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http://thestar.com.my/columnists/story.asp?file=/2012/4/21/columnists/insightdownsouth/11140686&sec=insightdownsouth
Saturday April 21, 2012
INSIGHT DOWN SOUTH
By SEAH CHIANG NEE
A call by former National Wage Council chairman Lim Chong Yah to close the wage gap between the lowest paid and high-income earners has developed into a public spat with the government.
IN an interview, I once asked former Prime Minister Lee Kuan Yew what he would have done differently given the chance, he replied: “Economic restructuring. I would have started it earlier.”
That was in the mid-80s. Lee said he regretted pushing the strategy back from 1974 to 1979, which on hindsight was a mistake.
The oil embargo and four-fold increase in price in 1974 was the reason for the postponement. The government feared it would create problems, he explained.
“Because we were too careful, we wasted five precious years,” Lee added.
It hit me at the time that it must be the closest Lee had come to admitting that he had made a mistake.
I’m recounting this in the wake of a public row between the government and economist and former National Wage Council chairman Lim Chong Yah, who is calling for a national wage shock to close the economic gap.
It was a rare public disagreement between an elite academician with many years of government service and second-line leaders.
To narrow the economic gap between rich and poor, Lim had suggested a shock wage therapy to raise the monthly salaries of workers who earn S$1,500 or less by 50% over three years.
He called for a simultaneous freeze on wages of those who earn more than S$15,000 a month for the same period.
The society’s economic gap measured by the GINI coefficient was approaching a “dangerous level”, he said. It is the second worse in the world, next only to Hong Kong.
Prof Lim described Singapore’s lowest class of workers as long underpaid because of the influx of cheap foreign workers.
It raised a mini-storm among some government leaders. A number of ministers took turns to refute it, but it was well received by many Singaporeans.
In a Yahoo! public poll on whether the wage shock therapy would work, some 65% (or 2,773 people) replied “Yes”, while 16% or 689 said “No, it will lead to higher costs”.
The remaining 19% (821) said “It requires further thought”.
Some PAP leaders said Prof Lim was oversimplifying the issue. His suggestion contained serious hidden risks for the economy such as structural unemployment and higher cost of living, they said.
The chief of the government-affiliated trade unions, Lim Swee Say, said: “This approach is very risky.”
Minister of State for Trade and Industry Lee Yi Shyan said Singapore must be careful about raising wages without a corresponding increase in productivity.
For a free market system to work well, he said “we have to be very mindful of the interventions we introduce and if you artificially raise it too much”.
Prof Lim later clarified: “My position is that our lowly paid workers have been underpaid by much more than 100% of their pay when compared with their counterparts in countries with comparable national affluence like Hong Kong, Japan or Australia.”
He referred briefly to the first wage revolution in 1979, which he played a part formulating.
That economic restructuring initiated by Lee was to move the economy away from low-value products (like textiles, plastics) by forcing up salaries of their workers.
The idea was to push low-skilled factories to relocate to Batam (Indonesia) or Johor (Malaysia), freeing workers to be trained for higher-value products and services like computer parts, pharmaceuticals, etc.
His rationale was that the emergence of China and India, with plenty of cheap land and manpower, had made us uncompetitive in low-value manufacturing.
(Note: Wage rates were increased across-the-board cumulatively by 20% during 1979-81: part of which went to CPF and Sills Development Fund).
The current public row is surprising considering that Prof. Lim is believed to have Lee Kuan Yew’s trust.
Both are related by marriage. Lim’s daughter Suet Fern, a lawyer, married Lee’s youngest son Hsien Yang in 1981. The couple has three sons.
The controversy has caught many Singaporeans by surprise. It is not often that a government disagreement is aired publicly. Such matters had mostly been resolved within four walls away from the press.
It led one commentator to ask whether the professor had the backing of former Prime Minister Lee.
“The idea might have been to stick some spurs into government inertia and test the market with contrarian provocations, a kind of idea balloon,” the writer added.
A study by the Institute of Policy Studies (IPS) has found that government policies to draw in foreign talent had likely helped widen the income gap.
“The rising tide of foreign workers almost certainly impacted wage growth at parts of the income distribution and thereby worsened inequality,” said Manu Bhaskaran, the adjunct senior research fellow at IPS.
It is not known when or why the 1979-1981 restructuring towards a higher value-added economy had to make way – as trade union leader Lim said – to one where workers must be “cheaper, better and faster”.
In 1979 Lee had decided to move away from a cheap economy with low salaries because Singapore had grown too affluent for that.
As Prof Lim said, when that happened, Singapore’s per capita income was US$4,071; today it is US$50,123 one of the highest in the world.
And the government had imported 1.157 million foreign workers, which the city did not have 33 years ago.
The resultant income gap is developing into Prime Minister Lee Hsien Loong’s biggest political headache.
