[WOT analysis] GE2015 issues: Minimum Wage vs. Progressive Wage

[ethan89]

Singapore Elections 2015: The Minimum Wage vs. Progressive Wage (I)
anonhomosapien / 2 days ago

As elections draw closer, The Fool feels the urge to address a contentious issue that has come up in recent discourses – The Minimum Wage and the Progressive Wage Model.

These concepts are obviously more complex than I am making them out to be, but they generally attempt to balance the demands of the economy with the demand for higher worker wages.

Generally, the Minimum Wage attempts a direct redistribution of wealth from the business to the worker, while the Progressive Wage model attempts to increase the wealth of workers by making them more valuable to the employer, who, in turn, will hire them at higher wages.

It should be clear that the policies are not mutually exclusive. The Minimum Wage model can be implemented alongside the Progressive Wage model. The Fool is therefore perturbed as to why the models have been placed in conflict with each other. But, that is for another time – Since proponents of the respective camps have drawn their lines, and such is the reality.

Additionally:

• Those who favor the Minimum Wage model at the expense of the Progressive Wage model inherently distrust businesses.
  
  
• Those who favor the Progressive Wage model at the expense of the Minimum Wage model inherently favor businesses over workers.
  
  

The Fool believes that the debate over which model is superior is stupid. Rather than debating the inherent superiority of the individual systems, the question should be on which system suits the country best.

So, here are a list of conditions that The Fool believes are needed in order to make the respective models viable in Singapore assuming a labor force who size remains constant (which is the desire of most Singaporeans hoping to reduce its reliance on foreign labor).

Image credits: TOC
​

The Progressive Wage model

1. Businesses require and desire local workers that are highly trained
   
   
2. Workers are willing and able to undergo the training that has been given
   
   
3. Businesses are willing to accept (through heavy incentivizing or coercion) to accept the disruption to their businesses when training takes place (heavily incentivized, rather than merely incentivized because disruption to a business are not counted merely in dollars and cents – sometimes, those causing the disruption are so vital that businesses might prefer to discard the worker altogether, and hire someone else on a permanent basis)
   
   
4. Workers do not suffer from fatigue, insecurity and demoralization, which make it impossible for them to sustain the effort needed to "up-skill" themselves (especially in the context of the above requirements)
   
   
5. The economy is significantly driven by external factors, rather than internal consumption
   
   

Has this succeeded? Based on information from the Ministry of Trade and Industry, Singapore’s productivity level in recent years have been stagnant, although exceptions exist. This post suggests that the failure to meet the first four conditions is a cause of this. Not the only, or total cause, but a significant one.


The Minimum Wage model

1. Businesses are able to absorb the cost of any increases in the wages provided.
   
   
2. Workers are presently underpaid vis-a-vis the amount of effort that they put in – resulting in negative economic consequences such as under-consumption within the domestic economy.
   
   
3. Businesses are willing to accept (through heavy incentivizing or coercion) to accept the increased costs that they must incur as a result of this action
   
   
4. The effect of fatigue, insecurity and demoralization are a primary cause of productivity decreases and stagnation, either through an unwillingness to take risks, or an inability to concentrate for psychological reasons.
   
   
5. The effect of increased salaries result in sufficient beneficial results, such as additional consumption, greater ability and willingness to partake in entrepreneurship, better ability to take on new skills and increased tax revenues will outweigh the negative effects such as increases in unemployment, withdrawal of business opportunities and consequences of violations of trade agreements with other countries, if any.
   
   

This is the first part. The Fool will discuss the implications of these assumptions in the next post.



Source: http://abeautifooledmind.com/2015/09/03/singapore-elections-2015-the-minimum-wage-debate/

 

[ethan89]

Singapore Elections 2015: The Minimum Wage vs. Progressive Wage (II)
anonhomosapien / 2 days ago

In the previous post, The Fool (edit to fix previous typo) has introduced the concepts of the Minimum Wage model, as well as the tenets of the Progressive Wage model.

The goal of this post is to show that the prerequisites of the Progressive Wage model have not yet been met in Singapore. Therefore more has to be done for the country than what has been done so far.

Before that, this post will first examine Singapore’s economy. What is it like? How are we doing?

At present, the Singapore economy appears to be highly dependent on the following sectors (more specific information available at the Ministry of Trade and Industry website)

Screenshot from a file (A1.1_AES2014.xls) obtained from the Ministry of Trade and Industry (Singapore) Site

​

1. Manufacturing
   
2. Wholesale and retail trade
   
3. Finance and Insurance
   
4. Business services
   
   

Based on information from the Ministry of Trade and Industry, that overall worker productivity has been stagnant at best. Exceptions exist, but merely in the following sectors:

1. Bio-medical manufacturing sector
   
2. Parts of the engineering sector
   
3. Wholesale trade (retail appears to be left out, please correct me if I am wrong)
   
4. Accommodation
   
5. Finance and insurance
   
   

These sectors have been named in advance, in support of a point that will be made later.

