Folksy Thoughts on the Workers Lot

 

The debate on having a minimum wage is back and this time it’s back with force. The reason for this is simple – Dr. Jamus Lim, who is the Member of Parliament for Sengkang Group Representation Council (GRC) for the Workers’ Party and a star economist. Dr. Lim managed to make what has traditionally a placid affair (the usual case being a state of every time someone suggests what little the poor get should be protected by law, the ruling party inevitably comes up with a statistic suggesting that its bad for the poor) into a news storm because he had the audacity to suggests that we needed to find hard statistics to prove that minimum wage legislation was bad rather than to reply on “folksy wisdom.” Singapore’s normally placid unions have been up in arms over the adjective of “folksy.” More can be found at:

https://www.todayonline.com/singapore/do-not-belittle-us-union-leaders-say-s1300-too-low-minimum-wage-reject-folksy-wisdom

This event underlines some of the more serious fault lines in Singapore’s “meritocratic” society. The first one is the fact that we are a society that seems to link wealth with achievement. The official line is that if you are good, you will rise and earn a lot of money. Hence, whenever there’s a debate on ministerial salaries, the bottom line that the government stresses that you need to pay top dollar for top talent and Singapore has done well in the world because we paid good money to have honest and very competent ministers running the show.

However, it’s a different story at the other end of the scale. Whenever anyone floats the idea of any form of legislation that faces the realities of the free market system, the idea is instantly shot down. Things like a minimum wage or unemployment insurance are considered bad for the economy because they’ll somehow raise labour costs and scare away the investors who have made Singapore so wealthy.

Using the military analogy, the message is clear. Generals have to have more money because we need them to plan. The foot soldiers (i.e. the people who actually put their life on the line in a battle) should not be mollycoddled.    

The second point of Dr. Jamus Lim’s speech is the focus on the role of unions. In the 20-odd years that I’ve lived in Singapore, this is the first time that I remember seeing our unions say anything. The unions normally prefer to stay mum and let their umbrella organization; the National Trade Unions Congress (NTUC) be the public face on all issues relating to workers.   

NTUC is an exceedingly successful organization. It runs a chain of supermarkets and an insurance cooperative amongst many other enterprises. It provides discounts to a number of commercial enterprises (most of which it has a stake in). What is less clear is whether the Union of All Unions has been good at helping the working man. The Secretary General of NTUC is inevitably a cabinet minister, whose main role seems to talk about the success of our “tripartite” model of industrial relations between employers, workers and the government. However, the question remains, what exactly have the unions done for all industrial relations?

The government’s line is that it has done a successful job in as much as Singapore seems to have confined strikes to the history books. I think of the press business where the last strike in journalism was back in 1971 (before I was born). The leader of that strike once admitted that the end of the strike was perhaps good for journalists working conditions but not good for the independent media in as much as the government helped make conditions so comfortable that challenging the status quo was frowned upon.

NTUC will also point out that they offer discounts and in some cases payment for people who want to retrain and thus make themselves more employable. I have yet to take on the paper work required to get paid to learn.

However, does that mean that NTUC has been successful in ensuring harmonious working relationships? As in the case of foreign workers, the answer is likely to be no. Employers begrudge the extra dollars paid to workers as costs and the truth of the matter is that workers continue to struggle. The basic line on wages in Singapore is that the average salary in Singapore is around $4,500 a month and two thirds of us earn below that. Furthermore, costs continue to rise in Singapore. If you want to give the government a headache, just repeat the findings of the Economist Intelligence Unit, which has found that Singapore is the world’s most expensive city for expats. If we’re expensive for an expat with all sorts of perks like housing allowances, then what must it be for locals?

The standard line that the government has used as that Singapore has a “progressive” wage model which is better than the Worker’s Party proposal of a minimum wage. They have pointed out to the fact that the poor saps earning $1,300 a month do get “workfare” supplementary support.

As someone who has received workfare, I will say that its nice to see a few extra bucks in your account every quarter. Workfare is a good incentive to help you stay in a job. However, it is by no means a serious supplement to ones living expenses. I take myself, a 46-year old worker as an example. How much I’d get in income support, assuming I earned the proposed minimum of $1,300 a month:

https://www.workfare.gov.sg/Pages/CalculatorEmployee.aspx

 

Let’s be realistic, the most I’ll be able to do with the money is to buy the family a meal when I receive it. It’s not going to do anything beyond that.

Something needs to be done to ensure that workers at the lower end of the scale have a means of getting a living wage. Rather than dismissing Dr. Lim’s remarks about “folksy wisdom,” the unions should gather their “folksy wisdom” and lead a discussion on making our model for industrial relations better. Unions are after all supposed to protect the rights of the workers as well as selling them products.

“Not competitive at all.”

One of the highlights of my working life in corporate insolvency came from a meeting which involved one of Singapore’s foremost insolvency and restructuring practitioners. I was part of a team bidding for a case that was being held up in the American courts and my employer felt that it was necessary to rope in a “brand” name practitioner and so got this particular practitioner into the coalition that we were trying to assemble. Towards the end of the meeting, the solicitor who was trying to build the team turned to this practitioner and asked, “Are your fees competitive.”

