societies handle the market mechanism differently. Some resort to extreme measures to address the inherent harshness of the invisible hand of the price mechanism on its people, whilst others leave it with minimum intervention. On one extreme end is the once upon time Karl Marx’s communist ideology where everyone is guaranteed an iron rice bowl against greedy capitalists. Clearly this ideology is not successful cuz even China has abandoned it for the free market economy. Click the link to read the article written by me when I was a student. What about the laissez faire type of model? Obviously in a democratic country where the government of the day is expected to provide a decent standard of living for the electorate will never adopt such a model where the weak and disadvantaged will suffer under the merciless effects of a free economy without any intervention from the government.

Every economic student is aware of the fact that too much government intervention in the economy will stifle growth and lead to economic decline. Too little as in the case of Hong Kong will result in a widening income gap and more hardship at the lower bottom of the population.

To legislate minimum wage whether across the board or industry based is a form of government intervention in the free market mechanism. The long term effects will inevitably lead to the erosion of productivity and economic decline.

Let’s take a look at France. When Francois Mitterrand of the French Socialist Party won the popular vote in 1981 to 1986 with huge majority and again in 1988 to 1993, they nationalized not only public sector services such as utilities like gas, coal, electricity, water, postal services, transportation such as railways, buses and airlines but also thirty six banks, two finance companies, twelve industrial conglomerates. All these come directly under the state accounting for about 30% of industrial exports. More than half of the workers are directly under state employment. Based on one man one vote system and a strong desire by the electorate to change the system i.e. Nationalization ( government direct intervention of the economy ), the socialists won by landslide victory and implemented their election pledges. Fast forward to today, France is one of the worst economy in Europe. If you compare it with Germany, the standard of living and the poor pathetic situation is one of the worst. That’s the result of too much state intervention in the market mechanism.

I’ve not been to France. But I’ve heard horror stories about France even in Paris. I met a French lady, Mrs Mao who is married to a local Chinese man for more than 30 years. She could speak and write few languages including Mandarin. She told me all kinds of shocking pathetic happenings in her country of birth. For example – If you go overseas, vagrants or the homeless Parisians could just break into your house (in France) and live there. The police could not even do anything at all. There are so many homeless and unemployed wretched roaming in the streets of Paris. It is quite shocking for us to hear that from a French citizen. I just can’t believe what I heard. My German friend Uncle Bodo also ever told me that fortunately Germany did not go the French socialist way under President Mitterrand where untold damages have already been done. The controversial but competent President Nicolas Sarkozy could not undo or repair whatever damages already done. Now another Socialist President Francois Hollande is in office. More misery will befall the French. Sigh!

I quoted France as an example to show the severe long term damages inflicted on the economy. To nationalize everything – which is direct intervention in the market mechanism – seems to be very ideal and serve the commoners well. Sadly it is not the case as seen in so many past failures in so many other countries.

I believe that the elected government of the day should come into the picture not to intervene excessively but to cushion the side effects of the free market mechanism. The government should play the crucial role of calibrating any adverse effects of the free market economy by helping the disadvantaged, lowly educated, lacking in skills etc to fit into the economy. Certain basic services such as medical, education and housing should be provided by the government.

In our case, we do have a good model ( though it’s not perfect ) of tripartite arrangement with the employers, workers and government coming together to discuss and work out solutions in a win-win situation to improve the economy. They must understand they are all in the same boat and everyone in that boat must survive in the global marketplace. There will be bad weather, treacherous storms and uncertainties beyond our control.

In many countries, the 3 major factions in the economy ie Govt, Workers and Employers don’t always work together. They are quite confrontational at times leading to wild cat strikes and crippling the economy. Once they refuse to budge in a negotiation, workers just go on strike causing much inconvenience to the public. A sector goes on strike will also affect other sectors of the economy.

Out of the two models described, I would prefer the model that seeks peaceful negotiation without resorting to any industrial action. Our current model of tripartite partnership I feel is not quite effective even though it’s an excellent model to uplift our workers. I’ll talk about it next time.

Let me continue with why minimum wage is not the solution to uplift our workers in terms of productivity and sustainable long term earning power.

