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.
Teh Shi
Ning
The
Business Times
Business & Investment Opportunities
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