Unless he can improve the living standards of the lower middle class and poor, the ruling PAP will have a hard time with future elections, starting from 2016.
Saturday April 21, 2012
INSIGHT DOWN SOUTH
By SEAH CHIANG NEE
A call by former National Wage Council chairman Lim Chong Yah to close the wage gap between the lowest paid and high-income earners has developed into a public spat with the government.
IN an interview, I once asked former Prime Minister Lee Kuan Yew what he would have done differently given the chance, he replied: “Economic restructuring. I would have started it earlier.”
That was in the mid-80s. Lee said he regretted pushing the strategy back from 1974 to 1979, which on hindsight was a mistake.
The oil embargo and four-fold increase in price in 1974 was the reason for the postponement. The government feared it would create problems, he explained.
“Because we were too careful, we wasted five precious years,” Lee added.
It hit me at the time that it must be the closest Lee had come to admitting that he had made a mistake.
I’m recounting this in the wake of a public row between the government and economist and former National Wage Council chairman Lim Chong Yah, who is calling for a national wage shock to close the economic gap.
It was a rare public disagreement between an elite academician with many years of government service and second-line leaders.
To narrow the economic gap between rich and poor, Lim had suggested a shock wage therapy to raise the monthly salaries of workers who earn S$1,500 or less by 50% over three years.
He called for a simultaneous freeze on wages of those who earn more than S$15,000 a month for the same period.
The society’s economic gap measured by the GINI coefficient was approaching a “dangerous level”, he said. It is the second worse in the world, next only to Hong Kong.
Prof Lim described Singapore’s lowest class of workers as long underpaid because of the influx of cheap foreign workers.
It raised a mini-storm among some government leaders. A number of ministers took turns to refute it, but it was well received by many Singaporeans.
In a Yahoo! public poll on whether the wage shock therapy would work, some 65% (or 2,773 people) replied “Yes”, while 16% or 689 said “No, it will lead to higher costs”.
The remaining 19% (821) said “It requires further thought”.
Some PAP leaders said Prof Lim was oversimplifying the issue. His suggestion contained serious hidden risks for the economy such as structural unemployment and higher cost of living, they said.
The chief of the government-affiliated trade unions, Lim Swee Say, said: “This approach is very risky.”
Minister of State for Trade and Industry Lee Yi Shyan said Singapore must be careful about raising wages without a corresponding increase in productivity.
For a free market system to work well, he said “we have to be very mindful of the interventions we introduce and if you artificially raise it too much”.
Prof Lim later clarified: “My position is that our lowly paid workers have been underpaid by much more than 100% of their pay when compared with their counterparts in countries with comparable national affluence like Hong Kong, Japan or Australia.”
He referred briefly to the first wage revolution in 1979, which he played a part formulating.
That economic restructuring initiated by Lee was to move the economy away from low-value products (like textiles, plastics) by forcing up salaries of their workers.
The idea was to push low-skilled factories to relocate to Batam (Indonesia) or Johor (Malaysia), freeing workers to be trained for higher-value products and services like computer parts, pharmaceuticals, etc.
His rationale was that the emergence of China and India, with plenty of cheap land and manpower, had made us uncompetitive in low-value manufacturing.
(Note: Wage rates were increased across-the-board cumulatively by 20% during 1979-81: part of which went to CPF and Sills Development Fund).
The current public row is surprising considering that Prof. Lim is believed to have Lee Kuan Yew’s trust.
Both are related by marriage. Lim’s daughter Suet Fern, a lawyer, married Lee’s youngest son Hsien Yang in 1981. The couple has three sons.
The controversy has caught many Singaporeans by surprise. It is not often that a government disagreement is aired publicly. Such matters had mostly been resolved within four walls away from the press.
It led one commentator to ask whether the professor had the backing of former Prime Minister Lee.
“The idea might have been to stick some spurs into government inertia and test the market with contrarian provocations, a kind of idea balloon,” the writer added.
A study by the Institute of Policy Studies (IPS) has found that government policies to draw in foreign talent had likely helped widen the income gap.
“The rising tide of foreign workers almost certainly impacted wage growth at parts of the income distribution and thereby worsened inequality,” said Manu Bhaskaran, the adjunct senior research fellow at IPS.
It is not known when or why the 1979-1981 restructuring towards a higher value-added economy had to make way – as trade union leader Lim said – to one where workers must be “cheaper, better and faster”.
In 1979 Lee had decided to move away from a cheap economy with low salaries because Singapore had grown too affluent for that.
As Prof Lim said, when that happened, Singapore’s per capita income was US$4,071; today it is US$50,123 one of the highest in the world.
And the government had imported 1.157 million foreign workers, which the city did not have 33 years ago.
The resultant income gap is developing into Prime Minister Lee Hsien Loong’s biggest political headache.
Unless he can improve the living standards of the lower middle class and poor, the ruling PAP will have a hard time with future elections, starting from 2016.
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