Poverty cannot be legislated away with a minimum wage

Some people have continued their call for a minimum wage.

Minimum wage purports to lift people out of poverty. But does it? 

If minimum wage is the solution to poverty, then poverty in the US should be on the decline because they have had many years of minimum wages since statutory minimum wages were introduced nationally in 1938. Over the years, minimum wages have risen in the US. So have poverty and unemployment. 

Australia has the highest minimum wage in the world. Yet poverty is on the rise according to the latest report by the Australian Council Of Social Services (ACOSS). It rose from 13% in 2010 to 13.9% in 2012. 

So what drives minimum wage? It's mainly politics.

This is not to say that minimum wage has no role to play. Where there are unscrupulous employers, it can help to protect workers from being exploited.

But to implement a minimum wage in the hope of reducing the income gap and to lift people out of poverty is akin to treating the symptoms without addressing the causes. It is almost like a cosmetic change that looks good on the outside but changes little on the inside.

Every revision to the minimum wage without a corresponding rise in the worker's productivity adds to the cost of doing business and renders the worker with little skill more vulnerable.

For people to get out of poverty they must have jobs. They must be encouraged to seek employment. In this regard, Workfare Income Supplement WIS) does just that. It REWARDS regular and productive work, thus helping to maintain the 'work ethic' which is the bedrock of our success. 

To complement WIS, Workfare Training Support (WTS) Scheme was introduced. While WIS rewards productive work, WTS encourages the worker to go for training to improve his skills and employability and earn more! 

Workers who are sent by their employers for training enjoy 95% course fee subsidy while the employers enjoy an absentee payroll of 95%.

Progressive Wage Model

The Progressive Wage Model rolled out by NTUC recognizes that workers must be paid fair wages. Thus it has a minimum wage feature incorporated into it. At the same time, it also recognizes that the way for a worker to earn more after the entrant wage is to be more productive and not by a revision of that minimum wage. There are therefore provisions for training for the worker so that he/she can progress up the wage ladder through higher productivity.

Home ownership 

For anyone to focus on his job and further training to enhance his job prospects, he must not have to worry about a roof over his head. This brings us to housing. In Singapore, the affordability of housing is such that if you earn $1000, you will be able to afford a new 2-room BTO in a non-mature estate just using your CPF contributions alone. 

This is because there are the CPF Additional Housing Grants and CPF Special Housing Grants which adds up to a maximum of $60,000. These grants are not merely discounts on the purchase price of the flats that people buy. These grants are money for you to keep. Should you decide to sell your flat, these grants will be credited into your CPF account. 

There are a host of other schemes to help people in the lower and lower middle income group including financial assistance for their children's education. 

It takes more than a minimum wage to lift people out of poverty and policies must not be viewed in isolation. It takes a whole lot of schemes and policies to help people.

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