Friday, October 26, 2018

Implementing minimum wage may lead to lower employment: Josephine Teo
Read more at https://www.channelnewsasia.com/news/singapore/minimum-wage-may-lead-to-lower-employment-josephine-teo-10866548
By Amir Yusof @AmirYusofCNA
 (Updated: )
Let us objectively put the minimum wage to market test - and see whether it will uplift the people's standard of living or will it cause widespread unemployment if implemented.

Case background :-
- A boss employ 2 workers and pay them $1,500 each per month.
- Earn a profit of $12,000 per year.

Come the minimum wage.

Scenario (1)
Assume minimum wage is set at $1,300 per month.
Outcome :- The boss will employ 2 workers at $1,300 per month each - and let go the 2 current workers.
Boss earn :- additional $4,800 per year = Total profit = $16,800 per year.

So 2 current workers whose skillset of $1,500 per month have to lower their salary expectation to $1,300 per month to get employment

Thus 2 current worker lose - if minimum wage is set below the market price of $1,500.
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Scenario (2)
Assume minimum wage is set at $2,000 per month - above the market rate.

- The boss employ 2 workers and pay them $1,500 each per month.
- That means the boss got to pay and additional $12,000 per year to the 2 workers.
- Boss will earn 0 profit for the year - due to the minimum wages of $2,000 per month for 2 years.

Result :-
(1) The boss will have to fire one worker and employ only one worker at $2,000 per month - and expect this worker to work 2 person's jobs.
- If this 1 worker cannot do 2 persons job - the boss will also fire him - and employ a more versatile worker in the market at $2,000 per month to do 2 persons' job.
- If not hte boss will invest in robots and only employ one worker at $2,000 per month to do 2 persons' job.

Outcome :- at least 1 worker will lose the job.
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Scenario (3)
Assume minimum wage is set at $1,500 per month.

- A boss employ 2 workers and pay them $1,500 each per month.
- Earn a profit of $12,000 per year.
Outcome :- Nothing will change to this boss.
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Summarising the outcome of implementing minimum wages :-

- Implement minimum wage in Scenario 1 and 2 --- will be detrimental to the workers - as many will lose their jobs.
- Imagine 100,000 SMEs cut 1 or 2 staff - that means 100,000 to 200,000 workers will lose their jobs.
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Let us market test the hypothesis of "wage ladder approach peg to productivity" - instead of implementing minimum wages.

Again we take the case background - and use the "wage ladder approach peg to productivity" :-

Case background :-
- A boss employ 2 workers and pay them $1,500 each per month.
- Earn a profit of $12,000 per year.

Boss implement "wage ladder approach peg to productivity" :-
(1) If both workers can bring in additional sales of $500 per month - boss will pay $1,800 per month for each workers.
Outcome :-
- Boss pay $1,800 per month to 2 workers.
- 2 workers get additional sales of $500 per month
- Boss earn $16,800 per year and 2 workers earn $1,800 per month (in wage ladder approach peg to productivity".

(2) Boss now tell the 2 workers, if 2 workers bring in additional sales of $1,000 per month each - boss will pay $2,000 per month for each workers.
Outcome :-
- Boss pay $2,000 per month to 2 workers.
- 2 workers get additional sales of $1,000 per month
- Boss earn $24,000 per year and 2 workers earn $2,000 per month (in wage ladder approach peg to productivity).

Conclusion :-
- Wage ladder approach peg to productivity - will most likely to keep Singaporean workers employed and grow with higher wages peg to productivity.

- Implement minimum wages (with no corresponding increase in productivity) - will result in widespread unemployment in Scenario 1 and 2.
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Now let us see the unemployment rate of Asia Countries that implement minimum wages:-

(1) Japan - 2.4%
(2) Hongkong - 2.8%
(3) S Korea - 4%
(4) Taiwan - 3.7%
(5) Australia - 5%

Singapore that does not implement minimum wages - but instead use "Wage ladder approach peg to productivity" = 2%.
(0.8% difference - means 44,800 people lose their jobs.
0.4% difference - means 22,400 people lose their jobs.
3% difference - means 168,000 people lose their jobs.)

