10 Facts About the Minimum Wage Model & Why It’s Not Implemented in Singapore

Last Updated on 2020-12-19 , 3:34 pm

Unless you’ve fast-forwarded to the part where Jamus Lim talked about the blank cheque, you would’ve heard him raise up this term, Minimum Wage Model, at least two times during the political debate.

In fact, if you’ve read through the Workers’ Party (WP) manifesto for GE2020, you’ll have come across it at least once.

So given the fact that there are now 10 WP members rightfully elected into government, you can bet that the minimum wage model is definitely going to be brought up in parliament.

And of course our dear oppa Jamus Lim spoke about it again after a seat is reserved for him in Parliament:

But what is it? And what’s with the magic number of S$1,300?

If you’re interested to watch this topic instead, check out this video we’ve done whereby we simplified minimum wage for you (please also subscribe to our YouTube channel for more informative videos!):

Here are 10 facts about the Minimum Wage model that we’re suddenly very interested in after GE2020.

1. What Is It?

If you’ve been paying attention to parliament for the past few years, you’ll have heard of this never-ending argument:

WP: We want minimum wage here in Singapore!

PAP: No, we give you a progressive wage model instead.

WP: Minimum wage.

PAP: Progressive wage.

line 3 & 4 X 1,000 times-

Here’s what minimum wage is all about.

Basically, it means that the government comes up with a law saying cleaners must be paid at least $2,000 (or any amount).

So if the boss of company ACB decides to only pay a cleaner $1,000, he is, in fact, breaking the law and Singapore bubble tea stores are told not to sell their drinks to him.

And why did I invoke the name of the Progressive Wage Model? You’ll find out later.

2. Minimum Wage Is Actually The Majority

When supporters of the minimum wage model advocated for it, they pointed out to other countries like South Korea, Japan, Taiwan and Hong Kong which has implemented it but is still doing well.

According to the International Labour Organisation (Ilo), 92% of their member states is estimated to have a minimum wage that is applied to all or part of their private sector, according to their definition of a minimum wage.

New Zealand was the first country in the world to set modern-day minimum wage regulations back in 1894.

They were followed by Australia which implemented it in 1896, then the UK in 1909.

3. The Roots Of Minimum Wage Laws

The minimum wage that we know today has two beginnings: the medieval one (older than your great-great-great-grandfather) and the modern-day version.

And ironically, the medieval version, which most modern-day minimum wage laws are based on, was created to oppress the poor.

Back in 1348, the Black Death reached Britain from Asia. Think of it as the medieval version of Covid-19, except it’s so deadly six out of ten people died to the disease.

(By the way, it might be back if there are not enough cats in the world; you’d know if you’ve downloaded our app, or you can read this article and you’d understand)

With so many people dying, there’s a lack of manpower, which leads to wages rocketing sky-high.

King Edward III, a landowner himself who need the manpower (think of him as a modern-day CEO), issued a decree that sets the maximum wage for labourers.

And so, labourers were forced to accept an income ceiling until 1389 where an amendment was made and wages were fixed to the price of food.

It was eventually formalised in 1604 before being removed in the early 19th century.

4. How It Came Back

The modern-day version was, as mentioned in #2, first started by New Zealand.

They enacted minimum wage to act against workplaces with poor and unfair working conditions.

Then, many women and young people were employed for below-average wages and they don’t have any bargaining power.

The minimum wage was implemented to force these employers to pay them fairly.

5. A Call For Minimum Wage Was Made In S’pore Since 48 Years Ago

According to a TODAYonline article about minimum wage, it turns out that Professor Lim Chong Yah, a former chairman of the National Wage Council (NWC), had made a call for a national minimum wage back in 1972.

Unfortunately, he had not garnered any support.

In 2012, Professor Lim said that the Singapore economy needs to undergo “shock therapy” to address the problem of wage inequality.

He suggested that top earners in the country have their pay frozen for three years and to implement a minimum wage system.

In 2014, he revisited the topic again at the launch of his book, Singapore’s National Wages Council: An Insider’s View.

So, if it’s so goody, why not just implement it?

6. Why PAP Refuses To Implement A Minimum Wage System:

Based on #4, it’s been 48 years since the concept was introduced to Singapore.

So why was it rejected?

Well, here’s what the PAP (and most people who argue against a minimum wage) believe:

An employer has $4,000 to hire employees every month and he/she decides to hire 5 workers with a salary of $800 each.

