Daily Lessons from Life 14 April 2012 - 'Wage shock' therapy too risky, says labour chief Swee Say

"Apr 14, 2012 AsiaOne - 'Wage shock' therapy too risky, says labour chief Swee Say

LABOUR chief Lim Swee Say yesterday described as "thought-provoking" but "too risky" a controversial proposal to shock-hike low salaries to close the income gap, saying a wage-driven approach could spell big job losses and structural unemployment.

Illustrating on a square grid, the idea, he said, is to move from the low-wage-low-productivity quadrant to the high-wage-high-productivity box.

But if Prof Lim's "wage shock therapy" fails - ie wages soar, without a commensurate rise in productivity - Singapore could get stuck in a low-productivity-high-wage rut, with job losses and structural unemployment as companies and industries become uncompetitive, said Mr Lim. "That's what I'm concerned about."

The labour movement, he said, "is not prepared to take the risk".

Citing rough back-of-envelope estimates of multi-billion dollar increases in wage bills for just the bottom group. Who will pay for this wage hike, Mr Lim asked.

Indeed the better and "right" way to go is the tripartite movement's focus on raising productivity to boost the incomes of low-wage earners, he said. He conceded, though, that it's the rather more challenging approach as it would take much longer to get there.

"What we need to do is to apply our minds to how to speed it up," he said, adding that he is confident it can be done. Various schemes are in place to support the upgrading of low-wage workers, such as Workfare Income Supplement (WIS) and Workfare Training Support (WTS).

Mr Lim also pointed to three things that "must happen" for Singapore to get to the high-wage-high-productivity goal "and stay there".

First, every industry cluster must continue to be "cheaper, better, faster".

Every cluster must also build up and beef up their Singaporean core, instead of relying on foreign labour. Not least, growth must be inclusive, without leaving out segments such as older folks.

Singapore has become too "foreign-worker-centric", he said, with imported labour seen as the quick or easy solution to business and economic needs.

The big bottleneck in the drive for better jobs, better wages, higher productivity and inclusive growth over the next eight to 10 years would still be Singapore's manpower shortage, he believes.

But the solution doesn't lie in foreign workers, nor in hiking up wages, he made clear.

Under Prof Lim's proposal, made on Monday, those earning between $1,500 and $15,000 would get a 4-5 per cent wage rise a year, while the pay of those drawing $15,000 or more is to be frozen for three years."

I am coming back to this 'shock-wage-therapy' I passed a few nights ago after giving it some thoughts.

1. IF the majority of the employers of 'cheap' foreign labours (blue and whit) are SMEs, as most official number indicated to be the biggest employers group, then it is UNLIKELY that they will have an incentive to pay higher wages WITHOUT being pushed!;

2. the attractiveness of EVEN on par foreign white collar workers/executives vs. Singapore male workers/executives under 55 years old is the 'reservist training' period. This CANNOT be ignored. Also, the facts that more and more 'managers/executives' with hiring authority are foreigners and ARE employing more from their own country of origin. Even just for the fact that they are closer in culture and maybe, unconfirmed rumours, the 'foreign hired' are more obedient or more productive than Singaporeans!;

3. finally the most critical premise is: "what is the reasonable 'lowest' wages for Singapore workers?" Surely we can easily tabulate this using a 4-member family, if not 5-member since not many Singaporean want to have any kid due to, as some alleged, the high cost and pressure of raising children!!

There is NO doubt in my mind that SOME low value jobs are STILL here because someone is able to find LOWER WAGED workers. Maybe some of these jobs SHOULD be eliminated.

As for those who said that the FREEZE on those above S$15k/mth will drive away talents, it needs an EVEN greater jolt on a most fundamental of the so-called 'pure capitalism' - WHAT is enough? I have suggested using Mr Lee Kuan Yew's standard for his famed simple and healthy living despite being one of the most powerful, and hence, wealthy person in Singapore!