Thursday 9 February 2012

Mindset change needed to help low-wage workers

Society must be prepared to bear the cost of raising wages at the bottom
By Radha Basu, The Straits Times, 7 Feb 2012

MR JOHARI started out as a cleaner in an industrial building 20 years ago, earning a basic monthly pay of $900.

Now 44, he does the same job. But his basic pay has shrunk to $650 a month. His wife cannot work as she needs to look after their special-needs son. So times are tough for this family.

I thought of Mr Johari while listening to academics and policymakers discuss the dilemma of income inequality at two recent seminars organised by the Institute of Policy Studies.

The big picture is that wages at the lowest 10 per cent of the income scale have remained flat over the past decade. For some professions like cleaning, they have fallen. In 2000, the median gross wage for cleaners and labourers was $1,277. By 2010, it fell to $960. For cleaners of industrial buildings like Mr Johari, the median gross wage is even lower, at around $600 in 2010.

Government figures released last week show that there were 236,300 Singaporeans and residents who earned a gross income of less than $1,000 per month as of June last year, up from 218,700 a decade earlier. The figure excludes incomes of full-time national servicemen.

If you take household, not personal income figures, the picture does not get rosier. In 2010, there were more than 100,000 households with an average monthly income from work of $1,400.

The latest available expenditure figures, covering 2007/2008, show that Singaporean households in the bottom fifth of the income scale needed around $1,700 a month to cover basic costs of living like food and utilities. At the time, they earned an average of only $1,274 per month. The average household here has 3.5 members. The shortfall between income and expenditure is made up at least in part by government assistance such as ComCare.

At the other end of the scale, the number of individuals who earn at least $10,000 a month here has jumped from 48,400 to nearly 140,000 in a decade. Singapore has the highest proportion - one in six households - of millionaires in the world.

What can be done about the problem of incomes stagnating at the bottom? This has been a topic for keen discussion.

Some argue that the Government can do more. To be sure, policy changes make a difference. But at one of the IPS seminars, businessman Ho Kwon Ping went beyond asking what the state can do for the low-income, to asking what Singapore can do as a society to ensure that everyone gets a decent wage.

In a stirring speech, the executive chairman of Banyan Tree Holdings suggested that Singapore needs to build a more equal and self-reliant society by 'gradually but relentlessly' increasing wages in the domestic service industries and reducing the influx of low-cost foreign labour.

At the same time, he said, Singapore needs to foster a culture which respects quality plumbers, builders and food service staff, as has already happened in so many developed countries.

Mr Ho is right. Those who live in Singapore are complicit in this situation of low-wage workers toiling for little, while incomes at the top stretch higher. Higher-income Singaporeans benefit from cheap domestic service, cheap service staff and cheap meals, because wages in these sectors are so low.

What does it take to change? Mr Ho spoke of a 'wage revolution'. He might just as well have called for a moral or mindset revolution.

For far too long, Singaporeans have been comfortable being served by an underclass of workers - mainly foreign migrants - clutching the moral fig leaf that low wages for them are justified since they spend the money in their home countries, where costs of living are lower.

But the reality is that there are tens of thousands of Singaporeans who do the same jobs as foreigners do - for the same or slightly higher pay - and have to combat soaring prices here with diminishing wages. Will middle-class Singapore countenance wage increases that will raise their cost of a restaurant meal, a haircut or a car wash?

Perhaps the question should be put the other way round. Perhaps Singaporeans should consider if they can countenance being a society where the well-off live well, on the low cost of service provided by workers who cannot make ends meet.

Is Singapore comfortable being an increasingly ossified society with an underclass that might one day be permanent, as social mobility slows? Should we aspire to be like egalitarian Denmark or divided Dubai?

Settling these questions requires a certain level of commitment from a society. This is a phase other developed countries have gone through.

Many have introduced formal mechanisms to give their poorest workers a decent wage, precisely because unfettered free markets risk depressing their wages. Some - like the United States, Britain, Australia and Canada - have minimum wage laws which protect the working poor and prevent companies from exploiting immigrants willing to work for rock-bottom wages.

In some European countries such as Austria and Italy, wage bargaining is centralised, with unions and employers negotiating a fair basic wage for an entire sector. Last June, Norway went further to directly impose and publicise a new minimum hourly wage of €19 (S$30) for cleaners, to protect their wages from being eroded by cheap migrants from Eastern Europe.

Singapore's approach has been to focus on retraining to raise skills and productivity levels. But decades of this approach have not significantly boosted wages at the lower end.

The Workfare Income Supplement for low-wage workers, institutionalised in 2007, is promising. But most of the payout goes into their Central Provident Fund accounts, boosting retirement but not monthly savings.

There is a clear need for a major rethink on how best to help low-wage workers. This is an effort that goes beyond policy, to Singapore society at large.

Sometimes, change comes only when our consciences are pricked. A 'wage revolution' requires that someone pay those higher wages. Singapore as a society has to share the pain of higher costs. Only then will Mr Johari - and the more than 100,000 working households in the bottom decile of the income scale - have a fair shot at a decent life.

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