Simplifying Minimum Wage

Disclaimer: This article is written based on current news dated before 13 Oct 2020 as well as my personal opinions. I do not represent any other organization nor entity in this article.

Recently, there has been a proposal in parliament to look at a universal minimum wage of $1,300. I have had the opportunity to pick up a module on Labour Economics in my university days and have explored both sides of the coin. As per many policies or actions in particular, there is always the pros and the cons, and I have picked up a thing or two about minimum wage.

I believe that minimum wage would be detrimental to our economy, especially in times like these.

But before that, let us look at a simplified illustration of minimum wage. Suppose a plate of chicken rice is $3.50. The reason how $3.50 came about is a interaction between market forces of demand and supply, meaning to say at $3.50, sellers are willing to sell chicken rice and as the buyer, you are willing to pay $3.50. What if the price of chicken rice is forcibly pushed up to $5? Yes, sellers are more willing to sell, but some of us buyers may not be willing to buy.

That is the crux behind minimum wage. When imposed, businesses and employers become those buyers in our earlier example. They are either not willing to buy, or worse still cut down on their purchase. The purchase in question is labour/manpower/employees.

Also, I would prefer to opine that Singapore does have a "minimum wage". I would usually refer to it as a "psuedo-minimum wage". With the progressive wage model in place, as well as Workfare schemes, lower paid workers receive income supplement and subsidised training which allows them at better paying job opportunities. Even though these may not have adequately solved the issue at hand, I believe working further on these schemes as opposed to the implementation of a minimum wage.

Especially at times like these where businesses are facing declining revenue or even exit, a minimum wage that is supposedly targeted to help workers could make matters worse. It counteracts current policies that aim to help businesses keep afloat and in my opinion would not alleviate the situation.

References

The Straits Times (12 Oct 2020). WP chief Pritam Singh calls for universal minimum wage with $1,300 base. https://www.straitstimes.com/singapore/politics/wp-chief-pritam-singh-calls-for-universal-minimum-wage-with-1300-base.

Workfare. (2020) https://www.workfare.gov.sg/Pages/Home.aspx