The concept of a minimum wage is not new. It has long been seen as a “safety net” for society’s lowest earners, and the policy idea is coming back into popularity today. Yet, this policy is not lauded universally and there is stillopposition towards its implementation. Inspired by the case study of Singapore, we’ll explore the policy implications of introducing a statutory minimum wage level using an Environmental, Social & Governance (ESG) lens.
What is a minimum wage?
While definitions differ based on jurisdiction, a minimum wage can generally be thought of as the statutory baseline pay a worker is entitled to, usually given per hour or month. Here in the United Kingdom, we have a distinctionbetween the National Minimum Wage and National Living Wage, where the latter is slightly higher and eligible to those who are over 23 years of age.
Nonetheless, a minimum wage can be implemented in vastly different ways across countries. For example, the UK sets its National Living Wage at a flat rate for each year leading up to April, which is currently £10.42 for 2023-24. On the other hand, Kenya has a complicated system which takes into account the industry, job type, length ofservice and other factors into computing the minimum wage for a given position.
Minimum wage can also mean very different things to different people. Some may see it as a minimum to live a frugal lifestyle, while others believe it should support a more comfortable way of life. This is further complicated by the varying cost of living based on where one lives. For instance, the minimum wage of NZD$3632 (or US$2252) per month may be appropriate in New Zealand but would be grossly unsustainable in a country like Sudan, whichcurrently pegs its monthly minimum wage at just SDG425, the equivalent of US$0.71.
That is to say, a minimum wage is the general idea of a legally imposed lower limit on wages, implemented to protectsociety and its workers from exploitation by corporations. Yet, it remains a highly contested idea, depending greatly on the context around which it exists.
Why doesn’t Singapore want a minimum wage?
We now zoom into our case study of Singapore, whose government has fervently opposed the introduction of anysort of minimum wage in view of economic concerns. This is despite the policy proposal regularly gaining traction andbeing raised by members of parliament from both its incumbent political party and the opposition. However, the government’s stance is crystal clear: a minimum wage would restrict the economy’s competitiveness and stunt the country’s economic growth.
Singapore’s political leadership has kept their messaging remarkably consistent. The country’s Prime Minister in 2013 has been quoted saying: “My belief has been that a minimum wage is not going to solve the problem. If it is modest, itwon’t do harm, neither will it do a lot of good. If it is high, well, then it is going to cause costs to employers and it isgoing to cause unemployment to the low-wage workers. So you are not really solving this problem, you are just goingto transfer it somewhere else.” Nearly a decade later in 2022, the Deputy Prime Minister warned of ‘unintended consequences’ like income inequality and higher unemployment that could come about by simply implementing a minimum wage.
Opposition towards the implementation of a minimum wage is not just limited to Singapore. The Obama administration failed to raise the federal minimum wage from US$7.25 an hour (as it still stands now) to US$10.10 during his two terms in office. A minimum wage has always been a politically divisive economic policy, and Singapore’s experience is no different. Governments must balance economic priorities with social justice and welfare principles to ensure the policies they implement truly benefits society.
What’s the alternative?
If not a minimum wage, what is Singapore’s solution to supporting its lower-wage workers? Introducing theProgressive Wage Model (PWM), which was developed with tripartite support of unions, employers and the government. Its mission statement reads:
“The PWM benefits workers by mapping out a clear career pathway for their wages to rise along with training and improvements in productivity and standards.
At the same time, higher productivity improves business profits for employers. Service buyers also enjoy better service standards and quality.”
In other words, the PWM tags skill and training improvements to increases in wages. The word choice is deliberately geared towards employers, with a strong focus on how wage increments for employees will be accompanied by higher service standards for employers.
Associate Professor Terence Ho from the Lee Kuan Yew School of Public Policy likened the PWM to a ‘minimum wage plus’. This is because although other minimum wage proposals may offer wages that are higher than the floor given in the PWM, the model ‘specifies an income and skills ladder that goes beyond the flatminimum’. This gives agency to society’s lowest-wage workers, who now have a defined pathway towards higher wages through upskilling.
Policy implications and concluding thoughts
Overall, we can see that Singapore's opposition towards the minimum wage is less so resistance to the uplifting of lower wage workers and more so a disagreement on how that should be achieved. While dissenters may criticise the strong focus of PWM on industry instead of what should arguably be its focus — the people — we cannot deny that the government has managed to get support from both the public and private sectors to meet ESG priorities.
The common issue with inspiring the private sector to champion ESG causes is that corporations often do not seeany tangible benefits to themselves and thus work entirely in self-interest, to the detriment of the environment and society. Perhaps one learning point from this case study of Singapore is that aligning corporations and social aims allows us to meet both aims, a win-win situation for all.
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