By Tan Jee Say –
The NTUC Secretary General Lim Swee Say again rejected calls for a minimum wage system, claiming that the existing wage model is better. Question is “better for whom” ? Let’s try to understand him. The worker’s basic wage which is already depressed low by cheap foreign workers, gets supplemented by the Workfare Income Supplement (WIS), the Workfare Training Support (WTS) scheme and the new Wage Credit scheme (WCS). According to the labour chief, these combined supplements will make the wage system “work better than a minimum wage”. But he did not tell us who pays for these income supplements. And the answer makes a world of difference.
In a clean minimum wage, the total wage cost is paid by the employer. However in the PAP composite wage model, the employer pays only a portion of the overall wage that is lower than what a minimum wage would cost, and the rest is paid for by taxpayers through the various income supplements. This wage subsidy by taxpayers enables the employer to maintain or increase his profit margin without the requirement that he shows improvement in his workers’ productivity particularly in the case of the Wage Credit scheme. Doesn’t this remind us of the wage subsidy scheme introduced during the global financial crisis of 2008-2009 that simply enhanced empolyers’ cashflow and profitability? This time, the Wage Credit scheme will make profitable firms become more profitable as explained in the BT report below.