It's an interesting topic.
Disclaimer: I'm not saying any job is good or bad, or looking down on any job. Since this post is about jobs, then I have to talk about them. Whether they are skilled or unskilled, workers all provide a service and play a part in society and everyone is trying to make a living in the way they believe is best for themselves.
When we hear about low wage workers, the answer seems so simple. Just have a minimum wage and they will all be able to live properly.
And yet, when we look at countries with minimum wage, this solution didn't work out anyway.
Low wage workers are still struggling. And the solution seems so simple. Just raise the minimum wage...
Now, I'm no expert in policy, so... there's probably a lot of things I don't know about this.
But as I see the situation in the US, some parts of the story become clearer.
I see a lot of hourly workers. America is big there's a lot of workers who work in hourly wage jobs.
I didn't realize this, cos I am used to my own industry where people are paid an annual pay with benefits.
But in US and maybe even in SG, there are a lot of people who are paid hourly, and usually, the pay isn't very high.
Yes there are highly paid hourly workers, but generally, there are more low wage hourly workers than there are highly paid hourly workers.
Ok, so what happens if we put in a minimum wage?
Well yes, people will earn more.
Next, cost of production increases. The company will charge more for the product.
Consumers will pay more. Consumers who are also the people earning a minimum wage.
So if HDB construction costs more, then other minimum wage workers will need to pay more for their HDB. Same as for McDonald's, etc...
If the minimum wage is increased to a high enough level, companies will probably do 2 things.
1. Invest in automation.
Jobs will be lost, BUT companies will have to train some workers to use the automation. So productivity will increase.
Currently, wages are low, so companies cannot be bothered to invest in technology.
2. Companies may just move overseas to countries with lower labour costs.
A lot of manufacturing has left USA for China and Mexico where the labour is cheaper.
Even financial companies are looking to have their back offices in lower cost countries.
Call centers are being redirected through India or the Philippines.
Jobs will be lost.
Option 1 would be great. Cos it forces companies to invest in technology and increases the productivity of the people and thus providing quality jobs.
You see, the problem here lies not in wages or minimum wage.
The problem lies in value add, or the demand of the current economy vs the supply of skilled/unskilled labour.
Increasing the wages without increasing the productivity of workers will result in companies finding alternative methods. Or just cause more expensive products.
The real solution would be to create higher value added jobs. Train citizens to take up those roles, then maybe have foreign workers take up jobs which citizens don't want to do.
This will keep the cost of products cheap, citizens will have better jobs and have better wages.
And currently Singapore seems to be doing somewhat quite well here.
Many families are able to have excess money to buy stuff and travel overseas on top of their basic necessities. How many families do you know who do not at least take one vacation overseas per year?
IF Singapore doesn't import foreign workers at all, then the cost of low wage workers will also increase.
Someone still needs to clean the toilets. So maybe we'll end up with a country like Norway, or Japan, where such jobs have quite high pay as well. I'm sure that there's going to be Singaporeans who wouldn't mind being a cleaner for $5,000 per mth.
This also ends up with higher costs of products and possibly lower disparity of wealth. Cos every company is fighting for workers in a small labour pool.
Skilled workers will get market pay for their skills.
Whereas unskilled workers get higher pay cos there is little competition from cheaper alternatives, such as foreigners. Of course in this scenario, more companies will likely be willing to invest in technology and automation.
This ends up with a higher cost of living for everyone.
Which is somewhat ok I suppose, if that's the society we want to build. But means people won't be able to save as much and travel as much.
It would probably be better if most Singaporeans get skilled jobs, earn more, then have lower cost of living cos foreigners take up lower paying jobs and Singaporeans get to benefit from the reduced cost from cheap foreign labour. Then Singaporeans can save more and travel more and buy more stuff as well.
The issue is how to encourage behaviour.
That's what policy is about.
The Government needs to encourage people to upgrade and take on better roles.
Problem is sometimes, people don't want to upgrade to take on better roles. The rise of the gig industry is a testament to this. People want to do simple jobs and get paid a livable wage. As what I wrote about in my last post, this just isn't possible anymore in the new world. People can't sell labour and expect to be paid well, people need to sell skills, knowledge, specialty to be able to live well.
Having people change jobs, careers isn't as easy as just offering higher pay. Us mere mortals have a lot of inertia for change. It's just part of being human.
They need to get encourage companies to create better jobs.
Or get companies to set up shop in Singapore to create good value jobs.
But what if companies come to Singapore and sets up good value jobs...
BUT Singaporeans don't want to upgrade or aren't able to take up these jobs?
As a Government, will you ask the companies to go away or do you open the gates to "foreign talent", who might be able to take these roles?
I think this is a current problem in SG.
They are probably conflicted about importing foreigners for jobs which Singaporeans want.
Personally, I don't enjoy seeing foreigners at retail outlets and as accountants and auditors or IT professionals. I find these jobs are jobs which Singaporeans would like to have.
Unfortunately, although I prefer to have Singaporeans at hawker centers selling food, I understand that this is a tough job and many Singaporeans don't want the job of helping out at a hawker center.
But what if a job is low value add, but it's also a job which Singaporeans want?
Should the Government intentionally displace the Singaporeans to force them to upgrade and take on more value added roles?
And what if Singaporeans insist on having those jobs and getting low pay and continue to complain about the low pay?
This is happening in the US. People are working at McDonald's and demanding a livable wage.
Whereas I think many of us recognize that such jobs are jobs that shouldn't be taken as a career or to sustain a lifestyle. These jobs are maybe for teenagers to earn some pocket money during their holidays or retirees who want to pass time and make some pocket money.
But in the US, people get these jobs and hope to raise a family on it. And so... they demand to increase minimum wage.
The thing about minimum wage is... this is also a policy which affects behaviour.
It will encourage companies to do certain things.
It's easy for people to just say, implement or raise minimum wage, and expect the problem to take care of itself. However, personally, I feel that it's having a minimum wage will result in cause and effect, won't solve the problem and minimum wage will just keep having to go up cos it ends up as a cyclical problem.
So I think this is a multi-faceted problem which the Government, all Governments need to manage.
Cos it's not only about creating jobs, but also getting the people to take up those jobs.
Having the jobs created, doesn't mean that people want them, even though it pays better.
Could also be that people can't learn the skills required as well as reluctance to retrain.
Not everyone can become a doctor. Or not everyone wants to learn to be a plumber. Even though a plumber could earn a lot in the US.
It also has to do a lot with the expectation of people, and what people hope to work as to earn a livable wage. If folks believe that working at McDonald's deserve a livable wage, then that's something that the Government needs to manage, whether that expectation is reasonable, or acceptable or not... well that's up to the society to determine.
So for me, the argument for a minimum wage, or to increase minimum wage... it sounds really easy and sexy on paper. Such an easy solution to help the low income. Just pay them more.
And yet, I don't believe that the solution is so simple. Policies will change behaviour and companies will react to changes in policy.
I believe that a more holistic solution would be to create better quality jobs and encourage citizens to take up those jobs. Just cos the job is available doesn't mean people want or have the skills to fill those jobs.
And that's where the real problem lies.
I think today's post is different from my previous post written in 2014.
Some parts of that old post I still believe in but now, I think I was naive to think that just cos better jobs exist, that people will naturally gyrate towards it.
Yes, some people will upgrade to take up those jobs, but there are probably a lot of people who don't want to upgrade to take those jobs. It's just human nature.
And IF companies want to set up shop in Singapore, the Government will definitely want their business, but if Singaporeans aren't able to or unwilling to take up those jobs, then the Government will naturally open the gates for foreigners to help fill those jobs.
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