So look like Singapore is doing better - as compared to other Nations that is implementing minimum wages.
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Let us compare the GDP (PPP) per capita :-
(1) Japan - $42,659
(2) Hongkong - $61,016
(3) S Korea - $39,387
(4) Taiwan - $49,827
(5) Australia - $49,882

Singapore = $90,531

Comparatively, Singapore seems to be on the right track.
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Let us compare the GDP (nominal) per capita :-
(1) Japan - $38,440
(2) Hongkong - $46,109
(3) S Korea - $29,891
(4) Taiwan - $24,577
(5) Australia - $55,707

Singapore = $57,713

Comparatively, Singapore seems to be on the right track.

So for those Singaporeans and foreigners - who whack Singapore for not implementing minimum wage - and think Singapore using "Wage ladder approach peg to productivity" are wrong ---- all the statistics and figures ---- point to the direction that Singapore is on the right track.

 Increase wages - must always come with productivity growth.
If forcefully implement minimum wages - without the corresponding productivity growth - everyone can see the facts and results - it will be higher unemployment and lower growth.

Singapore only need to fine-tune and tweak the policies - to help Singaporeans in climbing the social mobility and close the income gap.
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Ricky Lim
So all those on these forum who "blow hot and cold" and think --- implementing "minimum wages" for Singapore ---- will have to think twice, thrice, four time and five times ---- whether will it cause more "unemployment for Singapore - without the corresponding productivity growth" ---- or will do better for Singapore.

We always have to be "smart" and subject ourselves to "market test" --- not "monkey see monkey do" === and then create "big mess" for ourselves.
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Wiseonce Lee
Ricky Lim From your statistics whether a country implement minimum wage or not still got unemployment rate.
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Ricky Lim
Wiseonce Lee - sorry i don't quite understand your question.

My statistics merely show 3 things - whereby Countries who implement minimum wages and Singapore who uses "wage ladder step peg against productivity growth" :-
(1) Unemployment rates
(2) per Capita GDP (PPP) - purchasing power parity that shows the income purchasing power against a basket of goods and services versus as per local exchange rate.
(3) per Capita GDP (nominal) - Nominal GDP, or gross domestic product, measures the value of all finished goods and services produced by a country at their current market prices.

Singapore do very well in all against other Countries that implement minimum wages.

This means :-
(1) Singapore has lower unemployment - compare to Countries that implement minimum wages.
(2) Singapore income per household is higher - compare to Countries that implement minimum wages.

So we are getting our formula correct --- and why should Singapore forgo our successful formula and instead go for "minimum wages" --- that will bring higher unemployment and lower income --- as per all the illustration above?
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Ricky Lim
In case you don't know :-
(1) Singapore has one of the lowest unemployment rate in the World.
(2) Singapore per capita GDP (PPP) is the 3rd highest in the World.

 Even Trump who boast of high employment rate in US --- its unemployment rate is still 3.7%.

Singapore unemployment rate is 2%.
(And yet people in this forum - make it as though Singapore Government has done a thousand wrong). 生在福中不知福。
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James Zhanzhao Phang
Minimum Wage isn't just a single-action standalone solution one can just throw around like a panacea for rising costs. In fact it could lead to further rising costs if we do not address the root problems.

Lets start simple. With minimum wage, that means: Town Council fees will increase cos cleaner salaries go up.

Hawker Center food costs go up cos now cleaners are more expensive.

Ditto with any place you get food.

Construction Industry: You think your housing is expensive now? Wait til every worker gets a pay hike. Then all existing property prices adjust to the expensive prices of the new developements.

And the root problem is: Why are costs so high in the first place in Singapore, and going up so fast?
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Real McCoy
An authority of the likes of Economics Professor Lim Chong Yah recommended minimum wage. And fools here abound to think he is wrong (and they are correct). Well, the only way to prove it is to implement minimum wage and we will all know for sure. No excuse of too much risk which is nothing but a cop-out. Kapish
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Ricky Lim
Lim Chong Yah say he propose $1,000 is the minimum wage per month.
Are you happy to take it - because your boss is going to deduct your salary and pay you $1,000 per month.