I’ll cite another simple illustration. A plate of Char Kway Teow easily costs $2.50. Why some customers willing to pay more even up to $10 per plate of Char Kway Teow. Consumers willing to pay higher price cuz there are more ingredients and definitely taste better. They feel it’s worth the $10 especially if there is XO or abalone added? So there is a demand and supply even though it’s expensive. What if the government decides to set a minimum price for a plate of Char Kway Teow? If the price is set at $2.50, it serves no purpose since the cheapest Char Kway Teow is already set by the free market mechanism at that price. What if it is set at $5? Now you can only eat a plate of Char Kway Teow at $5 by “legislation”! Many hawkers selling Char Kway Teow will have to close shop unless it is worth the $5 consumers willing to pay. Nobody will want to eat a plate of $5 Char Kway Teow if it’s not worth that amount. Those consumers will just switch to other food instead of Char Kway Teow. On the surface, it appears that setting the minimum price of Char Kway Teow is helping the poor Char Kway Teow hawkers. Do you think it is so?


Now let’s take another direct example. Currently security officer is paid at about $5 per hour. 12 hours is about $60. If the minimum wage is raised to $7 per hour, there is no incentive for him to upgrade his skills in terms of his job scope. Why should he? It is better that the security officer made effort to upgrade his skills to earn that extra and hence become more productive. If he is well trained and able to perform his job professionally, most employers are willing to pay the extra dollar. There is also the incentive for him to upgrade his skills to match that extra dollar. From $5 to $7 is about 40% wage rise which also enables him to cope with the inevitable inflation and rising costs of living. The WorkFare Wage Supplement given out every quarterly by the government to low wage workers is another laudable scheme. My mother working as a cleaner in a local supermarket is a beneficiary.

If you look at some of the countries, not all adopt the minimum wage policy. Austria, Denmark, Finland, Germany, Iceland, Sweden, Switzerland are some of the countries without minimum wage. Why do they refuse? There must be a reason for that.

For these countries without minimum wage, they usually have a union for collective bargaining therefore wage levels maybe different depending on union/sector/industry (in whichever way that they are structured).

In Singapore as well, the unions negotiate for better wages through collective bargaining and in cases where there are less than 50% of the workforce joining the union, the union will negotiate for a Memorandum of Understanding. A recent example would be the Attractions Resorts and Entertainment Union (AREU, Link) whom conducted a recruitment roadshow for workers of Marina Bay Sands and unable to reach at least 50% of their 7500 workforce. Link to news

On top of collective bargaining for our rank & file workers, they also work to cover low wage workers who may not be union members. And they use the tripartite relationship to negotiate with industry players, government agencies and specific unions to work out the details. Their focus for these two years are “Clean, Green & Safe” – targeting the cleaners, landscape professionals & security sectors. Progressive Wage Model is the key in lieu of minimum wage across the board.

“Progressive Wage Model not only gives our workers better wages, it also up-skills workers and give them a career path. For employers, it enables companies to better their productivity ensuring a sustainable growth for the industry thereby creating better jobs for better workers.”

The idea is that people should be paid more for:

1. Skills

2. Productivity (tools are provided by the employers, and they can apply for grants from NTUC under the Inclusive Growth Program grant which is $100m to be disbursed …. Here’s an example of a productivity tool under IGP and this gave the operators of the machine 13% increment.) Link

3. Career (develop workers so they can climb the career ladder and be paid more)

4. Wage ladder (with annual increments recommended by NWC)

Examples of wage model:

Here are some success cases on Progressive Wage Model:

Most recently, SMRT adopts PWM for bus drivers (November 2013):


Healthcare workers (August 2013):


Various other new reports:

Cleaners (since 2011/2012) (google Progressive Wage for school cleaners, Town Council Cleaners etc … there’re lots of success cases)

Changi Airport group Trolley Handlers Link

I hope this gives you a better understanding of what NTUC is doing for low wage workers in Singapore, and they are avoiding the pitfalls of minimum wage …. for example in Hong Kong, the minimum wage is HK30/hour and each meal costs more than HK30 …. In Singapore, if we take S$1000 as the least a worker can earn, the hourly rate is about S$5.6 – which suggests that our low income workers work less than 1 hour to earn a meal, while Hong Kongers have to work more than 1 hour.

Bottom line is to enable business enterprises with better productivity so that wage increases can be sustainable in the long run to create better jobs for productive well deserving workers.



About Gintai_昇泰

I'm a Chinese Singaporean living in the Eastern part of Singapore. I tweet on current affairs & inspirational quotes. I blog on issues or events if they interest me. I write for pleasure. I also write mainly for my family and friends.
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25 Responses to Minimum wage is one hot topic …

  1. Sgcynic says:

    The bottom line is that the PAP government and the NTUC has failed utterly to meet the bottom line over the past decade, if they even tried.

