PM rejects econs prof’s proposal for wage restructuring

New staff writer, Maverick, provides a weekly summary of the major talking points in Singapore news:

29 Apr – 4 May 2012: the week of the ‘wage shock therapy’ debate

Calls to raise productivity in Singapore
Singapore’s Manpower Minister Tharman Shamugaratnam has encouraged increasing productivity in Singapore to help Singaporeans cope with structural changes in the Singapore economy. He emphasized at the “May Day” Dinner that productivity would be the key to continued economic growth and higher wages; and also stressed the importance of the tripartite alliance: workers, employers and unions in the productivity drive. In addition, the Singapore Standards, Productivity and Innovation Board (SPRING Singapore), a government organization, has committed $70 million under the Inclusive Growth Programme to help companies invest in productivity improvement such as upgrading equipment and redesigning jobs. Mr Tharman also stressed the importance of productivity at a time of global economic uncertainty, with developed Western economies such as Europe and the United States still mired in dull economic conditions.

Concerns arise over low-wage Singaporean workers
In his “May Day” rally speech, Singapore’s Prime Minister (PM) Lee Hsien Loong rejected Economics Professor Lim Chong Yah’s ‘wage shock therapy’* over concerns of threats to Singapore’s long-term economic competitiveness. He pledged to address concerns about the rising inflation rate in Singapore – which reached 5.2% in March 2012; whilst encouraging Singaporeans to improve productivity so as to enable them to command higher wages. PM Lee added that the Government would continue to implement welfare schemes aimed at low-wage Singaporean workers, such as the $100 million Inclusive Growth Programme and tax rebate vouchers totalling $3.6 billion over five years. In addition, Singapore’s major trade union group, the National Trades Union Congress (NTUC) also made a bold proposal for “fixed wage increases” to help low-wage Singaporean workers as well.

The foreign worker dilemma in Singapore
In his “May Day” rally speech, PM Lee also pledged to “put Singaporeans first”, but warned that the balance of foreign workers had to be kept to meet market demand- he revealed that in 2011 there were 120 000 job openings, of which only 30 000 were filled by Singaporeans. However, he also noted that the influx of foreign workers would be slowed due to space constraints; but Singaporean employers are worried about the possible labour shortage driving their operating cost up, and claim increased wage demands by their foreign employees as well. To beat the labour crunch, the government has cited numerous successful examples of local and multi-national companies, such as People Bee Hoon factory and Makino Asia respectively to encourage other companies to gear towards greater productivity.

* The ‘wage shock therapy’ (also dubbed as ‘Economic Restructuring II’) proposed by Professor Lim involves raising lower-income wages (workers earning less than $1500 a month) rapidly by 50 percent over the next three years, whilst maintaining the wages of the high-income earners at their current rate in a bid to address the rising income inequality in Singapore. Although this plan has received overwhelming support from Singaporean workers, it has been criticised by both economists and employers alike; who claim that it will increase business costs and bring about other negative economic implications in the long term.

by Maverick

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