Thursday, March 15, 2012

Malaysia implements minimum wage....

In a move that is considered both bold and risky, Malaysia has decided to go ahead and implement minimum wage. I've explained in detail in  earlier postings why it will be difficult for Singapore to implement minimum wages. For countries that have kept income inequality low and the cost of living relative to wages low, implementing minimum wage is a non-issue and will help people at the margin.

However, in Singapore, 2 whole decades of neglect and bad policies by the PAP govt has resulted in a large income gap, dependence on cheap labor and a cost of living that is very high relative to wages of the lower income group. A meaningful minimum wage will affect business that have become dependent on cheap labor. The PAP govt decided to implement a soft option - workfare. Workfare is highly disadvantageous because it traps workers in menial low paying jobs and does not incentivise businesses to invest to improve productivity. In fact workfare is sometimes called slavery because it encourages businesses to depend on cheap labor [Link] instead of moving up the value chain - it actually a subsidy for businesses to keep wages low and retain the menial nature of the jobs they create.

Malaysia has decided to make a risky move to go for disruptive change[Link]. Businesses, especially small enterprises, are dragged along screaming that the move will lead to displacement and unemployment as these businesses operates on low margins of 3-5% and the wage increase will cause them to close down[Link]. These small enterprises hire up to 4 million workers. The dynamics that result from the minimum wage move is not so straight forward - it can indeed push businesses to invest, improve productivity and operate more efficiently.

“If companies cannot afford to pay a minimum wage that is set at around the poverty line, they have no business being in business.” , Andrew Lo, Malaysian Union leader.

There is no guarantee the bold move will succeed but at least it has a chance. The  approach adopted by the Singapore govt locks us in our current unhappy state and preserves the status quo of cheap labor dependency, rising income gap and poverty. After 2 decades of using cheap labor from foreign countries and falls in productivity, we are left with no more effective safe options that will address the issue. We can keep the status quo and drive this economic van along until the wheels falls off and that will be soon ... the current model is just not sustainable and there is no courage in our leadership for real change.

31 comments:

TokyoSingaporean said...

We will witness the rise of Malaysia within our lifetime. Malaysia will supersede Singapore. As it is, many first world countries such as Japan are looking to Malaysia for retirement visas in order to stretch their pension further. More funds are coming into malaysia as opposed to rich Indonesians keeping their millions in Singapore banks.

A Malaysian has more access to subsidised healthcare, cheap housing, cleaner air and a car compared to the average Singapore.

Food for thought.

Anonymous said...

"... the current model is just not sustainable and there is no courage in our leadership for real change."
Lucky Tan

Because Lucky Tan is still only a blogger and not opposition candidate what.

So there is also no real change in the opposition what.

Therefore 60% will still see PAP as the best available model to sustain lah, right or not?

Anonymous said...

U r dam rite that the papist leegime has caused so much miseries to Singaporeans thru 2 decades of erroneous policies. The amazing thing is why r Singaporeans so stupid to meekly accept the harsh treatments the pap dishes out to them ? Either the pap government is wickedly dictatorial or Singaporeans have character flaws.

Clear eyed said...

We have to vote for change, vote for new leaders who have the courage and the steel to make the changes and guide us through the pain and mess this entails. But above all, leaders who serve the people and the country and not just themselves. Otherwise, as Lucky says, the wheels will fall off the economic van soon.

Anonymous said...

1st our education. Conditions is to be conformist
2nd, our msm brain wash us everyday with propaganda.
3rd, high living cost, keeps us busy making ends meet
Finally, the. High cost of public housing and the materialistic government have numbed singaporeans in to material slave !

We have lost our soul !

Anonymous said...

Actually not easy to change for the better lah. For the worse, more likely.

You just look at history lah. Bad dynasties can last hundreds of years before there is change.

And more recently, bad governments last for decades before there is change.

And the change is just replaced one bad one by another, or worse one.

Anonymous said...

Blogging is easy lah.

Change PAP is not easy lah.

Anonymous said...

"A Malaysian has more access to subsidised healthcare, cheap housing, cleaner air and a car compared to the average Singapore."
TokyoSingaporean 15/3/12 11:30

Why you only see one side?

Do you bathe only your front and not behind?

Kaffein said...

For all the nay-sayers of minimum wage, you can all pack your bags and leave, or close their business. Basically these owners use business models are centered around cheap labour. Often there is undermining of the cheap labour and suppression of wages to pay a worker with sufficient income against the high cost of living.

In the nutshell they don't need to think of innovative ways to run their businesses and also put value to their employees. To these owners, employees are just digits to their profit. Max profit at the expense of workers.

At this rate Singapore is going, she will fall behind Malaysia, HK, etc.

Kaffein

Anonymous said...

"At this rate Singapore is going, she will fall behind Malaysia, HK, etc."
Kaffein 15/3/12 14:10

In what way?

No foreigners will come here to work and live anymore?

PAP will lose elections and there will be chaos?

emt training san diego said...

This is a great article!

Anonymous said...

Many Malaysia Citizens who are Singapore Permanent Residents bought Singapore HDB flats.

At the same time, these Malaysia Citizens also own house(s) in Malaysia.

