The government’s announcement in budget 2013 that they will allocate billions of dollars to subsidise wage increases for citizens seems on the surface to be commendable. Look through the details however and there are many reasons to be concerned.
Let’s take for example a company like SingTel. They made 4 billion in profits for 2012. Do they need government help to give a wage increase to their workers? Probably not – but with this policy any wage increases they already had planned will presumably net them free money from the government. And of course, the government owns 54% of Singtel, so some of the money will presumably flow from the government, to the government, via Temasek. Similar arguments can be made for SMRT – a company that made $120 million in profit last year, which is also 54% owned by the government, and will presumably also be able to benefit from this subsidy. In fact we all know there are numerous companies in Singapore which are owned by the government and this subsidy will presumably give cash to them all.
The second concern is about targeting this assistance, to those who need it most. There are many people in Singapore really struggling to make ends meet, earning barely enough to survive and seeing practically no real wage growth over the last decade. In June 2012 it was reported that the bottom 20% in Singapore earn less than $1,500. Are these not the people we should be helping most? But the government’s subsidy will be available for citizens earning up to 4k, that is more than the national median. By setting the limit at this level, it means more than 50% of citizen employees could benefit. We should ask, is this a measure to help the less well off, or is it a populist measure to increase the government’s popularity? Should we not be focusing our help more directly on those who need it most?
Instead of the government giving cash to companies, many of which are government owned anyway, why does the government not do something to ensure the less well off earn a livable wage. Many have called for a minimum wage but the government appears to be deaf to their voices. A minimum wage would directly help those who need it most rather than pouring money into already profitable companies. A minimum wage would directly increase the disposable income of those less well off and their increased spending power would drive an increase in business activity throughout the economy. This will provide greater growth and employment opportunities for all, not just those earning up to 4k or holding shares in government companies.
A minimum wage alone would cost almost nothing to implement, and the 3.6 billion earmarked for this wage subsidy could still be better spent supporting any citizens who might hypothetically lose their jobs. Although, in the current “tight labour market” which we are constantly reminded of, it is debatable whether anyone would be out of a job for long.