NO GOVERNMENT is capable of legislating higher wages, without
reducing the number of jobs ('Minimum wage, maximum attention';
Thursday).
Typically, low-skilled jobs are the first to disappear. Anyone
who has lived in certain Western countries with minimum wage laws
and generous unemployment benefits for a while would have noticed
the absence of fuel-pump attendants and the lack of cheap food
hawkers.
Many households choose the do-it-yourself route to fix their
cars or repair their plumbing simply because of the high cost of
labour.
So, it is not minimum wage but the real purchasing power of the
Singapore dollar that really matters.
Nominal incomes of low-wage earners have hardly grown in the
past 10 years even as inflation has spiked significantly.
Other governments are printing money in response to America's
monetisation of its debt to keep their own currency exchange rate
stable.
Such competitive devaluation by government fiat has allowed the
large-scale exportation of US dollar inflation to Asia, which means
that Asian nations are subsidising the excess consumption of
developed countries such as the United States.
Fixed-income and low-wage earners, and cash savers are the worst
hit when governments resort to printing money to solve economic
problems en masse.
As interest rates plunge to near-zero, the well-off with better
access to credit can borrow cheaply and invest or speculate for
profit - and wealth transfers from the poor to the rich.
Despite the Monetary Authority of Singapore's attempt to let the
Singapore dollar appreciate gradually over other currencies, the
same Sing dollar buys only a fraction of sugar, cotton, rice, HDB
flats, gold and silver compared to 10 years ago.
In reality, the Sing dollar has lost real purchasing power.
Instead of over-protecting our export sector industries through
favourable exchange rates, let them readjust their cost structure
by exploiting the lower import cost of factors of production, and
then translate that to lower selling prices for overseas
markets.
After all, Singapore imports almost everything for our
industries' inputs.
Allowing a dramatically stronger Singapore dollar exchange rate
will benefit the majority, especially those in the lower and middle
classes.
Yong Jianjun