Singapore needs people with skills warranting a higher wage, not politicians legislating a minimum wage. Our national education system is the problem. It has produced an entire generation of people who copy and replicate, instead of creating and innovating. If our people are highly skilled or creative, they will naturally command a good wage, or even own flourishing businesses. Value creation must come before the rewards. Legislating a minimum wage won't solve the problem because inflation and illegal activity will negate the well-intended minimum wage.
Businesses will do three things when faced with a minimum wage law:
1. Stop hiring any position below the minimum wage
If there is little value in the position, and it is expensive to maintain, a business will simply cut its losses and terminate the position. Worse still, the business may decide to relocate those functions completely to other cheaper countries.
2. Make those paid above the minimum wage do more work
Businesses would prefer to give an employee a raise and add more tasks to the employees job scope than pay a minimum wage and be faced with arbitrary pay increases each time the government changes the law.
3. Pass the cost increase on to the consumers, which includes low income workers
Inflation is the worst tax of all. It erodes the power of savers to break the chains of poverty and rewards the rich who have the power to take huge risks to beat inflation. The poor will suffer the most when businesses pass on increases costs to the consumer. This is how income disparity begins: the government causes inflation, the poor are unable to save, and the rich keep investing to stay ahead of inflation.
Net effect:
1. Higher cost of existing goods and services
Businesses will transfer the increased costs to the consumers. Employees higher up the food chain will demand pay increments to ensure parity and use the minimum wage as a benchmark. All these translate to inflation.
2. Higher unemployment
The ones with low wages tend to be school leavers, vacation workers, and the elderly. They will be the first to be fired. Next will be the staff in low value positions. Businesses would not take as many chances on new people because a minimum wage would be involved, so a minimum standard of experience would be demanded too.
3. More foreign talent imports that meet the minimum wage
By making local labor as expensive as foreign imports (talents, not low wage workers since the minimum wage would eliminate low wage), businesses would look further away from Singapore when hiring and it would be tougher to get a job here for local school leavers.
4. More illegal foreign workers to circumvent the minimum wage
Some businesses would look at hiring illegal foreign workers to keep wages low. It will become a big problem in the construction industry, and you will soon see more locals displaced by illegal foreign labor.
Please think carefully before asking for a minimum wage. It looks very good and noble on paper, but the real world is a very dynamic (or corrupt) place and it is not going to work out the way you think.