At that very instant, the practitioner said, “I’m NOT competitive at all,” and he said so with a certain amount of pride.

I think of this moment and the way this man took so much pride in being “NOT competitive at all,” because it underlines one of the most fundamental aspects of doing business – price. One of my favourite clients said it best when he told me – tell me:

1. 1.      What can you do?
2. 2.      How quickly can you do it?
3. 3.      How much will be cost me?

As someone who was inevitably desperate for the job, the answer to these questions were as close as one could get to the following:

1. 1.      Anything you want?
2. 2.      It was done before you even thought of it?
3. 3.      Nothing at all.

Quite often, the most important factor in deciding who got the job, often boiled down to the third point. It is in the buyer’s interest to get away with paying as little as possible and the seller will inevitably try to show that he or she can give the buyer the price that he or she wants.

If I look back at my freelancing days, I realise that I had one key advantage over my competitors, who were inevitably sizeable companies – price. I could do the job at a certain standard at price that my competitors could not do. When I took my last big job in the industry, I was presented with a quote that the client had gotten from a multinational and was told – “It’s yours if you can do it at half the costs.”

I was hungry enough to agree and we ended up settling at around 40 percent of what the competitor had quoted. However, while I had won the job on the third point, the client had high expectations about the first point. I was expected to deliver coverage on a multinational level without the multinational team (which would have required a budget). I managed to deliver the expected results at the expected budget (so much so that they told me to invoice and paid on the spot) by working through a relationship that are not commonly used by conventional practitioners.

Business is inevitably about balancing points one and two with point three. The adage is that success inevitably boils down to being able to be “good, fast and cheap.”

I’ve noticed that national economies, particularly the Asian ones do something similar. Japan, the most advanced economy, built itself up by being able to make things cheaper and better than the West. Gradually, as prices rose in Japan, manufacturing moved to South Korea, Taiwan, Hong Kong and Singapore.

Being able to work cheap has done wonders for Asia. Millions have left poverty because we were able to give the multinationals a cheaper alternative. This went into hyperdrive when China started becoming the world’s workshop and India the back office.

However, while price is often an important factor, I have to ask if this is sustainable, particularly for the mature economies like Hong Kong and Singapore. Our politicians are particularly fond of reminding us that in order to stay competitive in the global economy, Singapore needs to be competitively priced.

I don’t think they’re wrong to suggests to say that Singapore needs to be “competitive.” We are a pipsqueak island with no domestic market or resources. Our larger neighbours have more to offer and so we got to be on our toes and constantly find things to offer the world.

While I do understand that we need to be competitive in the global economic arena, I do question if the “need to be competitive,” is becoming an excuse to justify unacceptable practices, especially when it comes to making life better for the poor and needy. Just think of the two most common instances when the need to stay competitive is brought up to stop a discussion. They are inevitably:

1.      Having a minimum wage – common argument is that this will make us less competitive (read cheap) and therefore our economic system and well being will collapse;

2.      When it comes to slave labour from South Asia. Once again, the common point is that if we gave the slaves a dollar an hour more (and actually gave it to them) and got them to spend an hour less in the sun, our infrastructure costs would sky rocket and our economic system would collapse (believe it or not, even when Covid-19 was showing us very clearly that slave hovels were endangering the rest of us, there were people fretting that improving the lot of slaves would endanger our economic survival).

Shouldn’t it be clear by now that a mature economy like Singapore’s can no longer compete on being cheap and we need to reinvent our focus on being good instead of being cheap. This is not to say that price will not be an important factor – merely that we need to compete on something other than price.

I go back to my freelancing experiences and the insolvency practitioner who is proudly not competitive. I competed on price because I went to look for my customers. The insolvency practitioner has reached the stage where customers look for him. He does not need to be cheap. He does not need to do every job to stay alive – merely the ones that pay very well.

There are examples of this. The most famous example of Apple, which designs products and reinvents the way we do things. Apple is an example of a company and business that creates our need to need their products. This is an example of what type of business Singapore Inc needs to aspire to.

Unfortunately to be good, you need to pay and this where Singapore needs to get away from its obsession with “cheap.” Let’s face it we will never make things cheaper than China or 3D printing or do back office work cheaper than India or AI and that’s even if we give away factory land away and exempt foreign multinationals from paying CPF contributions to locals.

Our economic role models can no longer be other developing countries. I think of the German model as an example. Germany has one of the highest hourly wages in the world:

https://worldpopulationreview.com/country-rankings/minimum-wage-by-country

Yet, at the same time, Germany is also the third largest exporter in the world. Germany with one third of the population of the USA and not even 10 percent of China’s, competes in the global market.

https://en.wikipedia.org/wiki/List_of_countries_by_exports

What does Germany export? It exports good quality products. The ones that come to mind are Mercedes and BMW, which are known as some of the best cars in the world rather than the cheapest:

However, there are others. The German economy or Europe’s largest and the world’s fourth largest, is driven by SME enterprises that specialize in unique goods for very niche industries. I think of the Rational Combi-Oven that every chef I’ve worked with used to drool over as an example.

