Minimum wage not flexible enough?

This past week has all been “minimum wage this, minimum wage that”.

Don’t get me wrong, I understand the need for Government to guarantee its hard-working citizens earn enough to get by, especially when the cost of living here is one of the highest in Asia.

What is minimum wage really? If employers are told that by law they must pay X amount of money to someone, then they will always pay only that amount of money and not a cent more in order to keep their operational costs down!

Why would they pay more? After all, there’s no incentive for them to go above and beyond what’s written in the law!

minimumwage

Another option, as pointed out by a recent article from the US, would be to peg the minimum wage to inflation; that way, if the economy is doing good, then the minimum wage increases naturally. If the economy is not doing so well, then it decreases.

In my opinion, that’s kind of unfair, because then workers and employees will be paying the consequences of something that’s out of their control: the economy.

Whether the economy is doing well or not, they will still be putting in their hours and working hard, so why should their salary decrease?

Another point made by the article is that “The least-skilled workers are seeing their wages fall over time, largely because they are out of work and failing to acquire the skills that come with working.”

But a progressive model might make more sense.

The efforts you put into acquiring new skills depends on you and your employer (and subsidies from Government helps). Both know what the job entails, both know which areas to improve, and both are able to plan a suitable career program.

In that sense, increases in wages that are progressive and proportional to your skills seems fair.

That way, good or bad economy, you’ve actively strived to remain relevant.

We shouldn’t underestimate people’s willpower to better themselves.

I’m pretty sure no workers – including low-wage workers – want harsh and inflexible rules to determine what they can or cannot earn.

At the end of the day, having the right skills will help sustain employment, and not just with current tasks, and open up other possibilities with higher responsibilities.

It’s not about helping low-wage workers, it’s about helping them help themselves. Even in schools we don’t encourage spoon-feeding, why practice it with the workforce?

Maybe one day we’ll see low-wage workers executing highly-skilled jobs, like these movers in Japan:

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Najib A.

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3 Comments

  • @Alvin: You seem to think that the wages today, right now, are an accurate reflection of how much a worker is worth – such that future improvements in productivity and value-add can be calibrated off of today’s wages. Is that the case? I question this because obviously wages aren’t very “free market” – certain parties (huge employers, labour unions, etc) are always interfering in the so-called “free” market. And in Singapore, we have some of these features, namely we have more big employers than small ones, who can influence prices, and we have had, um, weak (understatement?) labour unions. On top of that, we have had immigration policies that vary rapidly – and these have impacts on short-term labour prices (i.e. today’s wages reflect a certain immigration situation – as that situation changes, wages would respond.)

    (BTW, why is it so hard to paragraph comments here? I get the feeling you guys don’t often get long thoughtful comments?)

  • Hi eremarf,

    Thanks for your feedback!

    To your point, wages can be determined by many factors (demand, level of skills, and yes, even immigration policies as you’ve mentioned). I believe that underlying all these would be to have a good economy (regardless of big or small players, although having big players may help) to ensure that wages don’t go downhill, which means we should only aim for it to go up from where we are!

    In that case, it makes sense to control what we can on an individual level, which is to improve our skills in order to justify for a higher pay. So yes, in essence, while we can’t say that today’s wages reflect what we are worth, we can certainly aspire to one day be able to determine what we are worth!

    – AL

    PS: The WordPress template automatically formats text in the comment section, I’m not savvy enough to modify that feature, but don’t let that get in the way of giving us your feedback! :D

    • Ah, thanks for the info – I think I’ve found a way to format. I’m glad to see you’re so upbeat about stuff. I guess I’m getting old and cynical.

      So, anyway, what exactly is a “good” economy? This could end up being quite a philosophical question. I wonder if an economy that doesn’t serve the majority of people participating in it well, can it be considered a “good” one. How about economies that thrive on exploitation of others? Can there be “evil” economies?

      But even if we come back down to defining “good” as “strong” – what kinds of measures should we use? GDP? Ireland, Iceland, Cyprus all had huge GDPs at particular times due to their banking sectors (which like most big banks nowadays – are way too irresponsible and verging on criminal), but they collapse. (Not all GDP is good too? – China’s GDP is high because of (excessive?) infrastructure building, Hurricane Sandy caused New York’s GDP to go up – due to reconstruction efforts – but nobody would say that’s a good thing – whereas GDP from manufacturing and service provision seem good? How about GDP from rentier sectors – e.g. real estate? How about GDP from zero-sum games like stock market trading? Are those desirable?)

      How about other measures than GDP per capita? Averages aren’t as good as medians, some say. (What I mean is – is an economy with a few very rich people and many poor people – is that a good economy? Will it stay good in time to come?) How about purchasing power – which is linked to inflation measures. How about predictors of future GDP? After all today’s GDP is just for today, but actions we take influence tomorrow’s GDP. Etc. Pretty complex to me – what a “good” economy is.



      Re: big vs small firms, big players are assumed away in many economic discussions, the assumption being that there’re many (rather than few) rational actors (or they’re dealt with as special cases, called monopolies, or oligopolies). I think it’ll be worth your while to research the pros and cons of having industries dominated by a few large firms vs being made up of many small ones. (Sorry no good links – I guess Wikipedia or a textbook you could get at a library would be nice. I tend to learn incidentally via mostly American blogs and Wiki and podcasts myself.)



      Well, I’m just putting out a bunch of rhetorical questions, so I’m not looking for answers (well, I am, but not here specifically). I’m just trying to problematize things so we all search harder for answers I guess.

      Cheers :-)

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