Minimum wage law ensures just redistribution of GDP

I disagree with Mr Cheng Shoong Tat that a minimum wage law will not help low-wage workers (Minimum wage law will not help pump attendants, Nov 3).

The purpose of a minimum wage law is to protect workers against unduly low pay.

Most governments determine the quantum after considering social protection, education and healthcare benefits to ensure a just and equitable share of the fruits of progress to provide a decent living wage in the community.

It will prevent excessive income inequality and help to avoid 50 per cent of the total wage bill going to the top 10 per cent of wage earners, leaving only 10 per cent for low-wage earners.

A minimum wage law ensures fairer redistribution of wealth generated in a country's gross domestic product (GDP) to protect workers in the community with a meaningful living wage.

Over 90 per cent of member countries under the United Nations have adopted a minimum wage law.

The quantum may vary according to the performance of the country's GDP, generosity of welfare benefits and prevailing cost of living.

The percentage figures of GDP per capita are a good barometer of the redistributive policies in the following economies: (The percentage in brackets shows the level of minimum wage against the GDP per capita of an economy. The higher the percentage, the fairer the redistribution factor of wealth generated under the same economic system): Australia (50.8), France (50), Germany (45.9), UK (47.7), Thailand (43.2), South Korea (42.7), Taiwan (38), Japan (34.9), Ireland (27), USA (26.8), China (20.1) and Hong Kong (19).

Rich economies without a minimum wage law adopt a high-income policy through equitable redistributive measures to provide a meaningful lifestyle. For example, the lowest wage in Switzerland is $3,850 per month while Nordic countries pay an average $26 per hour.

Translated into percentage GDP per capita, the Nordic and Swiss average figure is above 53 per cent while Singapore's score is 16.4 per cent based on a $1,000 basic salary plus one-month bonus.

If the minimum wage for pump attendants and cleaners is $2,500 per month in Singapore, employers have a choice to automate or pay accordingly.

When jobs are replaced, workers are encouraged to upgrade to new jobs and still enjoy a decent living standard.

Paul Chan Poh Hoi

A version of this article appeared in the print edition of The Straits Times on November 21, 2018, with the headline 'Minimum wage law ensures just redistribution of GDP'. Print Edition | Subscribe