On the minimum wage

“The main problem confronting the poor is that they have too little money” – Abba Lerner

And that is exactly why I feel a minimum wage policy, however well intentioned, is not the right policy. With regard to helping the poor, it is a third best policy.

To make it clear, lets see a classic economic argument against the minimum wage. I find the need to do this as I suspect most are confused about the topic.

Here, we will assume that everyone wants to work regardless of wage (The most favourable assumption, any other would worsen the negative impact of the minimum wage.)

If we let the market operate, employers (be it MNCs or your local wet market) will employ everyone who wants to work, leading to a overall market wage.

(Unemployment would still exist here for various reasons e.g. those fresh from university looking for their first job etc, but to simplify things, we assume that is negligible)

Now, if we set a minimum wage, employers will employ less. That is inevitable. The law of demand dictates that.

They will fire workers, and squeeze out more from the remainder.

So who wins?

Not the newly unemployed, whom now have to find some means to live on. Most certainly not the employers

Maybe the lucky few whom are employed. But that is equivalent to the lucky poor stomping on the backs of the unemployed poor. Somewhat counterproductive for a policy aimed at helping the underprivileged.

Much better would be a public works program to increase the demand for low-skilled workers, thus raising wages for all. Alternatively, a negative income tax, helping to subsidize those whom find themselves working below subsistence levels. Either of this would be much better than the minimum wage, which is really an ineffective way of putting money into the pockets of those whom need it most.

Now to answer some arguments for the minimum wage.

Firstly, the point that it would raise the incentive to work. No one denies that one would work harder if he is paid more. Hey, I would! The main issue is whether anyone would employ you for said wage.

A related argument is that it would encourage efficiency in employment. Yes it would, as employers try to squeeze out more from the thinned ranks of the employed. So we have overworked workers and those whom want to work but cannot. Is that what we really want?

And for the fact that it would discourage foreign workers from entering Singapore through various means, there are so many more direct measures to stop this, e.g. increasing the foreign worker levy etc.Why do we want to settle for second best measures?!?

This is like cutting off one’s nose to spite the face.

Thus, while it sounds really popular, I really don’t think we want to use the blunt axe of a minimum wage to achieve our  social objectives, be it  helping the poor or discouraging immigration.

On nation and state: The nightmare scenario.

It has taken me quite awhile to come to this realisation, one that I only had inklings of previously.

The stability we have had over the past 45 years is unlikely to last.

It sounds too apocalyptic, but let me explain first before you judge. There are two interrelated factors here: the conflation of nation of state, and the loss of individual responsibility.

The conflation of nation and state

Since we broke off from Malaysia, the PAP has led the government. Under its leadership, we have undeniably progressed.

But there is an unfortunate side effect. The unyielding grip of the PAP onto the reins of power has blurred the distinction between the nation, state and party.

Put simply, the PAP (the party) controls the state (the Government), which in turns governs overs the nation (Singapore).

Yet we often conflate nation and state. We let the PAP/government impose itself as the very definition of Singapore. This misconception is often actively encouraged by the ruling party to cement its grip, by making the argument that the PAP is the linchpin to the entire superstructure.

But this is plainly untrue. There is so much more to the nation than the state, namely us. Society is what makes Singapore the nation we know and love.

What drives us to live, work and play here is fundamentally not through government fiat. It is the fact that we have origins here, that we have friends and family that tether us to this land, whether we like it or not.

The government is also larger than the PAP itself. As it is, the PAP, however formidable, is merely occupying the institutions of state at the behest of the common man.

But we forget this in our daily discourse. When we are dissatisfied with national policies, we take it out on the nation, when we should really be expressing our outrage at Parliament.

Which is why we get things like the recent YOG uproar on Facebook and elsewhere. In particular, let me highlight an excerpt from a post summarizing netizen views on said Facebook group.

“Fxxk you YOG. FxxK YOU. If this is for “ALL” of Singapore, where the hell do we citizens benefit from this? International fame and glory goes to the Country, so G-Men treats foreigners like angels by using OUR money and forever treating us like crap. WTF man.”

Lets stop and think awhile. In any other country, hosting the first YOG would be a crowning achievement. Yet, due to the seething undercurrents, the event itself has become politicized.

An national event becomes a stage for us to vent our frustrations about our government.

In part, this is because the PAP has indirectly had an hand in organizing this through the power of the state. But does this fully explain why we end up complaining about foreigners and other local issues in the context of a national event?

My gut feeling is no.

This controversy is like a spark that has been fanned by the long repressed anger in society. And in the process, we have used the nation as our punching bag.

Even the politically savvy are occasionally prone to this critical flaw (see headline here for an example). Whether intentional or not, it shows how entrenched this concept has come.

The loss of individual responsibility

The PAP’s success has blinded us. We expect government to solve problems for us, and leave all the work to it.

Which is expected. After all, that is a hallmark of a successful government. In the process, we have turned inwards on our own lives, washing our hands off politics.

And insofar, the status quo works. We mind our own business so long as government does its job well.

But we forget that government isn’t everything. Not all things can be done purely through government power.

Yet, our ingrained expectations of the omnipotent state washes off all ownership of national problems. We push it off onto the state, which finds itself incapable of solving the problem.

Thats why we complain. Not only does complaining work (usually), its never my fault, its not my problem, let my MP solve it.

But how is the PAP supposed to solve political apathy? How is the PAP supposed to solve the problem of an Opposition that is locked in an echo chamber, preaching to the converted? How exactly do we expect the PAP to solve the problem of spitting, littering and other public nuisances?

In part, the PAP works around this through second-best measures. E.g. punitive legislation for littering/spitting, and immigration to compensate for low birth rates.

But national issues are precisely that. The state needs support/input from society. Without it, we all suffer from second-best solutions with all their associated side-effects.

Put two and two together?

We are angry at the state of affairs in this nation. We take it out on the PAP/state, yet as we confuse that with the nation, we end up stubbing our own toes. We end up hating the nation.

In any ordinary democracy, we would have thrown out the PAP. But we aren’t ordinary.

The PAP will not so easily relent its hold on power (Here is one of the rare occasions where the interests of the PAP and nation don’t align). And voters for the most part recognize they pretty much have no alternative with the currently weak and fractious Opposition that seems more interested in arguing about the past than governing for the future.

So discontentment builds to pressure-cooker proportions. We become self-hating citizens.

Historically, growth has been the main valve releasing all this pent up frustration. So long as our lives improve materially, most are willing to accept the current state of affairs.

But the high growth we have seen will not last. At some point we will transition into a developed country, with its attendant slower growth.

Furthermore, as we develop, we value growth less and less, and view liberty as increasingly important. We move up Maslow’s hierarchy of needs, in other words, in search of self-actualization.

So as this escape valve closes, what happens next?

I honestly don’t know, and that scares me. At some point, the pressure cooker simply blows apart violently.

Alternatively, it develops a leak. We, the self-hating citizens, choose to emigrate instead. Singapore would then become as united as the people in a busy MRT station feel a common affinity.

We would view Singapore as a means to an end, a transit point to a better life. And neither is that what I want this country to become either.

Yet this is what is happening now. What are we going to do about it? Or are we just going to pretend that our problems would magically disappear?