This Is Why There's No Minimum Wage in Singapore

Singapore is one of the freest economies in the world. But, wait.... no minimum wage?

The Republic of Singapore, a small country in South East Asia, is an economic powerhouse. Why? Market conditions dictate wage and business regulations.

This mindset also applies to determining the country's national minimum wage. In fact, the Singaporean government has no interest in regulating such things, according to its lead labor affairs agency.

Wage Laws And The Economy In Singapore

Singapore serves as one of the very few countries in the developed world lacking a minimum wage provision. According to the country's Ministry of Manpower, wages are set by a system that determines "whether wages should increase or decrease best determined by market demand and supply for [labor], skills, capabilities, and competency to perform the task."

In fact, this macroeconomic approach has contributed to Singapore becoming one of the most high-tech economies in the world.

According to the 2017 edition of the Heritage Foundation's Index of Economic Freedom, Singapore has the 2nd freest economy in the entire world, falling only to the administrative zone of Hong Kong.

"Prudent macroeconomic policy and a stable political and legal environment have been the keys to Singapore’s continuing success in maintaining a strong and dynamic economy," according to the Index.

"Well-secured property rights promote entrepreneurship and productivity growth effectively. A strong tradition of minimum tolerance for corruption is institutionalized in an effective judicial framework, strongly sustaining the rule of law."

Current Wage Protections

In place of a national minimum wage, Singaporean businesses are subject to a wage floor that serves as the lowest amount a worker can be legally paid. In recent years, the Singaporean Parliament did pass provisions for a basic income for cleaners, security guards, and a select few other service oriented positions.

Despite governmental policies pertaining controls on wage, the majority of positions within Singapore are not subject to a basic income rate while the majority of industries have little to no regulation or centralized governance of best practices. Consequently, Singapore maintains a very high per-capita rate. On average, every Singaporean earns USD 85,253 annually.

Perspectives on The Singaporean Wage Model

Like any debate associated with meeting the necessary cost of living needs, several commentators and politicians have voiced concerns over the lack of minimum wage rules. Organized labor groups seek to install a progressive minimum wage model despite the government's opposition.

The national labor federation, the National Trades Union Congress (NTUC), serves as the leading proponent of a national minimum wage model that resembles a system of where wages for low-level laborers are determined by a "wage ladder." Low-income employees would be able to rely on businesses providing minimum salaries in a select group of labor clusters rather than relying on Members-of-Parliament to legislate a legally binding system.

Despite the ingenuity within the labor market, the sentiment of the government, prudently, remains focused on creating an environment that allows hard work, not wage control, to be the end product.

One Opinion From The Government:

"...A minimum wage policy would compromise the principles of preserving our strong work ethic and culture of self-reliance, as workers will be [disincentivized] from going for training and upgrading since they are guaranteed a minimum wage regardless of skills, capabilities or productivity. This is against our broader strategy to improve productivity at all levels." - Commentary from MOM, 2011.

Contrary to the sentiment of the government and senior officials within it, one economist believes that the time has come for a national minimum wage:

"One can discuss the minimum wage issue until kingdom come. There are pros, and there are cons. Most nations in the world, developed countries, in particular, have introduced the minimum wage system. There were studies showing that with the introduction of the minimum wage, it would not damage the economy, provided the minimum wage level is linked to the national productivity level. In other words, it cannot be too high, neither should it be too low that it becomes irrelevant." - Economist Lim Chong Yah, interview with Channel NewsAsia, 2017.

One general argument regarding minimum wage laws is that if a minimum wage is too high, no matter where in the world the increase is taking place, it could threaten jobs for low skill workers.

According to Human Resources Director Asia, this is the conclusion of a study conducted by the National Bureau of Economic Research (NBER). The study concludes that government mandated minimum wage hikes could incentivize companies to choose automation methods over retaining individual employees.

"In the future, many more occupations that employ low-skill workers are on track to be automated, even if they are not currently labeled as ‘automatable’,” the study claims via HRD Asia. “These include, for example, taxi drivers, cashiers, and bricklayers.”

Regardless of an increase, bodies of academic work suggest those same outcomes in market-oriented economies like Singapore's.

This Is Why There's No Minimum Wage in Singapore