Is Progressive Wage the solution to Minimum Wage?

 

We all know that minimum wage comes with its own set of problems – but it wouldn’t be right that a country doesn’t implement it.

The difference between Progressive Wage Model (PWM), and the minimum wage, is the former’s ability to raise wages and improve the motivation of a worker. Here’s how:

 

1. Problem: Minimum wage could end up being the maximum wage

If an employer could just pay $1000, why would he be paying any more than what he should?

Solution: The Progressive Wage doesn’t negotiate on just a minimum salary. It pins the responsibility of future wage increases on the business owner, and enforces it.

 

2. Problem: Employers have to bear costs of low productivity

There is a relationship between skills and salary. If an employer can’t find reason for this value, he would have to pay out of his pocket if enforced.

Solution: PWM spreads the onus of increase amongst the employer and the employer’s clients. National funds are available to help the employer improve his business to deliver better value, thus giving everyone a sustainable reason to pay more.

Ladder+cleaner

3. Problem: Minimum wage upsets the economic environment each year

Each year, many countries and their labour unions take to the streets to lobby for an increase in salary. This causes disruption in economic activities. Minimum wage is hard to increase without much political lobbying.

Solution: The Progressive Wage takes care of not just the minimum wage, but also of future wage increase of a worker. It encourages stronger tripartite cooperation, rather than conflict.

 

4. Problem: Minimum wage causes imbalance in hiring

When the wage landscape is flat, why would a person work in more difficult jobs (such as cleaning)? Some industries will turn to foreign labour to accommodate this drop in manpower.

Solution: The wages set by the PWM differs from industry to industry. The means of enforcing it is also different, thus allowing for flexibility.

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5. Problem: It causes unemployment in the low waged, low skilled jobs sector

This is the most common problem raised by the minimum wage. If a business becomes unprofitable, it would shut or outsource its productions to countries where wages are lower. Then your country would see the lose of even more jobs.

Solution: By helping to preserve, even increase, value – businesses have better reason to stay and deepen their activities in a country.

 

6. Problem: It reduces incentive for low-wage workers to upgrade and move upward

Solution: The incorporation of funding to improve individual productivity, skills and knowledge is very exciting. The effects it has on the morale of a worker cannot be underestimated.

 

7. Problem: It infringes on the doctrine of “freedom of contract”

Both parties should have the freedom to walk into a contract freely. Especially in a recession where jobs are scarce, some people would prefer this flexibility to have something than nothing at all.

Solution: The PWM encourages employers to re-design their jobs creating roles where people want to be paid more and employees can have the power to negotiate for better pay because of wider skills.

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8. Problem: It increases consumption prices suddenly

If a national minimum wage was set overnight, businesses across the board will be affected. Suddenly they will have to find the funds to pay for wage increases. Think about how a small increase in the tax on liquor or rental had on your food and drinks. Now imagine that across all industries in the country.

Solution: The PWM is paced by sector and time so that impact on businesses isn’t so great.

 

9. Problem:People are turned into commodities instantly.

That’s what minimum wage is in a nutshell – low wage workers lose their value, suddenly society thinks that they’re worth $1000 and nothing more.

Solution: The PWM emphasises on increasing value through productivity, through diversifying skills, services and better morale. It increases respect for jobs even at the bottom. A cleaner knows more about chemicals, cleaning techniques and machine handling than you and that’s something to be proud of.

 

10. Problem: The minimum wage becomes more of a political toy, than a tool to actually help low-waged workers

You’ll realise people start talking about minimum wages more in times of elections, or when they want to throw attacks on each other. By the time they’re done arguing, still little has been done to actually help the worker on the ground.

Solution: It is not easy to implement the PWM. It demands time, and a lot of selling into with employers and employees – with little political airtime. Which is good if you like to see less pretending and more action-ing.

 

 

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Productivity is not just minim wage. It is more than minimum wage.

About the author

Tay Leong Tan

Tay Leong Tan is a collective of 3 writers. Tay, Leong and Tan. (Who were you expecting?!) We are enthusiastic about labour issues, economics and current affairs in particular.

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