These Malaysia Citizens rent out the Singapore HDB flats to collect rental income while they live in Malaysia and work in Singapore.

When these Malaysia Citizens are old, these Malaysia Citizens will sell away the Singapore HDB flats to realize the additional capital gain. They will live happily in Malaysia with lower cost of living.

In contrast, old Singapore Citizens will continue to hold on to high price HDB flats with zero CPF withdrawal as CPF savings had gone to pay off the housing loans.

Young Singapore Citizens have to slog to buy the high price HDB flats. Some of these young Singapore Citizens may end up buying the flats from the Malaysia Citizens who are retiring in Malaysia.

While Malaysia Citizens who are Singapore Permanent Residents are laughing all the way to the banks to live happy, carefree lifestyle in Malaysia,
Singapore Citizens have to work till they are 85 years old and older to the extent that only when they drop dead, they will be relieved from miserable life in Singapore.

Anonymous said...

QUOTE:
"Blogging is easy lah.
Change PAP is not easy lah."
UNQUOTE
ANON: 15/3/12 12:55

I disagree.

When I gave up on PAP.
I just put my 'X' next to the Opposition Party in the ballot box in GE 2011.

Very easy to do.
Looking forward to repeating this act in GE 2016.

Gintai_昇泰 said...

Good article.

Anonymous said...

Stop expecting too much from a government that you did not vote for.

Your problems are not their problem.
Your pain is not their pain.

At least until 2016.

Anonymous said...

Looking forward to the wheels dropping off and the van exploding with the occupants being roasted alive screaming their shit out. Shiok.

Anonymous said...

What the SME bosses do not want the public to know

We always see that the SME bosses are living in bungalows and condominiums, drive BMWs, Mercedes-Benz, etc. and yet
we always hear that SME bosses keep complaining that since they are operating at low profit margin, they need cheap foreigners to work for them.

How do we explain these myth and puzzle?

To understand this, you have to understand the profit and loss statement. This is a record of how profitable the company has been operating over the last financial year.

Typically, this is a profit & loss statement:

Revenue
- Cost Of Sale
---------------------
Gross Profit
- Expenses
---------------------
Profit before Tax
- Tax
---------------------
Profit after Tax

Every year, every company has to pay tax if they are earning money.

How much tax a company needs to pay depends on how much profit before tax the company has earned over the last 1 year.

When the company is doing well, it has earned a big profit before tax. Therefore, the company will be taxed at 17% of the profit before tax. Simply speaking, company pays more tax when company has more profit.

If the company does not want to pay more tax, the company will increase the expense by paying out higher director fees to the directors so as to reduce the profit before tax. This is workable as director fee is part of the expense.

As directors are actually SME bosses, they are in control of the company and they are shareholders of the company, they can easily use the AGM to declare for themselves high director fees. As long as the director fess which form part of their total personal income do not attract tax that exceed 17% rate, the directors total personal income will be subjected to lower than the 17% tax rate as personal income is on a progressive tax rate system.

Effectively, directors earn high income but pay lower tax.

You will forever see and hear that SMEs have very low profit margin because SME bosses do not want to pay high tax. SME bosses will forever pay themselves high director fees so as to reduce the profit before tax to very small amount. With small profit, SMEs only need to pay small tax.

In essence,
The SME bosses want the public to know that the SMEs are operating at low profit margin (true reason is that they want want to pay small amount tax) and

SME bosses do not want the public to know that they are earning high director fees.

So we know that SME bosses are showing distorted, misleading and deceiving picture to the public.

As if the high director fees are not enough, these SME bosses being very greedy for more money, will cunningly use the low profit margin of the businesses to deceive for more cheap foreigners.

After all, these SME bosses are businessmen. Their primary motive is to pay less tax, pay more director fees for themselves and lower all the other expenses including employees salary. It is only natural that SMEs want more cheap foreigners, and if possible 100% cheap foreigners to replace any Singaporeans, so as to save on the salary expense.

Anonymous said...

"It is only natural that SMEs want more cheap foreigners, and if possible 100% cheap foreigners to replace any Singaporeans, so as to save on the salary expense."
Anon 16/3/12 01:46

Sounds logical. But then Singaporean workers, and not SME bosses, are the majority voters what. Cannot be more bosses than workers, right?

So how come PAP govt which allows a lot of cheap foreigners in to benefit SME bosses, can still get 60% majority votes if workers don't vote PAP?

Anonymous said...

"So how come PAP govt which allows a lot of cheap foreigners in to benefit SME bosses, can still get 60% majority votes if workers don't vote PAP?"

anon. 16/3/12 08:51


We need more Lucky Tans to educate the 60% daft who are still drinking the MIWs' KoolAid. So please help to spread the word around about this blog.

Saycheese

Kaffein said...

@Anon 14:38
Kaffein> "At this rate Singapore is going, she will fall behind Malaysia, HK, etc."

Anon> In what way? No foreigners will come here to work and live anymore? PAP will lose elections and there will be chaos?

Kaffein> Short of calling you dumb-a**, "I don't know what to say" (stomps foot)

Take for example Japan out of the many countries I can use. In spite of what LKY says about the country, aging and losing competitiveness et all, Japan has recovered tremendously the aftermath of earthquake. Japan takes in foreign talents on a need basis, not suck up to them.

