Wednesday, 18 April 2012

Prof Lim Chong Yah's wage restructuring plan won't work: SNEF President Stephen Lee

By Toh Yong Chuan, The Straits Times, 18 Apr 2012

PROFESSOR Lim Chong Yah's radical plan to narrow the income gap is not workable, said the Singapore National Employers Federation yesterday.

Foreign investors and multinational companies do not take to shocks, and top talent may leave Singapore, warned its president Stephen Lee.

Pay increases are also not 'something you can easily switch on and off', Mr Lee added in the employer group's first comments on the proposal.

Last week, Prof Lim put forward a plan to narrow Singapore's income gap by raising the monthly wages of workers who earn below $1,500 by 50 per cent over three years, while freezing the pay of those who earn above $15,000 over the same period.

Yesterday, Mr Lee told reporters on the sidelines of the Manpower Ministry's workplan seminar that while the federation agrees with Prof Lim on the need to raise wages, it disagrees on how to do it.

Prof Lim has 'concentrated very much on the wage level', and his plan will not work 'without taking into consideration the competitiveness and the flexibility of the market', countered Mr Lee.

He argued that it is better to take a long-term view which raises wages and productivity at the same time. This will be more sustainable and 'not as radical'.

Mr Lee's comments came immediately after Minister of State for Manpower Tan Chuan-Jin also spoke about the plan. The Government will 'robustly' address the pay of low-wage workers such as cleaners, Mr Tan said in his workplan speech, but it needs 'to do so sensibly' so it does not 'adversely tilt the economy over'.

He was the first office holder from the ministry to respond to Prof Lim, although he did not refer to the professor by name in his speech. Mr Tan said: 'Let us tread carefully. Economic restructuring does not come just by raising wages alone.'

Meanwhile, Prof Lim has responded to concerns that his proposal will risk incurring job losses.

In a letter to the media on Monday, he argued that low-wage workers are already 'grossly underpaid'. Even after the 50 per cent boost over three years, their wages will still be below their productivity contributions, he added.

And as to whether low-wage workers can be helped by fiscal policies, the professor said he is worried the low-income will come to rely on government handouts for their well-being. This is why 'retraining and retraining of our workers to enhance their occupation mobility' is an integral part of the plan, he stressed.

Low-wage workers here 'underpaid': Lim Chong Yah
By Lin Yanqin, TODAY, 17 Apr 2012

Addressing concerns brought up by Government leaders in recent days over his wage reform proposal - including the implications of productivity growth being outpaced by wage increases - former National Wages Council chairman Lim Chong Yah clarified his position yesterday: His proposal is premised on low-wage workers in Singapore being "underpaid by much more than 100 per cent of their pay when compared with their counterparts in countries with comparable national affluence like Hong Kong, Japan or Australia".

The "gross underpayment", said Professor Lim in a letter to the media, is "consequent on the unlimited influx of cheap foreign labour to Singapore".

He added that his assumption that such workers are paid 100 per cent less than their productivity contribution is "an underestimation" - even if their pay increases 50 per cent over three years, they would still be paid 50 per cent at the end of the restructuring, he said.

At a public lecture last week, Prof Lim had proposed that those earning below S$1,500 a month have their pay increased by 50 per cent over three years, while wages of those earning S$15,000 or more should be frozen.

His proposal drew responses from labour chief Lim Swee Say and Transport Minister Lui Tuck Yew, among others.

Prof Lim reiterated yesterday that low-wage workers should be paid "according to their productivity contribution", or "at least a larger portion of their real productivity contribution".

He also questioned Singapore's traditional fiscal solution to low-wage workers, which included Government subsidies, transfers and hand-outs.

Such an approach would entail higher taxes - thus eroding competitiveness as companies and professionals seek to settle elsewhere - and more worryingly, the development of a "dependency syndrome" among the low-income group on the Government for their well-being, he said.

Hence, an integral part of his proposal is the training and re-training of Singapore workers to enhance their occupational mobility, said Prof Lim.

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