OCTOBER 28 — Deputy Prime Minister Tharman Shanmugaratnam has weighed into the issue on inequality in Singapore.
Speaking at the 30th anniversary of the Institute of Policy Studies (IPS) he said that social mobility in Singapore should be like an escalator — while there may be gaps (we aren’t all going to be equal) everyone should be going up.
As the wages of the highest earning professionals and fortunes of the nation’s tycoons increase, so should wages at the bottom end of the spectrum.
It’s a simple idea of course and quite a logical one. However, the reality in Singapore has been quite different.
For many years, wages at the bottom of the “escalator” stagnated — as wealth at the top end exploded.
This led to a situation where while there are billionaires on one end of the scale (Singapore has more than 30 of them) and no shortage of millionaires (Singapore has well over 100,000 high net worth individuals — a very high figure given our small population) there were also plenty of low-income workers earning under S$1,000 (RM3,023) a month.
Beyond being low, many workers’ wages also didn’t rise so they were trapped. A large influx of (cheaper) foreign workers ensured that wages remained low even for Singaporeans working in low wage sectors — cleaners, security guards etc.
The government (to its credit) did take action. In 2012, it launched the progressive wage model which established floor wages — effectively minimum salaries that could be paid to workers in three sectors; cleaning, security and landscaping.
The progressive in the scheme’s title comes from the fact that the wages are pegged to certain milestones after which employers are obliged to increase them.
After a security guard, for example, completes two certificate modules (subjects include incidents management, operating security systems etc) employers are obliged to increase his wages.
Employers are also obliged to help their staff secure more training and certification.
Again this all makes sense in principle and Tharman at his speech pointed to the success of the PWM scheme.
But the reality isn’t so simple. While there have been increases in the wages for some workers within the scheme, there have also been increases in costs — with inflation and the basic cost of living rising.
Perhaps more importantly a great many workers aren’t covered by this scheme — F&B sector workers, retail workers, drivers and so on.
So why don’t we just expand the scheme? Or simply introduce a minimum wage – the model followed by over 80 per cent of nations.
Singapore’s government has long argued a minimum wage would reduce competitiveness and not target the poorest (as everyone gets minimum wages even say young people doing summer holiday jobs).
There may be some truth to this; minimum wages haven’t really solved the problem of low wages elsewhere in the world.
However, is our current system really targeted enough? The DPM also argued that the lower wage Singaporeans got S$4 back for every S$1 they paid in tax — ie. they received considerable benefits, subsidies, training grants.
The bottomline is that there are a large number of Singaporeans who do not seem to be a on a wage escalator and even if they are moving up, they aren’t moving up at a rate that allows them to keep up with the escalator’s higher echelons.
So, the argument is this — in order to keep everyone on the track to higher wages, Singapore needs to be highly competitive and also keep the labour market tight.
Isn’t this a catch 22? Keeping the labour market tight (not allowing too many foreigners) will certainly help push up local wages but it will almost certainly also erode our competitiveness.
It is very difficult to keep your labour market tight and benefit only locals while you stay competitive.
At some point in time, we have to choose between competitiveness or a tight labour market — and I really wonder which one our policy makers will go for.
* This is the personal opinion of the columnist.
