20140621 PAP will continue to profit from low wage workers

Roy Ngerng wrote an article “Can low wage workers earn higher wages in Singapore?” in December last year.

The answer is clearly ‘yes’ provided the government accepts that it must not continue to profit at the expense of low wage workers.

PAP profiting from levy for years

According to DPM Tharman, the median wage of a cleaner is “$850 per month on average”. A person with such a salary will be required to perpetually seek financial assistance from the government. Unlike other politicians, Tharman is more upfront and admits that “most cleaners have also not enjoyed the real wage growth seen among workers nationally, including other low-income Singaporeans..”.

Instead of allowing market forces to dictate the salary of cleaners, the government has actually tweaked policies to allow salaries (including other low-income jobs) to be depressed.

Employers who hire cleaners pay the government a levy of $600. This will be increased to $800 in July next year. Taking the median salary of $850, the total wage cost for an employer is actually $1450.

The government has actually been profiting from levies for years.

Foreigner/local wage discrimination

There appears to be a wage discrimination because the employer is willing to pay $600 more for a foreigner than a local. Even if CPF contributions were included, the cost of hiring a local is still about $400 less than a foreigner.

The government should have allowed gradual salary increases to set a fair wage for cleaners. Instead, it allows cleaners to be paid current wages; any additional manpower shortage will be imported with additional costs borne by employers. The government has intentionally depress wages of a number of industries through legislation.

The government insists that cleaners must upgrade their skills and could command wages of up to $1400 should they be able to use motorised ride-on equipment like sweepers or steam cleaners. However, employers are already incurring a foreign worker wage bill of $1450, increasing to $1650 in July next year. Why are employers paying local cleaners only $850?

The government is also aware that upgrading opportunities for cleaners at, say, a food court is as good as non existent.

PAP’s profit motive in question

The only party to benefit from low wages is clearly the government. Total foreign worker levies was $1.9 billion in FY 2010 and increased by $600 million to $2.5 billion in FY 2011. Levies are not directly redistributed to low income citizens but they fund “government expenditures in general” eg only $400 million given out annually in WIS in 2011 and 2010.

Singapore’s budget has been increasing not because of innovation but with shortcuts ie increasing the amount of levies.

Levy system failed, why more of the same?

The government is well aware of the failure of the levy system. Instead of allowing market forces to adjust the belated increase of low wages, the PAP continues to increase levies, hoping for a miracle. It is therefore not sincere in helping low wage Singaporeans. The increase in levies in 2015 will only enable the government to profit even more.

The government then turns around and blame Singaporeans for being choosy despite depressed salaries being insufficient for survival.

PAP breaks citizens’ legs, then provides crutches

Ex PAP MP Tan Soo Koon commented on our GST system: “Sure you can give the goodies or offsets but why break a man’s legs and then give him crutches to wobble on?”. His quote on GST is actually applicable to the chronic issue of low wages. First the PAP depresses wages through legislation (levy) and then perpetually offers kueh lapis financial assistance to almost half a million citizens.

Public housing is no different. The PAP first creates high housing prices through flawed policies/short term planning and then offers an increasing number of grants.

“Goldmine”

Tan had also commented that “…after seeing all these figures is that the government has realised what a goldmine the GST is”. Not only is GST a goldmine, so are betting taxes, COEs, ERP, etc. The PAP has been busy mining and our increasing budget revenue confirms an increase in mining activities. The prerequisite to this is a drastic increase in foreigner population and this has been confirmed. During the process, the PAP also discovered the ‘workers levy goldmine’.

PAP depresses wages, sets bad example

The government is apparently aware of the situation. In a parliamentary reply, MOF stated “These (cleaning) officers, aged between 58 and 65, have many years of service with the government. They receive a gross monthly wage of between $1,200 and $1,500”.

By “many years” and as confirmed by their age, this usually means government employees have been working for decades. So why have workers not been upgraded to be able to earn higher wages? Obviously, all the talk about upgrading is nonsense. As the biggest employer in Singapore, the government should have taken the lead. Instead, it has set a bad example for businesses and has encouraged wages to be depressed.

Labour costs only increase government’s revenue

Labour costs have been increasing but this has not led to a proportionate increase in wages. This was highlighted by Leong Sze Hian who asked “Labour cost to increase but would wages rise?”. If the PAP seriously wants to help low wage Singaporeans, it must first remove its profit motive.

Conclusion

Employers justify paying low wages to foreign workers because they have an additional cost of levy to pay to the government. Citizens are offered the same wages, take it or leave it. Financial assistance is then offered to low wage citizens. This amount pales in comparison to the levy collected by the government.

Foreign workers’ levy is a ‘goldmine’ which will increase government coffers next year. All. Allowing market forces to dictate the belated increase of low wages is the right thing to do. Instead, the government clings on to its goldmine by increasing levies.

The PAP will continue to profit from low wage workers and shortchange them through legislation.

PS
The PAP must depress low wages at all costs. This has been highlighted in an earlier post.

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4 Responses to 20140621 PAP will continue to profit from low wage workers

  1. Sgcynic says:

    “There appears to be a wage discrimination because the employer is willing to pay $600 more for a foreigner than a local. Even if CPF contributions were included, the cost of hiring a local is still about $400 less than a foreigner.”

    I don’t get the logic. Why would the employer pay more to employ a foreigner? Thanks.

  2. phillip ang says:

    There are no more takers for a job which pays ridiculously low wages. Low wages are intentionally depressed by the government for obvious reasons. https://likedatosocanmeh.wordpress.com/2014/06/19/20140619-singapore-inc-mustwill-continue-depressing-low-wages-to-prevent-economic-collapse/
    So the government now ‘comes to the rescue’ with a legislation framework allowing businesses to employ foreigners on the condition of paying a levy.
    If you are an employer, do you really have any choice?
    The absence of logic can be defined as logic by any dominant political party.

  3. Pingback: Singapore is very sick and here are the reasons | Askmelah.com

    • phillip ang says:

      This trend cannot be reversed because of the contribution to the economy from foreign workers. They require additional housing, travel, food, entertainment, education, etc. This is a no-brainer way to create additional demand – government benefits from higher prices and indirect taxes. More jobs are also created with the additional demand.
      Citizens may be hurt by a pro foreigner policy but the PAP will only take concrete action when a substantial number is affected.
      The PAP has been addicted to the immigration/population shortcut to generate ‘growth’ for 2 decades. They don’t have any idea. The casinos are another example where despite all the easily anticipated problems, they still went ahead.
      There are very few good jobs created for Singaporeans by the casinos.

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