Published by MTI:

Spoiler

Domestically oriented sectors are showing productivity losses across the board, especially in the retail trade sector.

For easy reference, below are some of the theoretical prerequisites that must be met before the Progressive Wage model produces significant positive results. They are:

1. Businesses require and desire local workers that are highly trained
   
   
2. Workers are willing and able to undergo the training that has been given
   
   
3. Businesses are willing to accept (through heavy incentivizing or coercion) to accept the disruption to their businesses when training takes place (heavily incentivized, rather than merely incentivized because disruption to a business are not counted merely in dollars and cents – sometimes, those causing the disruption are so vital that businesses might prefer to discard the worker altogether, and hire someone else on a permanent basis)
   
   
4. Workers do not suffer from fatigue, insecurity and demoralization, which make it impossible for them to sustain the effort needed to "up-skill" themselves (especially in the context of the above requirements)
   
   
5. The economy is significantly driven by external factors, rather than internal consumption
   
   

The question is therefore whether are there any reasons to plausibly believe that the above prerequisites have not been met.

NOTE:
The Fool acknowledges that the government has more access to information than he has. However, the incompleteness of my understanding merely means that caution must be taken before accepting what I say at face value – but it does not mean that there is nothing that can be done to contribute to the understanding of one aspect of an issue.

​

Image Credits: TOC
​

Assumption 1: Businesses require and desire local workers that are highly trained

Assumption 2: Workers are willing and able to undergo the training that has been given

Assumption 3: Businesses are willing to accept (through heavy incentivizing or coercion) to accept the disruption to their businesses when training takes place (heavily incentivized, rather than merely incentivized because disruption to a business are not counted merely in dollars and cents – sometimes, those causing the disruption are so vital that businesses might prefer to discard the worker altogether, and hire someone else on a permanent basis)

These assumptions are highly suspect. Our economy, as mentioned earlier, is dominated by the following sectors:

1. Manufacturing
   
2. Wholesale and retail trade
   
3. Finance and Insurance
   
4. Business services
   
   

These sectors are problematic, because they do not easily make use of retrained and re-purposed manpower. Even if a person were to make that switch, he or she would likely face the following barriers:

1. Potential loss of wages (manufacturing, retail)
   
   
2. Lacks the acumen that comes from experience (all four sectors)
   
   
3. Lacks the ability, be it physical or mental, to deal with the demands of the job (all four sectors)
   
   
4. Not cost effective enough for businesses (manufacturing, wholesale, and retail), because these jobs require either strength, flexibility, health, change in company paradigms and investments in new systems needed to utilize such labor, which results in point 1: potential loss of wages.
   
   

It is pointless to talk about skills retraining, when the industries that are best able to absorb new labor are unable to absorb retrained labor effectively!

The same is true even if we were to consider the sectors that are showing the highest productivity levels:

1. Bio-medical manufacturing sector
   
2. Parts of the engineering sector
   
3. Wholesale trade (retail appears to be left out, please correct me if I am wrong)
   
4. Accommodation
   
5. Finance and insurance
   
   

The bio-medical manufacturing sector looks promising. But it suffers from the same issues listed above. This is not a sector where one can easily pick up newly retrained people, and utilize them with ease – especially so when it is concerned with human lives.

But that is not the most damning problem!

Even when we have people who desire to be retrained, the forms of assistance available are mostly in the form of monetary grants that only cover a part of the expense of the course itself. This is insufficient, because it ignores the opportunity cost that are associated with actually picking up these skills.

Existing workers still suffer opportunity costs for upgrading themselves, both in monetary and non-monetary terms.

This means that the only groups of people who find “upgrading” worthwhile are people who already lost their jobs or those that are given an iron-clad guarantee that what they lose in the interim will definitely outweigh the cost of taking up upgrading.

This is unreasonable for both employer and employee alike. None will choose to play their part if they had a choice, and all employers would seek to bypass the requirements if it were possible.

Regardless of the best intentions of the government,

Assumption: Workers do not suffer from fatigue, insecurity and demoralization, which make it impossible for them to sustain the effort needed to upskill themselves (especially in the context of the above requirements)

This is nonsense. As early as 2013, AsiaOne has reported that Singaporeans work some of the longest hours in the world. This is a testament to the strength of the worker, but it is also a trend that is unsustainable. Already, we have seen its effects spill over into other aspects of Singaporean life. For one, a paper by Prof. Paulin Tay Straughan in 2012 reveals that Singaporeans work longer than the South Koreans, and that our fertility rate has suffered in part because of that.

Pray tell – if that is the case, where are we supposed to find the time to "up-skill"?

The strong in society may claim that these policies support meritocracy, and that it is not their job to establish policies that result in laxity, but it is not the responsibility of the government to establish policies that only a few can fulfill – since few will benefit from it either!

Assumption: The economy is significantly driven by external factors, rather than internal consumption

This condition has been met. Hence, the post will not dedicate space to it. However, there are limits to externally oriented growth, and the government would be wise to creating conditions that will allow domestic consumption rates to increase further.