If you don't accept, your boss will fire you - and employ another worker who is willing to take $1,000 per month.
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Ricky Lim
Nah - this is what Lim Chong Yah say - in case you dispute :-

"In our case, we are very blessed that we have the NWC that can study whether we are going too far in having the minimum wage.
If it's say, S$1,000, how many people would be affected? Preferably, the minimum wage should be implemented at a time when there is a booming economy than when there is fear of a slowdown or recession. The timing is important. The quantum, too, is important."
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Real McCoy
Ricky Lim SG is blessed to have a genius like you
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Ricky Lim
Real McCoy - You should say "we are lucky to have PAP to be the Government - who do things very differently from the rest of the World.
Else our little red dot cannot survive and thrive up to now".

And Mr Lee KY need to rise from his grave - to rescue Singapore !
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Real McCoy
Ricky Lim you speak for yourself and don't ever tell me what I should or should not say. Kapish
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Paul Tan
Ricky Lim Lim Chong Yah want flexibility of implementing the minimum wage, however in reality once implemented, it would be hard to remove as poor familly still need the same amount of income. Existing Wages Supplement scheme should be regulary reviewed and adusted upward base on the inflation of the basket of goods consumed by these families.
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Ricky Lim
Paul Tan - Pse see my illustration above on how minimum wages (without productivity growth) will drive up unemployment and in fact does not help in improving the people's income.

And also pse see the comparison of our unemployment rates and our high per capita income - as compare to other Countries that implement minimum wages.

We cannot artificially prop up wages (without productivity growth) - as the boss will fire workers (especially SMEs) if eat into their profit.

 Also minimum wages is a blunt tool - and cannot apply to all industries as each industries is unique.
Eg. the minimum wage for Macdonald is different from lift technician, cleaner, plumber, electrician, clinical nurse etc.
If apply minimum wage across board - we will mess up the labor market.
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Ricky Lim
Boss will only have 2 objectives in mind when they start their business :-
(1) Maximise their profit
(2) Grow their profit every year.

If Government artificially implement minimum wages that eat into their profit without productivity growth (improve their profit), the bosses will do the following :-
(1) Fire one or more workers --- to ensure their wage expenses (are kept the same - before minimum wage) - and make the rest of workers work doubly hard to make up for the lost workers (this become a miscue and force feed productivity growth on the remaining workers) ---- and some workers lost their jobs.

(2) Fire one or more workers - as the boss expenses increase and the boss profit is reduced (as there are no increase sales, revenues and profit) --- ie. no productivity growth.
Boss will either move their business overseas (with lower cost base) or replace workers with machines, robots, automation or IT.
---- result more workers lose their jobs.

(3) If boss pay workers more than the minimum wages - the boss will fire the current workers with higher wages - and employ new workers at the minimum wages.

(4) Bosses across the board may decide to increase the prices of their products and services to preserve their profit (and this may reduce people's spendings) - triggering a Nation-wide wage push inflation - and increase the cost of living for Singaporeans. Those who lose their jobs will be a double whammy.

Thus minimum wages is a blunt tool (that will not help to increase more jobs and increase income for people) - but will in fact drive up unemployment and reduce the overall income for the people.
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Ricky Lim
Where coining the concept of ITM (Industry Transformation Maps) for all the 23 industries - is meant to uplift, upscale, upgrade, upsize, transform all the 23 industries and uplift, upscale, upgrade, upsize all Singaporeans workers skillsets to handle upgraded, skill-intensive jobs - so that Singaporeans can have higher wages --- due to higher productivity growth and higher profit for the businesses.

Why go back to archaic "minimum wages" - that will make employment worst and does not grow the income of the Singaporean workers?

Now the restructuring of the Economy for the 23 industries via the ITM led by 23 MOS are doing relatively well and businesses profit are going up - in which Singaporean workers will also benefit from higher wages.

For the 1st time in history, we have achieve a real productivity growth - and high wage income growth.
And for the 1st time in history, we have one MOS leading 1 industry to achieve an industry transformation and worker skillsets transformation - leading to real productivity grow per industry and real wage growth per industry.

So why talk about "minimum wages" - and blow "hot and cold" about "minimum wages" - as though it is a miracle pill --- which actually is not?
你们很奇怪。
有宝不知道。
偏拿杂草来炫耀。
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