Supposed you set a minimum wage of $1,000. What happens is, instead of 5, the employer can now only afford to hire 4 people.

That’s a 20% drop in employment for this particular employer.

Now imagine every employer going through the same thing, the employment rate will drop.

In a dialogue back in 2018, manpower minister Josephine Teo also pointed out that having a “binding minimum wage” across all sectors isn’t ideal, given that there are some sectors where employers don’t believe in paying as much for.

Implementing a minimum wage could also make Singapore less competitive and less attractive for investments, according to former-Labour Chief Lim Boon Heng.

Current labour chief, Ng Chee Meng, had also weighed in on the issue of a minimum wage.

He questioned: What if the minimum wage was taken to be the maximum wage by an employer since they think it’s a reasonable amount to give?

After all, the government say this one okay so it’s okay, right?

7. What People Who Support A Minimum Wage Believes:

People on the other side of the equation, however, believes that it comes full circle.

You set a minimum wage, cost for employers increase; people now have more purchasing power, the economy grows (revenue might increase), thus balancing everything out somehow.

Supporters of a minimum wage believe that implementing a minimum wage helps reduce poverty, reduce inequality, increase the standard of living and boost morale.

Studies done on minimum wage produces mixed results:

Some found that restaurant workers earn more but employment fell (University of California, LA)

Others, however, found that wage hikes in several cities have not impacted jobs (University of California, Berklee)

Suddenly, you realise it’s not easy to be a politician, isn’t it? You’d rather make decisions like whether to have Gong Cha or LiHo instead.

8. Why Is The Workers’ Party Advocating Minimum Wage?

There are two core beliefs to the school of “minimum wage”:

  1. The “fair” amount a worker should be paid is above the “market” rate (determined by supply & demand).
  2. When the market fails to set a fair wage for workers, it’s up to the government to put in place policy to look after them.

A bit simplistic, yes, but that’s the idea.

The Ministry Of Manpower believes that whether wages should increase or decrease is “best determined by market demand and supply for labour.”

WP, however, thinks otherwise.

WP proposes a national minimum take-home wage of $1,300 a month for full-time work, which can be pro-rated for part-time work.

They claim that there are more than 100,000 Singaporeans who earn a take-home pay of less than $1,300 a month while engaged in full-time work.

This is what the average four-person household in Singapore would need to spend each month on basic necessities such as food, clothing, and shelter, they said.

The keyword here: take-home wage.

In other words, they need a gross income of at least $1,625 (with CPF contribution) in order to hit that amount.

9. There Will Be Trade-Offs

One time Jamus Lim warmed the cockles of your heart is when he answered Dr Vivian Balakrishnan’s question about how WP plans to fund their policies.

He mentioned in his answer that the Workers’ Party (WP) has done its math and its manifesto is “budget-neutral”.

Meaning, costs are paid for by money coming from somewhere.

Two days ago, Jamus Lim took to his Facebook page to answer exactly how a minimum wage can be achieved.

The money doesn’t come from the government, he said.

Instead, the extra cost will be borne by two segments: 3/4 by consumers from increased prices of goods and services and 1/4 from firms.

Before we have time to get shocked like this really cute cat here:

Image: The Len / Shutterstock.com

He went on to explain his rationale that the minimum wage is basically about redistributing “some bargaining power from the capital to labour”.

He also added that the number of buyers in a market outnumbering minimum wage workers (you have to remember, the minimum wage helps the low-wage workers), price increases will be minimal.

He also said that an evaluation committee has to be set up to review and make quick changes (if necessary) before putting out a minimum wage.

You can read his full Facebook post (again) below:

10. PAP Is Practising Minimum Wage in Some Industries

Remember #1 where I invoked the name of the Progressive Wage Model (PWM)?

That is PAP’s response to the Minimum Wage suggestion.

Instead of creating an all-encompassing binding minimum wage, they target selected sectors instead.

They have compared the minimum wage to a rung on the ladder while the PWM, they said, is a ladder.

Instead of just wages, the PWM also focuses on improving the career prospects and skills of the workers.

Let’s say we have a low-wage worker, Robin.

Under the PWM, Robin will be given a minimum wage of $1,000.

He will also be given a career map to look at what he wants to be and be given the chance to attend classes.

When he learns new skills, he moves upward into more “skilled” jobs, which allows him to earn even more.

So on and so forth.

Currently, the PWM covers Singaporeans and PRs in the cleaning, security and landscaping (grass mower, tree pruners, etc) sectors.

Featured Image: AhXiong / Shutterstock.com