  2. angsarlee says:

    I always have very high regards on your blog but this one really off the mark. Let me just cites a few of my personal observations:

    1) I had been to France numerous times from 1993 to 2007, that was post-Mitterrand’s economic failure as you put it. Outside of Paris, I dun see beggars, it was safe to walk on the street. I was impressed with civilisation and high quality workers. Paris was also not as bad as you set out to be. Like big cities like Vancouver, New York, LA, London, many of the outcasts are immigrants such as Gypsy. On the other hand, Margaret Thatcher had practised the opposite by privatising many of the public organisations (which Singapore copied faithfully), when I was living in Britain in the late 90s, I often wondered how UK can be in such sad state to be branded sick man of Europe. The reasons could be many, it is definitely the way you portray it so simplistically.
    2) You mentioned the world’s most free economy model Hong Kong, but even HK has adopted min wage this year.
    3) Of the many countries that you cited that has no min wage, many are welfare states with very high salary even for the lowest rank workers, of course they have no need for min wage. These economies also do not import large immigrants like us.

    So I think your argument is highly flawed and seems to fall into the trap of the Government-appointed trade union leader LSS’s self serving argument. As lucky Tan’s has put it:” you will never find a labor union chief in any other country that will speak out against paying workers a minimum decent living wage. Lim Swee Say speaking against minimum wage just shows us how lopsided and unbalanced the system is ….even more so than the absence of a minimum wage itself. ”

    Read more:

  3. Jasmine says:

    Angsar Lee, since your last visit to France, the country has deteriorated, now one in six are in poverty.

    About HK minimum wage, Gintai did mention that it is HKD30 per hour. How much does a meal in Hong Kong cost? When minimum wage started in Hong Kong in 2011 it was HKD28 per hour, and this year (after months of wrangling and negotiations), they agreed on HKD30 per hour. See what Hong Kongers themselves think of their minimum wage.

    Welfare states? Yes there are, so let’s see how far can their welfare go.
    Germany, heard of Hatz IV? At the moment, social security in Germany is facing severe pressure due to the demographic change in the population. On the one hand, an increasing number of old people require a large part of the funds for pensions, healthcare, and nursing care. On the other hand, the number of younger, active contributors is shrinking, putting a strain on social security in Germany.

    I think you can google the rest of the countries and find out for yourself how long can their social welfare system sustain.

    Minimum wage is a controversial subject and Gintai has provided an excellent balance from a lay person point of view.

  4. patriot says:

    Me am inclined to concur with angsarlee.
    Btw, Hong Kong as well as Malaysia and
    Indonesia had adopted Minimum Wage
    whereas Countries such as China, Vietnam
    and many other developing nations have
    raised the incomes of their citizens with
    various means. In China, still largely an
    Agriculture country, the high population of
    farmers are alloted lands and taught by
    experts to increase the yields of their crops,
    fish, poultries, grazing husbandries and
    others including exotic species of animal
    and plants etc.
    Many foreigners hd returned to their
    Countries of Origins. Even Burmese
    are returning to Burma as it has pick
    up economically and open up politically
    for citizens to participate more in it’s

    NTUC, as the Umbrella(Head of) Union in
    Sin has over-riding and over ruling mandate
    over Industry and In-house Unions. And
    uniquely, it is headed by a Cabinet Minister.

    The Sin Government is by and large perceive
    as Pro business and Pro employer instead
    of employee friendly. Employees tend to
    feel that their Unions are only good in
    providing co-operative services but, does
    not provide much bargain in pay and welfare
    for workers, nor good at settling grievances
    of employees. Many are not able to understand
    why Labour Movement in Sin is under a
    Cabinet Minister, they are perplexed and
    rightly so.

    Anyway, Minimum Wage is only meaningful if
    inflation is reined in. If cost of living is raised
    when Minimum Wage is implemented, then it
    becomes meaningless to have. Worse it will
    hurt the workers more.


    • Jasmine says:

      First of all, in what ways is Singapore similar to Malaysia and Indonesia? Singapore has chosen to raise the salaries of low income workers by equipping them with skills and providing productivity grants and means to employers. Unlike other countries, we have a small workforce and we dont have land to till for survival, and we need to upskill our workforce they find meaning and purpose in their jobs for them to have a sense of integrity.

