Comments on Wage Shock Therapy for Singapore low-wage earners by Raymond CS Lee

I refer to "Wage shock therapy too risky: Lim Swee Say" (14 April) and Professor Lim Chong Yah's proposal.

How much should wages of low-wage earners be adjusted?

The lowest 20% of Singapore households are in deficits.

The lowest-wage-earners need $1,800 or 40% higher than $1,274 shown. (Source: 2008 Singapore Department of Statistics figures, adjusted accordingly)

		1997/98	2002/03	2007/08
Average Monthly Household Expenditure by Income Quintile ($)
Total		3,176	3,292	3,764
1st – 20th		1,693	1,670	1,760
21st – 40th		2,294	2,439	2,881
41st – 60th		3,004	3,105	3,571
61st – 80th		3,626	3,980	4,532
81st – 100th		5,261	5,264	6,078
Average Monthly Household Income by Income Quintile ($)
Total		5,322	5,535	7,440
1st – 20th		1,309	1,104	1,274
21st – 40th		2,778	2,730	3,476
41st – 60th		4,207	4,193	5,480
61st – 80th		6,225	6,361	8,495
81st – 100th		12,091	13,288	18,472
Average Monthly Household Surplus(Savings)/Deficit/ by Income Quintile/ ($)
Total		2,146	2,243	3,676
1st – 20th		-384	-566	-486
21st – 40th		484	291	595
41st – 60th		1,203	1,088	1,909
61st – 80th		2,599	2,381	3,963
81st – 100th		6,830	8,024	12,394

Are foreign workers the culprits that depressed wages?

Companies have been cutting non-core functions. This is a worldwide phenomena. These functions include backroom functions, cleaning and assembly lines. The purpose is not just to cut cost but to better control cost. This creates a nimble company with better focus.

When companies move non-core functions overseas, economy that functions best as an ecological unit will breakdown. As certain low-skill-supporting-industries close down, other supporting-industries will struggle. Consider the case of Apple. Its CEO said it is now not possible to move the assembly line back to US because supporting-industries such as those that makes the case or screws have moved.

Hence, need to maintain low-skilled low-tech industries and support them by importing low-skilled labour. Besides supporting higher-tech industries they are alternatives for low-wage earners.

How best to increase wages of low-wage earners?

Currently it is not legally possible to control wages of top-wage earners unless we amend our legislations. If Singapore legislates wages of top-wage earners ahead of other countries, they will leave. They are the decision makers. Otherwise leave it to board of directors and allow them to pay according to profits.

We can increase wages of low-wage earners by raising minimum wages. It is a double-edged sword. If wages increase before "productivity" improves, non-core-supporting industries can relocate.

What is productivity improvement?

Management textbooks describe 5 tools for productivity improvement:

• Control of cost structure
• Organisation of work
• Business processes
• Knowledge management
• Information technology

Personally, I believe in putting the onus on low-wage earners. Teach them skills that they can improve based on their determination. Relevant skills should be more entrepreneurial thus opening up avenues to provide services as a skilful paid employee or even start-up businesses. A variety of courses can revolve around pizza-making, coffee-making (barista), cooking, baking, pastry, dress-making and other crafts.

This aims to put productivity improvements on the hands of individuals so they can claim ownership rather than leave them in the hands of organisations or collectives.

This is a Singapore specific topic.

The opinions in this document are entirely the author's own and should not be construed as professional advice.

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