Renewed call for 'shock therapy' to raise
wages
Expert urges NWC to again ask for specific
pay rises for low earners
Prof Lim says he has "no fear" of high-earners leaving
as the wage freeze he proposed in his "Shock Therapy II" is for
only three years. -- PHOTO: LIANHE ZAOBAO
By JANICE HENG
VETERAN economist Lim Chong Yah has renewed his call for "shock
therapy" to raise wages at the bottom.
Rising income inequality and a falling proportion
of gross domestic product going to wages "are telltale signs that
our inclusive growth policy requires a relook", he said yesterday
at the annual Singapore Economic Policy Forum.
The former National Wages Council chairman praised
the NWC's recommendation in May to raise pay by at least $50 for
those earning less than $1,000 a month. It was the first time in
decades that the council had suggested specific figures.
But quantitative recommendations should also be
made in the next two years - and wages at the top frozen, said
ProfessorLim, as he revisited the subject of "Shock Therapy
II".
Shock Therapy I refers to Singapore's economic
restructuring from 1979 to 1981.
In April this year, Prof Lim argued for a second
round of restructuring, later tagged by the media as his "shock
therapy" proposal.
His Shock Therapy II idea involved a three-year
plan that included staggered pay rises for those earning less than
$1,500 a month: 15 per cent in the first year, 15 per cent the next
year, and 20 per cent in the third year.
He also proposed a three-year wage freeze for those
earning $15,000 or more a month.
A public debate on his idea led "in the end" to the
NWC's recommendation, Prof Lim noted yesterday. If the NWC
continues to recommend specific figures, this would not only help
workers, but also aid Singapore's effort to reduce its reliance on
low-wage labour, he said. "If you have a quantitative increase for
one year only, that does not have an effect on economic
restructuring."
But if wage hikes are not a one-off, companies will
be forced to be more productive, he added.
Raising wages is also preferable to more government
transfers, he said, as the latter may require higher taxes.
Prof Lim also noted that his suggestion of a pay
freeze at the top had not stirred much interest, despite it being
important to rein in the "unconscionably" high salaries of top
executives.
Persuasion, not compulsion, would suffice, he
said.
"We can just call for a halt for three years."
Later, he told reporters he has "no fear" of
high-earners leaving as the wage freeze is for only three
years.
The Singapore National Employers Federation said
the recommendations were best left to the NWC to consider.
But it noted "top executives are mobile, and
bottling the wages of executives... for three years would lead only
to other long-term problems".
Yesterday's forum was co-organised by the Economic
Society of Singapore and Nanyang Technological University's (NTU)
Division of Economics. Prof Lim is an Emeritus Professor of
NTU.
In attendance were 200 economists, policymakers,
students and guests.
But the strongest response to Prof Lim came from
another speaker, Professor Augustine Tan of Singapore Management
University. Help low-wage workers with direct transfers, but "don't
interfere with wages", he said.
Higher wage costs could hurt companies or be passed
on to consumers.
Meanwhile, NWC chairman Lim Pin said the council
had been paying attention to low-wage workers for some years, but
Prof Lim's suggestion in April "did contribute to the public
discussion".
Labour MP Zainal Sapari added that when the
National Trades Union Congress suggested the fixed quantum this
year, "it was with the intention of recommending it for subsequent
years".
Minimum wage a 'last
resort'
IF WAGES at the bottom
remain low in two or three years' time despite National Wages
Council recommendations, Singapore "may have to think of
introducing" a compulsory minimum wage scheme, said Professor Lim
Chong Yah.
His proposal: at least $1,000 a month. But that
might be too low if inflation is serious, he said. Assuming a
44-hour work week, this works out to $5.25 per hour. Prof Lim left
open the question of whether this might be "too high or too low",
but compared it with rates in other countries.
A $5.25 mimimum wage is about a quarter of
Australia's, a third of France's, and half of Japan's. It is
slightly lower than South Korea's but higher than Taiwan's and Hong
Kong's. And it is three times the minimum wage in Malaysia.
The idea, however, has long been unpopular here.
Yesterday, Prof Lim said he had proposed a minimum wage back in
early 1972.
Then, the tripartite partners feared it would
create unemployment, and preferred the flexibility of annual
recommendations.
"But today, things have changed," said Prof Lim.
Firms have become reliant on low-cost labour - a problem that a
minimum wage helps address, he said. Yet he stressed it was a "last
resort" only if wages cannot otherwise be raised.
Yesterday, labour MP Zainal Sapari said National
Trades Union Congress "is not supportive of the idea", as it fears
job losses. Instead, it feels "we should explore other
possibilities" - such as the progressive wage approach, which
suggests wage benchmarks workers can reach with further
training.
JANICE HENG
Top of the news, The Straits Times, Friday October 26 2012, Pg
A10