      For the foreign talents/workers going home, this will further decrease our labour supply in Singapore, therefore it is even more important that we upskill our locals.

      NTUC as the Unions Congress is very much like the UN, the power to execute lies in the ruling/governing bodies of each individual country. Therefore the power to execute lies in the Unions. Can Union represent workers who are not its members? Answer is No. Just earlier this year, NTUC shared the results of a survey that 8/10 companies in unionised sectors adopted NWC wage recommendations. However, only 2/10 companies in non-unionised sectors adopted it. This goes to show that the individual unions have their clout to arm-wrestle their management without any megaphone diplomacy nor industrial action. And it also goes to show that MORE should join the union for better wages.

      If the union chief is removed from the cabinet, where is his platform to voice out for union members? When the Manpower Minister sits in cabinet, who is in there to make his policies more robust if not for the union chief? We don’t have details of what goes on in Cabinet, but seeing the parliamentary proceedings and how Labour MPs argue for workers, I’m confident this goes on in the cabinet level as well.

      This is a wise statement Patriot, my question to you is how to rein in inflation?
      Anyway, Minimum Wage is only meaningful if inflation is reined in. If cost of living is raised
      when Minimum Wage is implemented, then it becomes meaningless to have. Worse it will
      hurt the workers more.

      My suggestion is:
      Set a benchmark wage level for each job/level with the corresponding skills and productivity level and pay workers accordingly. Wage increase is therefore earned, and productivity is improved. Give workers a career path and a sense of worthiness.

      • patriot says:

        Upskill? Upgrade?

        Do tell it to the grandma of the PhD taxi driver from A Star and the many IT Managers who are now Security Guards and working at retail stores as
        storehands and assistants.
        Or can we say a train driver becoming a taxi or crane driver is also a form of upskill or upgrade???


        • Yes, easier said than done. Those of us in our 40s and 50s must have more than a few friends who are retrenched MBAs who have never able to earn their original salaries no matter how they “upskill” and “upgrade”. Success stories include one IT engineer who went into funeral services and one who became a tour guide. Some went into teaching, which is still not so bad even if it involved a paycut. Those who are not so lucky and have no families to support reluctantly accept the fact that they have no more market value. These are your taxi drivers and security guards. Those who have families to support work overseas. This begs the question. If some of these countries (China included) can value their skills enough to pay them what they were previously worth in Singapore, why is it that Singapore needs them to “upskill” even to remain employable? Is it really because our economy is growing so rapidly that we need so many foreign workers?

          As Gintai and a few others mentioned, there are negative consequences to setting a minimum wage, but can we afford not to do that?

    • Mark Tyrone Chia says:

      I’m living in China on a permanent basis and your comment about that country is way off the mark. Farming areas in China is decreasing rapidly as much land was taken away for urban development. The young no longer can be found in farming towns as most prefer the bright exciting lights of the cities.
      Your comments about specialise agriculture in China borders on science fiction. Have you been there yourself and live there?

  5. Eunice Chia-Lim says:

    Indeed a hot topic.

    Whatever discussions we have online may not help low wage workers directly and it’s good to see sector by sector adopting the progressive wage model.

    On this little Island we only have people, so we should continue to develop our people to better skills and better jobs. Anything we don’t really want to do we use machines and technology.

    Thank you for insights from Gintai as well as commentators.

    I can see we all agree to elevate lives of low wage workers, just that our “how” differs. For the sake of low wage workers, I hope Progressive Wage succeeds.

    • Sgcynic says:

      Not sure if Gintai and the commentators read Anyone that the PAP IB brand as full of misinformation is worth a read

      If the Singapore’s way to raise workers’ productivity and wages had indeed worked, then we won’t be in this state (pun intended) and having this discussion would we?

      • Mark Tyrone Chia says:

        HAHAHA really funny you should take a massager of statistics as a real guru. His disciple Smelly Spider is the same too. Last person I’ll buy insurance from.

        • says:

          I am still waiting for a minister or a statutory board to sue him. Given what you claim about his statistics, I am curious why the entire government has not sued him? And the local broadcasters had the temerity to invite him to give his expert views on air. Lol

        • Sgcynic says:

          LOL. You know. PAP IB always use the line, Oh, the man’s statistics is so full of flaws that they don’t know where to start. And you know what, they never could start. LOL

        • Sgcynic says:

          In May this year, the CPF Board revealed that it recovered some S$293 million worth of CPF arrears, including late payments, for more than 200,000 workers last year.

