i thought we had been saying this for the longest time...
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http://forum.channelnewsasia.com/showthread.php?63337-Lim-Chong-Yah-suggests-second-wage-revolution
Lim Chong Yah suggests second wage revolution
Business Times - 10 Apr 2012
3-year plan to cut income inequality, foreign labour use
By TEH SHI NING (SINGAPORE) To tackle rising income inequality and an excessive reliance on cheap foreign labour, one prominent local economist is proposing a three-year restructuring plan that includes a wage freeze for top income earners and sizeable pay hikes for the lowest paid.
This 'bold and iconoclastic' proposal seeks to complete the wage revolution of 1979 to 1981, says Professor Lim Chong Yah. He helmed the National Wage Council (NWC) from 1972 to 2001 and as its founding chairman had a pivotal role in that first, radical three-year wage restructuring exercise.
Then, the NWC had recommended a 20 per cent across-the-board increase in wages a year, including higher contributions to Central Provident Fund accounts and to the Skills Development Fund, which grants companies training subsidies.
Speaking to an audience of about 50 at an Economic Society of Singapore public lecture yesterday, Prof Lim outlined another three-year solution to Singapore's 'two Achilles' heels' - the sharp rise in low-wage foreign workers and rising income inequality - while raising productivity.
This features a sizeable pay hike for the lowest-paid workers, regardless of nationality or age, earning less than $1,500 per month over three years. He proposes a cumulative 15 per cent rise in the first year, another 15 per cent in the second, and 20 per cent in the third. This increase would be channelled, in equal parts, to the worker's take-home pay, his CPF Retirement Account, and the Skills Development Fund.
At the top end of the income ladder, Prof Lim proposes a three-year wage freeze for those earning $15,000 or more a month. But he stresses, the intention is not to 'frighten the geese that lay the golden eggs' as there will be no pay cut, pay ceiling or super-taxes imposed.
As for the middle income, he proposes pay hikes ranging from a quarter to a third of that received by the lowest-income group, part of which will go into the CPF Retirement Account. The government should also match contributions to the Skills Development Fund to demonstrate its commitment to the restructuring effort.
Prof Lim envisions all operating details of this proposal being discussed and decided on by the tripartite NWC, as was the case in 1979, to 'forge consensus by the three tripartite social partners'.
He acknowledged readily that national economic restructuring is 'much more difficult' now than it was three decades ago, given the changed political, economic and socio-economic climate. But he thinks that Singapore still has effective tripartism and a government and civil service with integrity and ability, so what is needed is 'national will' in the face of 'the problems of economic success'.
In response to questions from the floor, Prof Lim said that his proposed scheme is unlikely to have a significant negative impact on unemployment - now at record lows - and that high-quality foreign investment will continue to flow into Singapore in pursuit of strong fundamentals.
Asked about the pace he proposes, which seems swifter than the government's target of a more gradual 30 per cent rise in median incomes in the 10 years till 2020, Prof Lim said that some 'shock' is needed to 'check, halt and if possible reverse' the rise in income inequality.
Lim Chong Yah suggests second wage revolution
Business Times - 10 Apr 2012
3-year plan to cut income inequality, foreign labour use
By TEH SHI NING (SINGAPORE) To tackle rising income inequality and an excessive reliance on cheap foreign labour, one prominent local economist is proposing a three-year restructuring plan that includes a wage freeze for top income earners and sizeable pay hikes for the lowest paid.
This 'bold and iconoclastic' proposal seeks to complete the wage revolution of 1979 to 1981, says Professor Lim Chong Yah. He helmed the National Wage Council (NWC) from 1972 to 2001 and as its founding chairman had a pivotal role in that first, radical three-year wage restructuring exercise.
Then, the NWC had recommended a 20 per cent across-the-board increase in wages a year, including higher contributions to Central Provident Fund accounts and to the Skills Development Fund, which grants companies training subsidies.
Speaking to an audience of about 50 at an Economic Society of Singapore public lecture yesterday, Prof Lim outlined another three-year solution to Singapore's 'two Achilles' heels' - the sharp rise in low-wage foreign workers and rising income inequality - while raising productivity.
This features a sizeable pay hike for the lowest-paid workers, regardless of nationality or age, earning less than $1,500 per month over three years. He proposes a cumulative 15 per cent rise in the first year, another 15 per cent in the second, and 20 per cent in the third. This increase would be channelled, in equal parts, to the worker's take-home pay, his CPF Retirement Account, and the Skills Development Fund.
At the top end of the income ladder, Prof Lim proposes a three-year wage freeze for those earning $15,000 or more a month. But he stresses, the intention is not to 'frighten the geese that lay the golden eggs' as there will be no pay cut, pay ceiling or super-taxes imposed.
