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.