It is one of the many developed countries which implemented minimum wages, have safety social net for its citizens. Yet these countries in spite of doom survived. People become stronger and wiser.

Another country is Australia. People do want to be bricklayers and labourers and waiters. The country has minimum wage system and social network security.

Are you telling me Singapore is so unique that in spite of our wealth, we can't even take care of our citizens?

Truth be told, there won't be chaos as what people thinks if the PAP loses the government. The world will still move on. We don't revolve or evolve around PAP.

Next time, use the grey matter between your eyes, you might see the truth and awaken.

Have a good weekend. Chillin' out.

Kaffein

Anonymous said...

@ Kaffein.
Eh! Hello!
Running Singapore not easy ok?

Singapore population = 5 million
USA population = 311 million

Singapore = 193 kilometers
USA coastline = 151,000 kilometers
(That's why Mas Selamat found it so easy to swim across to Johor undetected)

So the job is difficult.
And our leaders must be paid a higher salary than American President Obama.

Anonymous said...

"Your problems are not their problem.
Your pain is not their pain."
ANON: 15/3/12 21:28

I disagree.

PM Lee is the Prime Minister of Singapore and Singaporeans.

Not the Prime Minister of PAP constituencies and PAP supporters.

Are you telling us that he has changed the job title in his business card?

Anonymous said...

Anon@ 16/3/12 11:05

What a naive statement. If PM Lee is putting the country's interest above his party's, then he wouldn't have to crack his head trying to "fix the Opposition", would he?

Ng Eng Hou said...

Our current economic model of overly or highly dependent on cheap foreign workers is not going to be sustainable. Because eventually, the supply of cheap foreign workers will get lesser. When the foreign workers' own countries progress and develop further, the wage gap between their own countries and host countries will get narrower and narrower and this will discourage them from working overseas. In fact,signs of this are already happening in China and probably Indonesia.

Government and businesses have to realize this reality and look for ways and means to cut down dependence on cheap foreign workers. If they don't do this adjustment and long term planing based on this scenario, many of them will go out of business.

With foreign workers getting lesser, for sure wages will go up and this will drive up business costs and living costs. The economy will have to create more high-paying jobs to cope with this. If not, businesses and ordinary people will all be squeezed by high costs.

If The Government Is Not Sleeping,The Time To Act Is Now!

Anonymous said...

Good article. We should create jobs that are high value in nature as this will attract better pay. But for Singaporeans who are none business owners, are you willing to
1. Pay more for your domestic help?
2. Clear your own trays in food courts and coffeshop? (no more cleaners)
3. Sort out the trash for recycling? (due to lack of garbage collectors)
4. Eat in rather than eat out?

Not only businesses but ordinary Singaporeans need to change their lifestyle so that we can reduce our dependency on cheap labour

Anonymous said...

"When the foreign workers' own countries progress and develop further, the wage gap between their own countries and host countries will get narrower and narrower and this will discourage them from working overseas. In fact,signs of this are already happening in China and probably Indonesia."
Ng Eng Hou 16/3/12 11:45

You know how big China and Indonesia and their population or not? It is hundreds of millions or even billions of people you know.

Where got problem getting some willing to come to Singapore to work as cheap labour?

Anonymous said...

What is new, except the Opposition MP does not understand or dare to bring it up.

Anonymous said...

We need people like Lucky Tan or Catherine Lim to come out and speak in Parliament.

Dont wait as time is passing by.

Anonymous said...

You guys havent been to Australia. They have minimum wage but things are so bloody F** expensive there. SG5.00 for a bottle of mineral water and SG 18.00 for a 2pc KFC meal.

High pay also comes with high taxes. Singapore is much better.

Is this what you want for Singapore?

Kaffein said...

Anon@11:36 painted a wrong picture in Australia. Let me address it correctly.

Anon> You guys havent been to Australia. They have minimum wage but things are so bloody F** expensive there. SG5.00 for a bottle of mineral water and SG 18.00 for a 2pc KFC meal.

Kaffein>
There is a choice here. When you go to restaurants, they serve you water free of charge. You can even ask for refills. The water in Melbourne and I believe in most of Australia is drinkable water.

In Singapore, most places do not serve you water free of charge. You need to buy their bottled water at exorbitant price.

In restaurants in AU, you can even bring your own bottled wine. Can you do that in Singapore?

In supermarkets, you can cheap bottled mineral water at <0.80c. Please dude, don't skew with your opinions.

Anon> High pay also comes with high taxes. Singapore is much better.

Kaffein> So do you think you are paying less tax here? GST is on EVERY item, including your water PUB tax. Grow up and start thinking, seriously.

People like you don't get it - CPF is a form of tax too. I shall not delve into it. It will open another can of worms.

Anon> Is this what you want for Singapore?

Kaffein> Are you happy with status-quo? Sheesh.

Chillin' out,
Kaffein

Thrift Lifestyle said...

I have just completed experiment on Living on Minimum Wage in Malaysia
Definitely challenging as you can read in my blog.