          In contrast, 10,000 workers from 3,700 companies were owed about S$9.5 million in arrears in 2011. Nearly three-quarters of these companies had underpaid, while the remainder did not make contributions to their employees’ CPF accounts.
          Statistics provided by the nation-building press.

          An example of how uncle Leong tears it to pieces. LOL, don’t even know where to start massaging.

  6. Happy to vote PAP says:

    I believe what every democratic country govt need to do is to create conditions to enable the majority (say 60% or more) of working citizens to earn decent wages which will make them happy enough to vote for the ruling party. And a minimum wage is not necessarily even a decent wage, if inflation is very high.

    So in respect, PAP govt has done very well in getting majority Sinkies happy with decent wages. Or at least happy enough to vote for PAP lah.

    • Most unhappy on earth says:

      Yah Loh. Few elections ago 70% happy, then 66%, now 60% or less.

      • Mark Tyrone Chia says:

        So I can take it that you guys don’t agree with democracy?

        • Most unhappy on earth says:

          So I can take it that you agree with the PAP’s brand of democracy, pork-barrel politics?

  7. Tan Kok Tim says:

    Sharing what I wrote on this overly discussed topic. It is in my under ‘Minimum Wage’ category.

  8. Tan Kok Tim says:

    On the art of governing, what is divine govt, and what is Semco of Brazil way of allowing employees decide their wages, etc, I would like to share what I wrote in my under “Government” and “Productivity” categories.

  9. sad sinkie says:

    Me appreciates and thanks Jasmine for her response to my earlier comment.
    It is a great disappoint for me to learn from Jasmine that the Manpower Minister has to have Labour Minister ‘ask questions’ at Parliament Meeting. Is it supposed to mean that the Manpower Minister will be more competent and diligent whence ‘questioned or given some complementaries’ by Labour Minister.

    In my simple thinking, Unions should be wholly(completely) organized only by the workers them. The ONLY Representation from the Government Side on Labour Matters and Affair could either be the Manpower Ministry OR an Industrial Affairs Ministry.
    The Judiciary or Home Affairs maybe involved if the Government is not able to settle labour dispute.
    And it is simply ridiculous to have one ministry to prod another to work harder or more efficiently.

    Had been to a few provinces in China over the years. No long stay and the huge landmass of the Great Country is almost impossible to traverse. Local PRCs themselves could hardly cover much of their homeland.
    Me had and is glued to China National Televisions for many years. Before their availabilities, periodicals about China were my favourite reading materials. As an aside, me likes to say that Gintai knows that i am used to exhort acquaintances and others around to watch CCTVs.

    This morning when i turned on CCTVs including watching the Phoenix Station, they reported that the Chinese Government will further enhance the incomes of farmers. Indeed the youngs have left the farms to work in cities. However, in China as well as Japan and Taiwan, there were and are many townfolks including young graduates heading to the villages to do farmings for many years now.

    For those who wishes to know more about China, i strongly suggest thst they watch CCTVs. The hosts, artistes, guests and programmes of all the CTVs are great and a joy to watch.


    • Jasmine says:

      The Union Chief is elected by the Union members, the Manpower Minister is elected by his constituents and appointed by the Prime Minister.

      And Union members want their elected voice to be in Cabinet.

  10. Hi Gintai, I’m undecided if minimum wage helps or not.
    However, the examples you quoted (char kway teow and jagar) seems off the mark. If it is legislated that a char kway teow must sell at least $2.50, no one says it cannot be sold for $10. If the chef has the market (demands) for customers willing to pay for $10 because his has got XO sauce and abalone.
    I think a better illustration of minimum wage is the you char kway selling at maxwell (still there? ) The hawker might have shrunken you char kway and customers has to fry their own but selling at 10 cents a piece. Minimum order 1 piece. Why? The poorest can also afford to eat.
    Example of security officer – let’s say as you mentioned, minimum wage set at $5 per hour. Employees who refused to upgrade or improve service obtained a pay increment (assuming they were paid lower previously). However, they may also run the risk of being out of job. Would that not spur them to improve on par with their colleagues in other companies?
    No one say minimum wage has to be high or employers cannot pay higher for good employees. The question is on what basis do we peg the minimum wage. It is for this reason I’m hesitant.

  11. CT says:

    This is a discussion when Malaysia decided to impose a minimum wage. It is an economics blog and read the comments section on some of the arguments forth.

Comments are closed.