The Lim Chong Yah wage gap conundrum

Okay, I have had a request to comment on the Lim Chong Yah wage gap issue. For those of you who are not familiar with it, you can have a read here: http://www.todayonline.com/Hotnews/EDC120416-0000038/Also-understand-the-consequences-of-wage-reform-proposal and this one is particularly well-written: http://business.asiaone.com/Business/News/Office/Story/A1Story20120411-339097.html

In essence, Prof Lim had proposed last week that those earning below S$1,500 a month have their pay increased by 50 per cent over the next three years, while wages should be frozen for those making S$15,000 or more. This does strike me as an incredibly left-wing approach to the issue of the wealth gap. Ironically, I had already talked about this in my previous post when I compared and contrasted contemporary elitism vs creating a left-wing Utopia. Needless to say, the government has reacted somewhat nervously to Prof Lim's statement as it does tantamount to a criticism on the stance the government has taken on the issue of minimum wage.

Now having read a range of articles on the issue, my gut instinct is to agree with the government's reaction to Prof Lim's statement for he has missed out one crucial point: he has not talked about productivity. Increasing pay with no corresponding increase in productivity only leads to inflation - which the reduces the real improvement in living standards if the cost of living is then pushed up by these higher wages. I know Prof Lim has all the best intentions to deal with the wealth gap, but I feel that this is but a knee-jerk reaction. Nonetheless, I am very glad someone has brought the issue back to the headlines so as a nation, we can look at it, talk about it, discuss it and try to find a solution (rather than sweep it back under the carpet).

Sssshh,,, shove it back under the carpet, quick...

Now firstly, Prof Lim failed to look at the cause of the problem and it is two-fold. Firstly, the problem lies with the education system in Singapore. Secondly, the wages of the lowest-earners at the bottom of the food chain are suppressed by the influx of cheap foreign workers from places like China. The second point is pretty obvious and we've talked about it many times before on my blog and let's look at the first point instead. The second point can be summarized with this oh-so-familiar cartoon:

Back to my first point: the education system. Don't get me wrong, I am a product of the Singaporean education system which did serve me well, I am not going to spit into the well I drank from. However, the problem with the system is that it celebrates scholars and straight-A students and condemns those who fail to fit into that ideal Singaporean student mould. This has been a subject of several Jack Neo movies - including I Not Stupid and I Not Stupid Too (which you can watch on youtube):

Indeed, if you want to talk about the impact of education and how that has created a gulf between the well educated and the lesser educated in Singapore, a pretty good movie on the issue is Just Follow Law, which incidentally, you can watch on youtube too:

I have no idea why so many Singaporean movies are available on youtube - surely they must be breaking some kind of copyright infringement but I am enjoying the greatest works of Jack Neo there for now!

I also object to Prof Lim's proposal to freeze the pay of those earning more than S$15,000 a month - why punish those who have obviously proven themselves worthy of such high pay? (Well, with the exception of the PAP politicians... Now we all know they are all paid too much.) It does seem like a very knee-jerk Robin Hood "rob the rich to pay the poor" quick fix to a very complex problem. Surely a more sensible approach would be to raise the level of income tax for the very rich and then channeling that money to help the very poorest in our society - that is what most countries do anyway. But a mandatory pay freeze for the very richest (what, even in the private sector)? That's unprecedented to say the least.

The vital question we need to ask ourselves is this: why are these people doing these dead-end jobs in the first place? Let's analyze this a bit more closely. I have already addressed this issue previously - my nephew is autistic and is not academically gifted. It's not to say that he is quite simply, well, for want of a better word, stupid - but he is not the kind of child who will sit down and memorize chunks and chunks by rote learning.  You have no idea how worried I am for his future - it's not something I even dare to raise with my sister (very sensitive topic leh), I only dare to talk about it with my parents. Well, they have no answer to that either.

What if you're not academically brilliant? Then what?

Singapore's education system and Singaporean parents punish those who are not academically gifted and instead of helping them, we are simply beaten and threaten as children if we don't get the desired grades. Resources are dedicated to helping the elites who can excel - such as the gifted education programme, the humanities scholarship programme as well as Brightsparks. Well how much resources are dedicated to students on the other end of the spectrum? Not much - parents are left to use up their hard earned money to engage private tuition teachers to salvage the situation: so bright kids get the resources whilst parents of the dumb kids are punished financially.

