Minimum Wage

The election has really caught my attention. Here and there, we have speeches with references to driver and co-driver. It goes something like this. If Singapore were to be a bus and all of us are sitting on this bus, would you like to have this bus driven by just one driver? Or would you like to have a co-driver as well just in case the driver goes astray because of some reasons? To an average Singaporean like most of us, I think we are more concerned in knowing whether we can reach the destination safe and sound.

Let's talk about minimum wage today. In the demand and supply economic model, the setting of minimum wage will likely lead to oversupply of workers and lower demand of labor, resulting in higher unemployment. In layman term, if you are legally entitled to a minimum salary of $X but your boss feels that you are too expensive, they will not employ you and move their offices to other countries where people are paid lower than you. So, you will be unemployed because your boss cannot pay you any lesser than $X. This theory says that minimum wage will lead to companies employing less people or moving their operations out of the country completely.

This is a basic theoretical model. In real life, it is not so simple. It depends a lot on many factors including the nature of the industries, the general economy, etc. For example, if our IRs need to employ more people for their casinos but they are subjected to a minimum wage regulation, do you think they will abort the casinos and move out of this country? Not likely at all. They can probably build another casino elsewhere but they are not likely to find another country like Singapore. Generally, they will take into consideration other factors such as wealth factor of the population, the political environment, education level of the population, support systems, infrastructure, etc.

Minimum wage has its pros and cons. With higher wage rate, people will have more money and they will spend money. There will be higher standard of living and so on. But, for people working in industries where their competitive advantage is to remain as low cost as possible, the minimum wage will likely result in higher unemployment. Anyway, even without minimum wage now, factories are already moving out of this country.

Below is a link for reference to the minimum wage rate of the various countries.

http://en.wikipedia.org/wiki/List_of_minimum_wages_by_country

Enjoy reading.