No Minimum Wage and Strong Unions in Singapore: Low Wage Workers See Incomes Drop

This is a joint article written by Leong Sze Hian and The Heart Truths. The article first appeared on TR Emeritus.

I refer to the article “National Wages Council calls for another round of wage hikes for the low-income” (Straits Times online, May 31 5 pm).

$60 increase?

It had stated that “For the second year in a row, the National Wages Council (NWC) has recommended that firms give a minimum raise to employees who earn less than $1,000 a month.”

Last year $50 increase?

The article also reported that the NWC had, “called on such workers to have their monthly salary increased by at least $60. Last year, the recommended increase was $50.”

Networking for unemployed and employers

I was at a networking and job-matching session for the unemployed and employers organised by transitioning.org on 31 May. I went because of the free buffet dinner (just in case you think that I am employed) – a very good dinner at an Indonesian restaurant.

There were about 40 unemployed and 5 employers.

“Wayang”?

“WayangWhilst talking to some of the unemployed Singaporeans, one of them said something which struck me – something along the lines that “Singapore is a great “wayang” – always a lot of talk, the same talk year after year – but problem never get solved”.

Life works in strange ways – when I woke up the next morning on 1 June – I read the news about the NWC recommendations.

Lo and behold – what the unemployed chap said hit me again like a rock as I read the news reports about the NWC recommendations.

By now, you must be wondering why I’m “being hit by the rock”?

Well, what struck me was to wonder as to whether I can find any statistics to see whether the NWC recommendations in recent years has resulted in helping low-wage workers get higher pay or not.

If the answer is “No” – assuming I can find the statistics in the first place – then what the unemployed person I met saying “wayang” may make even more sense and not just a mere “grumbling” complaint, which is to be expected from a person who has been unemployed for a very long time.

238,000 earn below $1,000

According to the Ministry of Manpower’s (MOM) Labour Force in Singapore 2012, the number of locals earning less than $500 and between $500 and $1,000 was 51,300 and 186,700, respectively in 2012.

This means that a total of 238,000 locals earned less than $1,000. Now, this is gross income which includes the employees’ CPF contribution of up to about 20 per cent. So, the net take-home pay may be even lower.

So, arguably, if the NWC recommendations had been effective in the past, the number of workers earning less than $1,000 should be declining.

Those earning below $1,000 increased?

Unfortunately (for low-wage Singaporeans), the number earning less than $1,000 actually increased by about 1 per cent from 2011′s 236,300.

If you factor in inflation for last year, which was about 4.6 per cent (not to mention the NWC’s recommendation last year to increase by $50) – the situation is pathetic.

12% earn below $1,000?

Since the total local workforce in 2012 was 1,988,000, it means that about 12 per cent of locals (238,000) earn less than $1,000.

As I am analysing these numbers – I don’t know about you, but I feel very sad – that we are the richest country in the world – and yet we have so many low-wage workers. Sigh!

23% earn below $1,500?

If you count those who earn less than $1,500 – there were another 216,600 workers. In other words, the total number of lower wage locals who earn less than $1,500 was 454,600, which was about 23 per cent of the total local workforce.

The above statistics are for all local workers (full-time and part-time). But now, if we were to look at the number of full-time locals – those who earn less than $500, between $500 and $1,000 and between $1,000 and $1,500 were at 7,600, 106,500 and 187,600, respectively.

7,600 work full-time for less than $500?

Can you imagine – working full-time for less than $500 – and there were 7,600 workers!

114,000 work full-time for less than $1,000?

In other words, the total number working full-time and earning less than $1,000 was 114,100.

Those earning less than $1,000 keep increasing?

This is an increase of about 3.4 per cent from 2011′s 110,400 (in spite of NWC recommendation and after accounting for inflation).

11,097 employers pay less than $1,500? 

From my understand, there are about 9 per cent of employers (11,097 employers) that have workers who earn less than $1,500.

So many didn’t accept NWC recommendations?

The Straits Times had also reported that, “While eight in 10 companies in the unionised sector accepted the recommendations and boosted the pay of their low-wage workers by at least $50 last year, but only three in 10 non-unionised companies followed suit.”

NTUC “very concerned”?

Employer group the Singapore National Federation of Employers had said that the progress was a “good start”, but the National Trades Union Congress said that it was “very concerned” with the slow pace”. The word, “wayang” (the unemployed person’s word, not mine), resonated in my mind again, as it seems that NTUC’s almost annual protestations of concern and “wanting” to make progress, do not appear to pan out in the wage statistics.

I think we need urgent action and statistical benchmark targets to uplift low-wage workers’ pay and reduce their numbers, instead of rhetoric year after year (kind of like NATO – No Action Talk Only).

No minimum wage

But the real problem is this – in Singapore, there is no minimum wage. If you look at Chart 1, you can see the minimum wages of some countries compared.

Singapore doesn’t even have a minimum wage.

Slide1

Chart 1: International Labour Organisation Data collection on wages and income

Which means we have very low purchasing power

But more importantly, what does this mean for your purchasing power? What this means is that Singaporeans have the lowest purchasing power among the developed cities, as you can see in Chart 2.

Slide2

Chart 2: UBS Prices and Earnings 2011

Not only that, another report also collaborates on this – Singapore has the second lowest purchasing power parity among the developed countries compared (Chart 3).

