Former National Wages Council Chairman says Singapore should have a minimum wage

By June 12, 2017Current

TL;DR – It’ll help Singapore achieve inclusive growth, he says.

Professor Lim Chong Yah is no stranger to wage matters. After all, he did serve as the chairman of the National Wages Council for nearly three decades. He’s also no stranger for making radical suggestions. In 2012, he suggested what he called “wage shock therapy”. It was a proposal to hike the pay of the lowest-paid workers by 50 per cent over a period of three years and a voluntary freeze, for three years, on further pay increases for those earning more than S$1 million per year.

In a recent interview, Prof Lim spoke about a less radical, but no less contentious proposal – minimum wage.

Why minimum wage?

The reason Prof Lim suggested the “wage shock therapy” and minimum wage is because he would like Singapore to have “growth with equity, which is to have inclusive growth”.

Prof Lim acknowledged that the Government has taken quite a lot of measures to transfer income, a large number of measures – in one form or another – to help the lower-income groups. That has had served to narrow income inequality.

However, Prof Lim feels that more can still be done. He’s concerned that wage growth won’t keep pace with increases in costs of living and people will have to depend on the government for transfers and support. It seems that his concern came from his observations about the low compliance rate of the National Wage Council (NWC) guidelines. His suggestion to implement a minimum wage arose from this concern.

But won’t it hurt the economy?

Not if it is linked to the national productivity level. Prof Lim pointed out:

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“One can discuss the minimum wage issue until kingdom come. There are pros and there are cons. Most nations in the world, developed countries in particular, have introduced the minimum wage system. There were studies showing that with the introduction of the minimum wage, it would not damage the economy, provided the minimum wage level is linked to the national productivity level. In other words, it cannot be too high, neither should it be too low that it becomes irrelevant.”

If implemented, the NWC can be tasked with studying whether we have gone too far with the minimum wage. And, because of the close tripartite relationship, Prof Lim has faith that Singapore will be able to adjust the minimum wage appropriately and get the balance right.

But what about companies that can’t afford the minimum wage?

The interviewer for the article with Prof Lim did wonder whether a minimum wage would be so unaffordable as to cause companies to go bankrupt. Prof Lim didn’t directly address that issue. But another eminent Singaporean economist did. Yeoh Lam Keong, former chief economist of GIC, posted a comment on his Facebook about Prof Lim’s suggestion for a minimum wage.

In his post, Mr Yeoh said:

“If, at this stage, our companies cannot fully afford a decent living wage, the difference can then the be topped up by the Workfare Income Supplement (WIS).”

End of poverty in Singapore?

Mr Yeoh also explained that he supports Prof Lim’s suggestion for a minimum wage because that will “help bring our working poor up to a decent living wage.” Mr Yeoh believes that this will be the start of effectively making poverty history in Singapore.

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It sounds good in theory. Will it work? Maybe, maybe not.

But it’s definitely worth deeper analysis.


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Jake Koh

Author Jake Koh

Recovering sushi addict, I'm a man of mystery and power, whose power is exceeded only by his mystery.

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