Why does Singapore not have a minimum wage? This may be a million dollar question, but it has a one hundred billion dollar answer.
Most developed countries have one – either in law or negotiated through unions. But oddly this is one feature of first world life that the PAP stubbornly refuses to even consider. It is something that many locals would like to see for many reasons. It would help to level the employment landscape which is currently tilted in favour of cheaper foreign workers who can more easily support a family in their lower cost of living home country. A minimum wage would also encourage employers to work towards more productive economic growth rather than pumping up the wealth of the nation by importing cheap labour inputs of increasingly marginal economic benefit in ever greater numbers.
So why is a minimum wage consistently rejected by the PAP? We can get a clue by looking at what actions they take as an alternative to a minimum wage. For example, the budget this year announced billions of dollars will be given to businesses to fund wage increases. The tension between the desires of employers and employees is well recognised, but in Singapore the government consistently sides with businesses. Nevermind the hugely populist vote-buying aspect of this policy that is intended to funnel money to citizens who are even earning above the national median wage – increasing the salaries of citizens is the aim – and this clearly stands as a policy counter-point to a minimum wage. But who will really benefit? Singtel for example, 54% owned by the government, made billions in profit last year. Do they really need government cash to subsidise pay rises? Hardly. So why does the government take this route?
The clue is in the 54% government ownership. The government is the largest shareholder in Singaporean companies. The Singapore stock exchange maintains an index of the thirty largest listed companies – the STI Index – and at least sixteen have the government owning or controlling the largest stake. If we add it all up, shares either owned or controlled by the government in these thirty largest companies are worth over 100 billion dollars. One Hundred Billion Dollars. This actually puts the government in a very awkward position. Any policy decisions have to be balanced with a desire to not endanger the value of these investments. Is it any wonder the government sides with businesses over the needs of citizens?
Going back to the minimum wage – when deciding to increasing the income of ordinary citizens the government has a few choices. For years the government has simply ignored this problem. But more recently, having suffered shocking reversals at the ballot box, the government has realised they need to address this problem to save themselves. But how to act? The government could side directly with the needs of employees and impose a minimum wage, but that would increase the cost of doing business for employers. Does the government want to increase the cost of doing business, for those very businesses in which it has a one hundred billion dollar stake? It is much easier to give the money directly to those companies, on the assumption that the money will be passed on to citizens. But this alternative mechanism is vastly inferior. Like many government policies, it does not put cash in the hands of those who need it most. It does put cash in the bank for businesses that are owned by the government though, and the rules under which this scheme operates include no requirement that the cash is spent on wage increases that had not already been planned. So if Singtel had already decided internally to increase the salary of certain employees, it appears that they will be eligible to receive this money from the government for merely implementing an already existing policy. Hardly money well-earned – and in fact this is effectively just another subsidy from the government to businesses – businesses that in many cases are owned by the government.
So what is the solution? First of all the government should drop its fear of a minimum wage, as a minimum wage is the single best thing that could improve the struggling local economy. But more importantly the government’s holding of huge stakes in local companies needs to end. China for example attempts to prevent government entities from holding stakes greater than 5% in any local company, precisely to prevent this sort of bias influencing policy making. This contrasts starkly with Singapore where the government holds more than 50% in many local enterprises. Of course, the value of these holdings should not be squandered. A careful rebalancing of the portfolio over the course of twelve months would be wise, and the government should re-distribute its holdings so it has the same total value, evenly distributed amongst indexes of companies, similar to the STI, but listed both locally and overseas. This would result in the government taking much smaller stakes in the most successfully global companies – companies listed in Hong Kong, Korea, Japan as well as the US and perhaps also Europe.
With this change in place the government would be free to focus on the needs of the nation and citizens – without the distraction of wondering about the well-being of private corporations that should have the management skills to look after themselves.