I am deeply heartened to hear of NTUC’s progressive wage concept to raise the incomes of low wage workers. NTUC’s approach is balanced and appropriately flexible.
Productivity increases don’t always translate to wage increases through the free market system. Also, as we have seen stimulating productivity growth through re-training and redesigning of jobs alone can be rather slow as economists such as Prof. Lim Chong Yah have argued. Hence this calls for a more interventionist approach to raise the wages of low income workers.
Setting “moderate” targets, with assistance offered by NTUC, increases the impetus for companies to adopt more productive approaches and also enables them to financially cope with the increased expenditure. This balanced and flexible approach is win-win proposition for both businesses as well as employees. Unlike, the “shock therapy”, there is less pressure on the companies and lesser risk of them falling out due to the high and rigid wages targets.
While I do sincerely believe that low-wage earners have been underpaid and deserve a higher pay for the effort they put in, I do believe our national conversation on wages for low income earners can be greatly enhanced if we do an in-depth study of how the welfare of these workers and their families changes upon wage increases. From my own experiences volunteering at one-room flats, I find low income is just one reason why some families fail to get out of the poverty cycle. A fair number of households, lose substantial income through vices such as gambling and deleterious as well as financially costly habits such as smoking.
Having such a study, conducted by perhaps the Institute of Policy Studies or NTUC itself, would enable to ascertain our assumption that increased wages lead to increased welfare. In turn, we would be able to hold a more informed conversation about this topic and perhaps even alter what form these wage increases are passed to workers to ensure a stronger link between wage increases and the improvement of their welfare, which is our ultimate goal.
*An edited version of this piece appeared on ST's Online Forum on the 28-06-2012.