Isn’t it time we moved away from trying to be the world’s cheapest for the world’s big boys? Why can’t we be proud of being good and not being embarrassed of getting the world to pay for Singapore Inc’s products what it pays for that of the West.

We’re a small economy but in the interconnected world we live in, there’s no reason why we can’t do big things on the world stage? Surely this is something the government should drive us towards.

When You’re Poor, what’s due to you is a cost

I Got Scammed by a Media Masterstroke.

After expressing my delight that Singapore’s Sunday Times published a news snippet stating that eight out of ten Singaporeans were willing to pay more for essential services if it meant giving the workers more money, I’m now disturbed.

You could say that after a decade of dealing with the news media, I’m getting my just deserts. It’s just dawned upon me that my delight in thinking that my fellow citizens were more kind hearted than I gave them credit for, was in fact a total distraction from the reality. Call it an endorphin shot that distracts you from the fact that you have cancer. It is a PR master stroke that stops you from asking hard questions.

Background to this started in April 2020, when Covid-19 cases started exploding in foreign worker dormitories. Singapore, which before then, had been basking in the international spotlight for its management of the virus, suddenly saw its reputation for basic competence tarnished. Instead of focusing on the “brilliant” job that the government was doing, the focus shifted to the fact that Singapore had an underclass that was being royally screwed.

In fairness to the government, it did act quickly to shut down the dorms and it offered assistance to the migrant workers, who had been screwed by the disease and the ensuring confinement. Instead of focusing on their plight, a good portion of the workers were suddenly given a reason to be grateful to the government. While the government did upset the more extreme elements who felt the government was spending too much tax payer money on ungrateful foreigners, it did take away a motive from the foreign worker population to cause any civil unrest.

The second stroke of genius was to focus on one simple question. This question was “Would you be willing to pay more for services if the wages of the poor and needy were to be increased?” This was done very subtly and it slid in between all the noise about the need to improve conditions for foreign workers and so on.

At the lowest end of the scale you had the likes of the Fawning Follower, who argued that poor living conditions for Singapore’s underclass were in fact good for Singapore (despite the evidence brought by Covid-19). At the more intelligent end of the scale, you had the likes of the CEO of Centurion Corp, who replied to my forum letter on his profit margins. He appeared reasonable, did not “hide” from the obvious, explained that he was doing this and that to make things better and then somehow it was going to costs money and the tax payer would have to pay for it.

This question frames the issue into one of self-interested costs. Think of the various ways in which this has been framed:

1. Yes, we understand that living conditions for Indian and Bangladeshi workers need to be improved – but you do know that it’s going to costs the employers more and they’ll raise prices so your road tax and building maintenance fees will go up; or
2. Yes, poor aunty carrying the trays at the food court only earns $7 an hour for a 12-hour day – but you know,, if you raised her salary to $10 an hour and reduce working hours to 10 hours a day, the stall owners will need to recoup their costs and are you willing to pay $7 for your noodles instead of $4?

When you frame the issue in this manner, even the most well-intentioned person, will think twice. This is especially true if your own wages are barely keeping up with inflation and rising costs. Think about it – nobody wants aunty to slave at the food court of the Thambis to come home to a slum after a day in the hot sun – but it means that I have to pay more …… Sure, its inspiring that people will say that their willing to pay more if it goes to the workers but the counter to that is that is inevitably – since we don’t know the money will go to the workers, why should we risk paying more.

The second problem with framing the debate this way is that it distracts people from the real issue, which is why is the cost structured the way it is.

In my earlier posting “Lucrative Problems,” I made the point that in the case of foreign labour in Singapore, foreign labour is not cheap and the labourer gets paid badly because there are too many parties taking a cut in between the employer and employee. The biggest cut goes into foreign worker levy to the government. This increases the employer’s costs but does not benefit the worker at all.

I’ve also argued in my piece "The Obvious Answer to Cheaper Hawker Food" that the government has the capacity to reduce rents on land that it controls so that businesses keep more of the money they earn. 

If you look at the way the question is phrased, you think it’s just an employer-vs-employee issue. It makes you look at your own pocket without looking at the real issues. Imagine if we took the examples provided and said the following instead:

1. Since foreign workers live in awful conditions, why don’t we reduce the levy and regulate agent fees more, so that the employers and workers have more to spend on better accommodation; or
2. Why don’t reduce the rents at the food court so that the stall owners have more money to pay the cleaning aunties more?

It’s not going to happen because too many powerful parties have an interest in keeping things this way. These parties consider the reduction of the profit margin (take 50 percent instead of 80) as asking them to make a loss. Thus, they’ll fight tooth and nail to keep things the way they are.

However, there is a case to self-interest to be made. If the government took less from businesses and people through hidden levies and rents, it would create higher spending, which in turn would lead to more business activity and tax revenue.

While I’m happy that my fellow citizens are open to having more compassion for the less fortunate, we shouldn’t get distracted from asking real questions and addressing the real issues.