Straits Times panel on minimum wage is extension of Tommy Koh's FB post debate with Lim Boon Heng

We break down the debate for you.

Matthias Ang | December 04, 2018, 09:27 PM

Last Sunday (Dec. 2), you may (or may not) have opened The Sunday Times (ST) to find two entire pages of the paper containing multiple articles dedicated to a roundtable discussion about the minimum wage, which took place on Friday (Nov. 29).

As reported in ST, the participants in the discussion were:

  • Temasek Holdings Chairman and former labour chief and cabinet minister Lim Boon Heng,
  • Ambassador-at-large Tommy Koh,
  • NTUC assistant secretary-general Zainal Sapari,
  • President of the Association of Small and Medium Enterprises Kurt Wee, and
  • Co-founder of cleaning start-up Nimbus Daniel Thong.

The discussion was moderated by ST Opinion Editor Chua Mui Hoong.

What the government is currently doing

According to a transcript of the exchange titled "Are workers in S'pore getting a fair share of the pie?", the debate questioned whether existing government efforts in raising low wages were effective, or if a minimum wage was necessary for this purpose.

Currently, the government uses two main policies for this: the Progressive Wage Model (PWM) and the Workfare Income Supplement (WIS).

The PWM set minimum monthly salary levels for cleaners, security guards, lift technicians and landscaping workers that kicked in between 2015 and 2016. These are adjusted by government-mandated raises on an annual basis in some cases, like for cleaners:

The WIS is how the government puts extra money into lower-wage workers' CPF accounts, with additional small cash payments monthly.

Tommy Koh asks: Are these enough? We need to do more

Chua asked the panel why the government never implemented a minimum wage if they were not "ideologically opposed" to it. Lim responded that there was already a "de facto minimum wage".

Zainal said this came in the form of the PWM, which he called "sectoral minimum wage". When Koh pointed out that just covering four sectors of the economy under these minimum wage levels was not enough, Lim said the sectors "are moving beyond the minimum wage", and that the WIS applies "across the board".

This drew Koh's response that the PWM needed to be scaled up beyond the four sectors, and that the cash component of the WIS needs to go up in order for it to be meaningful, which in turn prompted Zainal's quip, "Not within my pay grade, Prof."

Koh: Arguments against minimum wage are "fake", using "usual scare tactic"

Koh then argued that the WIS at its current quantum have failed in lifting poor workers out of poverty.

Could the same be said about minimum wage? Lim said yes, but Koh disagreed, stating that a minimum wage in Hong Kong has been able to lift "140,000 Hong Kongers out of poverty".

Koh also said, by the way, that the same policy in Taiwan, South Korea and Japan had not led to unemployment or illegal employment.

At this point, the exchange took a turn for the heated, with Koh criticising the arguments made by Lim and Zainal as "fake arguments" that were "the usual scare tactic". It is not clear from the ST report what exactly these arguments were, though.

In that case, countered Lim, it isn't about whether there is a minimum wage in Singapore but whether the WIS is enough. Koh acknowledged this, adding it didn't matter what policy was in place as long as it was effective.

"I want every worker to earn a living wage. I'm not wedded to the minimum wage, you know, it's just a means to an end. If Progressive Wage Model, Workfare Income Supplement can work, by all means. I have no ideological commitment to one instrument versus another, I'm interested in the outcome."

Rewarding capital instead of labour

Koh introduced another aspect to the debate on wages: the fact that in Singapore, more of a company's profits go to its shareholders (i.e. capital) than its employees (i.e. labour). The number Koh gave is 56 per cent of our country's Gross Domestic Product (GDP) that goes to capital versus 44 per cent of GDP to labour — in OECD countries, he notes, it's 50-50.

Lim responded saying it is difficult to compare between countries of different economic structures, adding that it is a "very technical discussion" and it would be better to compare the change in a country's wage share of GDP over time.

In reply, Koh highlighted a report from the U.S. Department of Commerce that found Singapore gives an American investor the highest rate of return on investment, which he says proves his point — this isn't a technical issue, it's about equity, and with regard to this, workers are being under-rewarded.

Zainal said workers will benefit in this regard from being unionised, but at the moment, many companies in Singapore are not.

Competition from foreign low-wage workers push wages down further

What's more, argues Koh, workers at the bottom of the pyramid face stiff competition from foreign low-wage workers, which has pushed down their wages to extremely low levels.

This elicited Zainal's response that there were policies in place to mitigate this, like a quota in the number of foreign workers who can be hired, as well as on the S-pass for mid-skilled technical foreign staff.

Zainal further defended the monthly salaries of less than S$600 for foreign workers, arguing that "fair (pay) doesn't mean it has to be the same" and cited an account of a cleaning supervisor who could buy two parcels of land back in Bangladesh after working here for six years on a monthly pay of S$700.

Lim reinforced Zainal's position by adding that Singapore's open economy means high-end wages are pulled up by those in other countries, and low wages here will be pushed even further down by those in other countries.

Can we tax the higher-income more? Lim says yes, Zainal says no

Chua shifted the discussion to taxation — can the government reduce inequality by taxing the rich more?

Lim said for him personally, he was in favour of doing this:

"Speaking personally as a Singapore citizen, I think there's some room to go for taxing the high income, and I think if other Singaporeans, you know, share my view, we could increase the (personal) income tax level for the high income a little bit, right, and still be competitive with the rest of the world."

But Zainal raised the argument of Singapore losing its competitiveness, saying the rich are more mobile and can simply shift their wealth, business and jobs elsewhere where it's cheaper.

Extension to previous debates started at IPS conference, FB post

This discussion didn't come from nowhere, by the way — it started, in fact with Koh at the Institute of Policy Studies' 30th anniversary conference on October.

Here's what he said in a session with Manpower Minister Josephine Teo:

However, Koh subsequently put up a Facebook post criticising ST of "biased reporting" of the exchange, leading to an online argument between Koh, Chua and Lim on two different tangents — Chua, on ST's coverage, and Lim, on the minimum wage debate.

You can read more about that here:

The current roundtable discussion can be seen then, as an extension of the original discussion that first took place on Facebook on Oct. 27, for all parties involved to air their views in person this time round, with some additional players.

Perhaps it could also be viewed as an attempt by ST to show that their reporting is not biased on these matters.

Top image screenshot via The Straits Times