Those who end up in these very lowly paid jobs (as defined by Prof Lim as under S$1500 a month) are those who either dropped out of school or performed poorly whilst at school. Rather than simply paying people in lowly paid jobs more money, I propose dealing with the route of the problem.

1. The government should increase spending on those who perform badly academically - rather than forcing them to try to struggle through an academic system, they should be allowed to switch over to a technical education as soon as possible. This means boosting the funding for ITE so that they can improve the quality of their training and not look like a last resort anymore. 
2. Stop funding foreign scholars like Sun Xu with immediate effect - spend the money on local Singaporeans instead, especially those who come from low-income families and cannot afford private tuition. 
3. Expand the Workfare programme - paying Workfare participants generous bonuses for completing programmes as an incentive for them to participate in Workfare. 
4. Stop issuing with immediate effect any work permits to PRCs - in fact, once their work permits expire, send them back to China. 

I am a great believer in the ethos of "give a man a fish and he will eat today, teach a man how to fish and he will never go hungry". You might then level the accusation at me, "Limpeh, why can't we just pay these low-income people more money and trust them to spend the money to improve their situation?"

To which I will reply, "Well, can't we do one better than that - can't we stop them from getting into this situation in the first place?"

One of the points raised by many of the netizens (I read many of the bloggers' response on Prof Lim's) was that such workers were undervalued by their employees. I can't remember which blog it was (damn, I closed many windows at the same time) but the basic point is this. If you spend S$1500 on an employee, then you would get S$1500 of value out of him. If you spend S$3000 on an employee, then you would feel compelled to get S$3000 of value out of him. How can this be done? Longer hours and more responsibilities  come to mind - now given that there are only so many hours a day, mathematically, you simply cannot get twice the value from the worker by making the person work 16 hours a day instead of 8 hours a day as that's simply not possible (and downright illegal). So you have to effectively "promote" the worker, by making take on more responsibilities and the onus would then be on the employer to equip the worker with the right kind of training to be able to do this new job worth S$3000 a month.

This blogger offered a simple analogy - s/he had seen a pair of jeans that s/he liked in a shop and s/he thought it was S$50. S/he thought that the jeans were really nice - so s/he decided to go into the shop and to try the jeans on and s/he fell in love with the jeans. So when s/he took the jeans to the cashier, s/he found out that the price was actually S$150 not S$50 - s/he simply misread the price tag. S/he decided to buy the jeans anyway but now feels compelled to wear it more often to get more 'value' out of the jeans to justify having paid S$150 instead of S$50 for it. 

Well you can do that with a pair of jeans but you simply cannot do the same thing with an employee. This is a classic case of putting the horse before the cart - by promoting them before they have acquired the right skills and then putting the onus on the employer to make sure they justify the pay rise, Prof Lim is unfairly putting the responsibility to improve the workers on the employers when the problem started long ago - when these workers were students and the responsibility should be passed back to the government rather than saddle this burden on employers. I fear the government does have a very valid point - this will only drive employers out of Singapore, to turn to regional countries like Malaysia, Thailand and Vietnam and set up their businesses there instead.

At the end of the day, you will still need people to do manual work - we will still be left with a range of jobs that simply cannot be done by machine. What is to be the become of the unskilled manual labour who have to do those jobs? How we treat those people who do that kind of work defines us as a society: do we treat them like fellow human beings and pay them a fair wage which allows them to live a decent life, which allows them to send their children to school? Or do we see it as our right to 'punish' them for not being more educated or skilled?

How much are you worth to your boss?

I guess there are some people who will still end up uneducated and unskilled - like my uncle. Gosh, if you were to ask me how the uneducated and unskilled should be treated, I'm likely to be very liberal and left-wing, urging the government spend a lot more money to help them improve their lives. But if you were to ask me, "what about your uncle then?" I'll say, help other poor people - let my uncle starve to death, he deserves it the bloody tsi liao bee good for nothing. I'll rather donate all my money to charity (on the condition that this charity does not help my uncle) than to give my uncle even a dollar of my money. Do I hate my uncle? You bet I do.

Oh yes - and credit where credit is due - the unemployment rate in Singapore in is just 3% at the moment. Surely that is something to be proud of when you look at the rate of unemployment in Europe! It is 8.3% in the UK at the moment, 9.3% in Italy,  10% in France, 15% in Portugal, 21% in Greece and 23.6% in Spain.  I recognize that the situation in Singapore is not perfect, but at least they must be doing some things right?

What are your thoughts? Do you agree with Prof Lim? Please let me know what you think - leave a comment, kum siah kum siah...