MINIMUM WAGE – WHO PAYS?

An excerpt of a speech I made in Parliament about minimum wage.

“Finally I turn my attention to the issue of minimum wage which no doubt will be much debated in these chambers today. I will not be-labour the arguments for and against minimum wage as even professional economists cannot agree. There are empirical studies that abound on both sides of the argument that purport to ‘prove’ that either side is correct, and neither will I go into these. I would instead like to ask another simple, perhaps obvious question: Who Pays?

Amidst all the sophisticated economic arguments and empirical studies being bandied on both sides, I wonder whether anybody has given thought to this question. I feel that there is some mistaken impression that because the government does not want minimum wage to be implemented, somehow if it were to be legislated, the government will be paying the minimum wage.

This is of course utter nonsense.

The people who would be paying the minimum wage, who would be financially responsible for it, are employers. And who are these employers? Employers are not some faceless monolithic evil empire of multi-national corporations but people around us, people who we meet every day. In politicising the issue of minimum wage and playing on the feelings of resentment and envy, I think some politicians have hoodwinked people into believing that a minimum wage is some magic medicine that is somehow paid for by either the government or some faceless people detached from ordinary Singaporeans.

This is patently untrue. The people who would be affected by a minimum wage are employers, who are not only big companies who would ironically be the least affected because they are capital-intensive, but people around us, the small employers, the provision store owner round the corner, the HDB coffee-shop owner, ordinary people who are our family, our friends, our neighbours. The people MOST affected would be the small businesses who have no money to invest in automation, and therefore the people who rely the most on low-wage labour.

A minimum wage, at the end of the day, when one cuts through all the verbosity, is a re-distributive tax, a tax on the employers of low-wage labour, and benefiting low-wage earners. It is thus not only a tax, but a very narrow-based tax, taxing one small group of people to benefit another small group of people. This is not very inclusive at all, is it? Put like this, and recognising that the people who would bear the most burden of a minimum wage will also be ordinary Singaporeans, a minimum wage does not look very attractive at all does it?

But would politicians and people who are lobbying for minimum wage go forth and shout to the world ‘Let’s tax one small group of ordinary Singaporeans so we can help low wage earners’?

No they would not, because no politician who wants to get elected will campaign for higher taxes. But that is precisely what a minimum wage is, a tax that is not only narrow based but will most likely be borne by ordinary Singaporeans around us.