As for the middle income, he proposes pay hikes ranging from a quarter to a third of that received by the lowest-income group, part of which will go into the CPF Retirement Account. The government should also match contributions to the Skills Development Fund to demonstrate its commitment to the restructuring effort.
Prof Lim envisions all operating details of this proposal being discussed and decided on by the tripartite NWC, as was the case in 1979, to 'forge consensus by the three tripartite social partners'.
He acknowledged readily that national economic restructuring is 'much more difficult' now than it was three decades ago, given the changed political, economic and socio-economic climate. But he thinks that Singapore still has effective tripartism and a government and civil service with integrity and ability, so what is needed is 'national will' in the face of 'the problems of economic success'.
In response to questions from the floor, Prof Lim said that his proposed scheme is unlikely to have a significant negative impact on unemployment - now at record lows - and that high-quality foreign investment will continue to flow into Singapore in pursuit of strong fundamentals.
Asked about the pace he proposes, which seems swifter than the government's target of a more gradual 30 per cent rise in median incomes in the 10 years till 2020, Prof Lim said that some 'shock' is needed to 'check, halt and if possible reverse' the rise in income inequality.
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Lim Chong Yah was supporting the high-wage policy in the mid-1980s that pushed Singapore into recession. So what does he know about economics?
Dotology: are dots expensive?
Dotology: are dots expensive?
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Is LCY the one who wrote the JC econs textbooks during the 80s?
I did not study econs then but I heard many people hated the subject. When I finally studied econs in an MBA, I looked back at this textbook and found it easy to understand and well catered for a Singaporean mind. Perhaps he wrote that with the relatively naive, immature and worldly-unwise JC student of that age.
I find myself in the upper strata that he talks about, and I while I think stagnating higher income earners will help, perhaps some tweaks then might include a % plough-back of income from these high earners into the Singapore Economy itself instead of outright stagnation. Any income above a certain % threshold not ploughed back in to local economy will then attract a higher rate of tax on the gains made from the income from investments. (not the invested capital itself).
It would be good then if high income earners be "rewarded" via higher tax deductions should they place their money into riskier local ventures that will take the weight off from the Government having to grant subsidies or startup capital or a micro-loan venture to help poorer citizens (not PRs or FTs) have the capital to venture into bread and butter businesses such as farming, food production, or even scholarship funding (Singaporeans ONLY).
The more direct the capital injection, the more the tax deduction. Therefore, a high income earner would get better deductions by individuals pooling and injecting funds directly to a building of a food court for local hawkers as compared to having a vote in a board of VCs that approve risky local ventures and the least when parking their money into a secondary market instrument of the same VC company.
For the lowest income earners, do it ACROSS the board, regardless of FT or local, as this will disincentivise employers from seeking the cheapest labor for the widest profit margin. It must be effective enough to FORCE them to retrain workers, upgrade technology or exit the market. With things as they are now, Bosses have it good as they only need sit back and count money within their own little fiefdom, and not have to tackle the issues that would have made their company more competitive in a global scale.
I did not study econs then but I heard many people hated the subject. When I finally studied econs in an MBA, I looked back at this textbook and found it easy to understand and well catered for a Singaporean mind. Perhaps he wrote that with the relatively naive, immature and worldly-unwise JC student of that age.
I find myself in the upper strata that he talks about, and I while I think stagnating higher income earners will help, perhaps some tweaks then might include a % plough-back of income from these high earners into the Singapore Economy itself instead of outright stagnation. Any income above a certain % threshold not ploughed back in to local economy will then attract a higher rate of tax on the gains made from the income from investments. (not the invested capital itself).
It would be good then if high income earners be "rewarded" via higher tax deductions should they place their money into riskier local ventures that will take the weight off from the Government having to grant subsidies or startup capital or a micro-loan venture to help poorer citizens (not PRs or FTs) have the capital to venture into bread and butter businesses such as farming, food production, or even scholarship funding (Singaporeans ONLY).
The more direct the capital injection, the more the tax deduction. Therefore, a high income earner would get better deductions by individuals pooling and injecting funds directly to a building of a food court for local hawkers as compared to having a vote in a board of VCs that approve risky local ventures and the least when parking their money into a secondary market instrument of the same VC company.
For the lowest income earners, do it ACROSS the board, regardless of FT or local, as this will disincentivise employers from seeking the cheapest labor for the widest profit margin. It must be effective enough to FORCE them to retrain workers, upgrade technology or exit the market. With things as they are now, Bosses have it good as they only need sit back and count money within their own little fiefdom, and not have to tackle the issues that would have made their company more competitive in a global scale.
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