I know this is a bit belated as the announcement (of a minimum wage of $1,000 for cleaners) by DPM Tharman happened on 8th January 2014. I must have been really busy with work during that period to have missed this piece of news. 😛
But it pays to read local blogs, especially those aggregated by thefinance.sg. Visiting the site (almost a daily feature), I came across this article written by this local blogger MoneyHoney last week. Basically, he was appalled that our government had implemented a minimum wage for cleaners through the Progressive Wage Model.
And coincidentally on last Friday, another finance blogger issued a #helpsomeonechallenge after he passed a cleaner $10 when she went the extra mile to wipe the chairs at the hawker centre because they were dirty. Talk about professionalism. She thanked him profusely and this was somewhat understandable as the $10 probably amounted to a few hours of her wage.
Taken together, these two events have inspired me to write this article to support the government policy of a minimum wage (at least for the cleaning sector) and hopefully, convince you of the merits of a minimum wage. After all, I am a firm believer that most of the time, the government’s actions reflect the society’s preferences.
Market Failure Occurs In The Wage Market
Proponents of the free market system are champions of the demand/supply system. They argue that this model is elegant and that any government intervention to help a group of individuals distorts the market, leading to inefficiencies.
But is demand/supply working really well in the employment market?
Counter-intuitively, the most in-demand jobs in the world are also those that pays the best (i.e. many want to do it even if there weren’t any wages).
I think most CEOs would still want to be CEOs even if their pay is less than that of a junior executive. The junior executive is subject to the whims of his bosses, his bosses’ bosses and … (hope you get the point). He has little autonomy over his work or at the very least, the direction of his work. Which is in stark contrast to the CEO, whose friendly email reminder could send directors scrambling and junior executives working through the night. Even though he has much heavier responsibilities, his fate is likely to be determined by his very own decisions.
Millions, or billions of fans are willing to represent Manchester United or Liverpool in an instant. Some of us are even willing to pay for that honour. With that much supply, the wages of footballers should be peanuts, eh? And compare this to how many young Singaporeans would really want to take up a cleaning job even if the pay was like $5,000 a month?
Well, a certain Wayne Rooney is rewarded with a monstrous 300,000 pounds every week when he turns up for training (there isn’t even a need for him to play) with Manchester United. Seriously, I am not sure if my lifetime earnings can match just one month of his pay.
I know there is this “talent’ thingy that’s supposed to justify Wayne’s package. But is this “talent” worth more than 1,000 times a local cleaner’s wage?
And furthermore, is Wayne more productive than the cleaner who maintains the cleanliness of hawker tables and our void decks? Think about it.
Chronic Inequality Not Healthy For Society And Economy
The most enlightened rich men understand this point.
Warren Buffett is in favour of a more progressive tax code even though it disadvantages him personally. Ironic, huh?
Basically, Warren Buffett understands that for the society to function as the one we know it today and be stable, inequality cannot increase indefinitely. There will come a point when the poor will be so disillusioned (about the possibilities of economic mobility for themselves and their children) that they will tear down the system.
When society comes crumbling down and anarchy occurs, “talents” like being able to pick stocks or strike a football well would be valueless.
And since most Singaporeans acknowledge that $2,000 a month caters to a basic retirement for an elderly Singaporean couple (National Day Rally), a minimum wage of $1,000 is the least we should be paying our cleaners. And that’s not even accounting for the fact that they likely need to pay a mortgage unlike retirees.
An increase from $850 to $1,000 is not alot, but hopefully, it can create some form of buffer/slack for them and enable them to invest in education to increase their earning capabilities.
Unemployment? Rising costs? Unlikely
Our labour market is really tight and I don’t forsee unemployment for any of our cleaners from the implementation of this policy. Unless there is this robot that can replace them effectively AND for less than $1,000 a month. To all those naysayers, show me this prototype and I won’t wait to invest in it.
As for the increase in cost for businesses, I can’t think of a better place to set up a business than Singapore. Look at the government support. Which country provides a scheme similar to the Jobs Credit Scheme which was rolled out a few years back? And there’s a long list of government grants to help firms invest in infrastructure to improve productivity.
More companies make good profits in Singapore and struggle to expand overseas rather than the other way round. The stable political climate, benign labour unions and hardworking population are not conditions that can be easily replicated elsewhere and I am sure most businesses would settle for a slightly lower profit.
And anyway, I am willing to pay 50 cents more for every hawker dish if the bulk of it goes to raising wages for our cleaners. Or higher conservancy fees.
I hope you would be willing too as that plate of char kway teow priced at $3 is an anomaly that is not seen in other developed countries. It’s indirectly subsidised heavily by our cleaners.
Contrary to what you expect, I actually enjoyed reading Money Honey’s article, even though I disagree with him almost completely. 🙂
I would think readers prefer to hear a blogger’s honest opinion rather than something that is politically correct or just dealing plainly with facts. Otherwise, they might be better off sticking with newspapers or magazines. 😉
So feel free to support/disagree with me by leaving me your comments.