Slide3

Chart 3: World Economic Forum The Travel & Tourism Competitiveness Report 2013

Because we don’t have strong unions

Now, that’s not to say that a minimum wage policy is the definite solution to increasing the wages of the low wage workers. There are actually some economically developed countries that do not have minimum wage laws.

If you see in Chart 4, you can see the countries without minimum wage laws and their median nominal wages. You can see that even though they do not have minimum wages, their wages are still significantly higher than Singapore’s!

Slide4

Chart 4: International Labour Organisation Data collection on wages and income

Of course, these are nominal wages – so what about after taxes?

In Chart 5, if we use the lowest tax rate of each country (I was not able to locate the tax rate for the median income earner), you will see that Singaporeans still earn the lowest wages!

Even after deducting for taxes, Singaporeans wages are very low!

Slide5

Chart 5: International Labour Organisation Data collection on wages and income, Wikipedia List of countries by tax rate

But more importantly, do you know the reason why even though these countries do not have minimum wages that their workers still continue to receive such high wages? – Unions. They have strong, independent unions in these countries which have strong bargaining power and are able to fight for the collective wages of the workers. According to the OECD Observer, “This group of countries, which also includes Austria, Italy and the Scandinavian countries, has traditionally relied on collective bargaining agreements to set wage floors, covering sectors and occupations which account for a very high proportion of the workforce.”

The question is this – NTUC might lament about how it is “very concerned” and that “this year”, the talks with non-unionised firms were “not an easy negotiation”. Question is – why? Does the NTUC truly care about the workers? Is the NTUC independent enough of the government to not be influenced by the government’s profit-making pursuit?

95.9% “no hew” NWC recommendation?

By the way, 95.9 per cent of private establishments had not given the one-off special

payment to their rank-and-file employees as recommended by the NWC in 2010, according to the Ministry of Manpower’s Report on wages 2011.

So, it’s the third year now, of NWC recommendations that “nobody seems to care”! Do you?

Wage Credit Scheme won’t benefit low wage workers

The Straits Times reported that, “NTUC had wanted a bigger increase (than the $60) since the Government’s Wage Credit Scheme (WCS) would subsidise part of the pay hike, but employers were hesitant.”

According to IRAS, “Under the WCS, the Government will co-fund 40% of wage increases given to Singaporean employees earning a gross monthly wage of up to $4,000. WCS covers wage increases that are given in 2013 to 2015.”

In Budget 2013, the government had announced that the Wage Credit Scheme “is estimated to cost the government about $3.6 billion over 3 years.”

Now, there are about 1 million Singaporeans earning below $4,000. Thus with the $3,6 billion, there is enough for all the 1 million Singaporeans to receive an average increase of $250 each for 3 years, where the government co-funds 40%, or $100.

If this is so, why is the government only recommending an increase of $60 for the low wage worker, when the low wage worker should rightfully be able to get an increase of $250?

The government had said that the WCS is meant to benefit the low wage worker but if the low wage worker is only expecting to receive an increment of $60, doesn’t that mean that the higher wage worker would be receiving the bulk of the increment instead? How will the low wage worker even benefit from WCS? It seems almost too convenient that the minimum increase that employers need to give to workers is only $50 to be able to qualify for the WCS.

Low wage workers sees drop in real wages in 2000s

Already, do you know that the lowest wage workers in Singapore has actually seen their real incomes dropped in the last decade (Chart 6)?

Uneven Real Income Growth

Chart 6: The Straits Times Foreign talent policy had effect on income gap

 So, how is a $60 increase going to make much of a difference at all? After accounting for inflation, will their real wages still drop in 2013?

$600 or only $60 increase?

The government had even come out with a grand scheme called the “Progressive Wage Structure” where a low wage worker can see his/her income grow from $1,000 to $1,600 (Chart 7).

But this “progressive structure” would only benefit the worker if he/she gets promoted. How many workers will all be able to get promoted?

photo (4)

Chart 7: Recommendation for Tripartite Cluster for Cleaners on Progressive Wages

The final truth is that the government is only expecting workers to get a $60 increment – not $600. Low wage workers will be forced to remain as low wage workers.

Government will use law against the people but not against unfair businesses

Finally, The Straits Times reported that, “Singapore National Employers Federation (SNEF) president Stephen Lee acknowledged the lower compliance rate”, but all the NWC could do was to “urge companies” to make a “special effort” to raise wages.

One wonders why the government could decide to so easily implement a new “licensing framework” to make “online news sites” pay a $50,000 performance bond and to take down their articles within 24 hours when the government deems fit so that they could keep netizens – ordinary Singaporeans – in line, but yet, the government couldn’t and wouldn’t enact a ruling that can similar keep businesses in line.

Why is it that the government would not hesitate to “punish” Singaporeans but would just “urge” companies even as they are mistreating our low wage workers in Singapore?

Does the government want to prevent Singaporeans from speaking up online precisely because we have been able to expose the government for its wrongdoings and unfair treatment?

This Saturday, #FreeMyInternet, made up of a group of Singaporeans with an online presence, will be holding a protest to denounce the government for its actions. Please join us at the protest:

Date:       8 June 2013, Saturday

Time:       4.00pm to 7.00pm

Venue:    Speaker’s Corner, Hong Lim Park

For more information, please visit the protest website: http://www.freemyinternet.com/index.html

Leong Sze Hian and Roy Ngerng of The Health Truth

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