Part III will deal with suggestions on what can be done. Stay tuned.



Source: http://abeautifooledmind.com/2015/09/04/singapore-elections-2015-the-minimum-wage-ii/

 

[ethan89]

Reserved for Part III.

 

[ethan89]

Part IV, if any.

 

[ethan89]

Part V, if any.

 

[wuweiz]

Not even bothered as this does not solve the main problem.

Solve the root of the problems and they ish no need to discuss about minimal wage.

Simply put.. A waste of time trying to solve symptoms.

 

[xLupDup]

progressive wage is more long term solution compared to minimum wage

 

[Entry Level PC]

Progress Wage is CBS.
But Min Wage is also not without its own issues.
http://www.dailymail.co.uk/news/art...m-s-minimum-wage-70K-says-hit-hard-times.html

One thing everyone agree however is that our Ministers are OVER PAID and should take a 90% Paycut.

 

[Onelastwish]

The moment you have minimum wage, it will open another can of problem.

Employers will use minimum wage as maximum wage.

Mark my words.

 

[slash40]

Hm.

Seems like the other parts were up... but were not published by TOC?

 

[DanielTng]

The moment you have minimum wage, it will open another can of problem.

Employers will use minimum wage as maximum wage.

Mark my words.

yelp, it will be the case. Let the market forces determine the wage scale and not the government interference.

 

[DanielTng]

Progress Wage is CBS.
But Min Wage is also not without its own issues.
http://www.dailymail.co.uk/news/art...m-s-minimum-wage-70K-says-hit-hard-times.html

One thing everyone agree however is that our Ministers are OVER PAID and should take a 90% Paycut.

No, I don't think everybody agree. If you were to interview most corporate executives, they will tell you that the wage scale paid to the ministers are fair.

These people would be earning more monies if they were to be heading businesses.

I bet if you have a son that is good enough to be a minister, you will not say that he is being overpaid.

Prime Minister Lee Hsien Loong: US$1,700,000.
Singapore President: US$1,190,000
Singapore cabinet ministers: US$850,000
Singapore members of parliament: US$148,306

For one to say that they need a 90% pay cut, one would be putting their wage scales as:

Prime Minister Lee Hsien Loong: USD 170,000 = SGD 220,000 = SGD 18,333 per month
Singapore President : USD 119,000 = SGD 154,000 = SGD 12,832
Singapore cabinet ministers: USD 85,000 = SGD 110,000 = SGD 9,167
Singapore member of parliament : USD 14,836 = SGD 20,000 = SGD 1,667

What does those wages equate to:

The PM's pay is equivalent to a senior bank manager only,
The President earning the wage of a senior bank officer,
the cabinet ministers shall be earning the wage of bank manager
and the member of parliament earning the wage of the counter sales girl.

Then what caliber of ministers and member parliament do you expect for our country. This institution is run to be like a large corporate whereby we have the best brain to continue to steer us through economic success and the betterment of the society and with those wages that you purport that everyone agree, I think we would be in big big trouble.

Personally, I don't agree and I felt that the way our system is put in place such that we pay professionals to handle the job and in the process the avoidance of corruptions and the like.

I also believe that the PM or any minister(s) after devoting his entire live to the nations well being, their family must not be made to suffer after they retire. The bottomline is that they and their family must live with pride and dignity. Please note that unlike many other countries whereby the PM and cabinet ministers have big retirement pensions, our PM and ministers have to like us rely on their CPF.

The Singapore ministers wage scale was revised following the review of the wage system while luring in Mr Hu Tsu Tau, Richard as our Finance Minister. Mr Hu was the Chairman and CEO of Royal Dutch Shell - an international group and was earning a salary of around USD 500,000 per month. We want him to be taking of MAS and our finance ministry and how can we tell him that he must come and serve the people of Singapore and take a pay slash from his USD 500,000 per month to SGD 9,167 as you have prescribed.

So, we must be rational in our thoughts and if you were to be in his shoes, would you drop your USD 500,000 pm job for a SGD 9,167 pm job and get scolded by people for the slightest things - no matter how well you were to do your job.

I can understand why Minister Lui is prepared to forgo the big wage job and quit and go into the commercial line. I can understand why Mr George Yeo is now a much happier man earning much more than he has earned as a minister and not having to serve Aljunied and getting himself scolded for things are his and not his fault.

I have to admit that I pity LHL for taking the job and earning less than what his brother Hsien Yang earns as CEO of F&N. Hsien Yang is now chairman of CAAS following the divesting of F&N to the Thai brewery group.

His brother earns much more than the PM and get to office and go home and can have his other bonuses and add-ons without having from the sticks from the Singaporeans who are not happy with PAP or having an agenda with the government or having their political motives.

I know many would say that I am a supporter of the government but the fact is I just speak the truth as a matter of fact.

If we continue to bash good people and good leaders and government officers and cabinet ministers, in no time, how attractive the wage may be no good people would want to serve and then this nation would be left to the hands of you know who........