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I refer to your article titled A Thought on Wage Shock dated 26/05/2012 First of all, I agree that a wage freeze

for the upper brackets will not be beneficial, because it is not equitable to penalize talent. Still, a huge chunk of your article is misinformed. The main aim of the wage shock therapy proposed by Professor Lim Chong Yah is not to target economic growth, but to address income inequality in Singapore. First, what would the poor do with the additional cash? Does purchasing power essentially increase? And if it does, is it in line with the wage shock suggestion? Well, negative answers to all of those. Disposable income increases but would likely not be tapped on, for they would be, similar to the rich, saved in bank accounts.

I am mindblown after reading this completely misinformed paragraph of yours. Do you even read what you have written? These low income earners are people (actual human beings) who have trouble affording even their daily meals and basic amenities. Do you seriously believe that they have that option of saving that extra hundreds or so when they hardly have enough to pass the day by? This extra income will be spent on food, housing, clothing, transport, education and other necessities, all of which will improve their standards of living, letting them live their lives with more dignity. These low wage workers can only hope to improve their future standards of living through upgrading their qualifications and skills after they have fulfilled their minimum needs. And they can only be confident to spend money upgrading their qualifications if they have the assurance that this wage increase is sustained and not temporarily, in line with what the wage shock therapy aims to achieve. This is unlike one time measures like GST credits which will likely be saved up for a rainy day rather than spent. A 50% wage increase is a significant step to improving a low wage workers lifestyle. Some SMES may bankrupt in the short term and some workers may lose their jobs and, but looking at the big picture, these are all short term losses required for long term growth. Businesses that will suffer are likely to be SMEs where labour costs makes up a high percentage of operating cost, which leads to another question: Why is a business based in SG even operating on the basis of low labour cost in the first place? The focus of a SME should be on creating a niche market and exporting. Second, there would then be questions on where the additional 50% increase in the average Joes paychecks over three years would come from. Certainly not the government for it would then be explicit income redistribution. And so employers? Well, what about keeping Singapores labour market competitive when many of the lower income group work at plants or stores with an option of relocating overseas.

Again, unsubstantiated and misleading assertions. Firstly, percentages are not to be viewed in its entirety. A 50% wage rise for an employee earning $1500 monthly is meager, compared to say, an employee earning $15000 monthly, but yet, it can do much to address the aspirations of low wage workers. I would also, refer you to this article. Comparing the pay scales of other equally affluent countries, I can say that it is justifiable to raise the salary of low wage workers. You might have seen this comparison floating around on the net. I say its a fair basis for comparison. And do not even attempt to compare Singapore to countries like China and India. If we are to compare on a reasonable basis, we should at least compare wages to countries with similar business climates or GDP per capita as ours, like Hong Kong and New Zealand. After all, we claim ourselves to be a first world country. It is a unspoken fact that the lack of a functional trade union in Singapore prevents workers from asking for higher wages, much as they want to. And then we talk about boosting productivity as a long term solution for rising costs of production and hence living. How can we boost productivity when the lower-income bracket, mostly engaged in intermediate or penultimate stages of producing consumer goods and services, are ordered to be payed more justifiably? Surely we dont want that to happen, and much less losing our competitive edge. When you say losing our competitive edge, what edge are you exactly referring to? In the first place, we never had a competitive edge in low labour cost industry and we should not even try to compete on that basis given our small labour force. Raising salaries of low wage workers forces businesses that cannot compete cost competitively to leave the market, and those that can survive, to upgrade and improve the productivity of their workers, since they simply cannot afford to hire many. That is how productivity increases. And I find certainly not the government laughable, I propose that obscene salaries of ministers be cut to pay these workers higher wages. (lol) This presents another issue with our economy it has become to globalised, too international. What is moving our modest consumer market forward are large multinationals based in Singapore, securing inputs from Singapore, merchandising output in Singapore. Should there be any inbalance in either door of the factory, possibilities are the firm would pack up and leave for Changi. In this case, rising overheads due to a forced increase in wages are forcing them out. Should both income groups start to save more as described earlier, a cost-output spiral would be inevitable. Reading this paragraph hurts my eyes. MNCs do not base themselves in Singapore because we have cheap labour to exploit! They come here because we have a strong exchange rate, low corporate tax rates, a stable business environment and value added services. I think you might have mistakenly

believed that MNCs come over to Singapore to set up low cost factories to make shoes and brassiere. Fact is, most MNCs operating in Singapore are regional HQs or factories producing high value-added products like refined petroleum. They will not leave simply because salaries of low wage workers are raised by 50%. The more likely reason for their leaving will be due to social upheaval and unrest if nothing is done about the wide chasm in income levels. Also, your general view on policy making is fundamentally problematic. Since you say that policies have to be a moderation of extremes, I will propose salaries of low wage workers to be raised by 500%. This way, the moderate approach, by your means, would be to raise their salaries by a new optimal of 150%.

But I have to concur fully with what you said about resolving the lack of proper economic knowledge among the masses and the ill informed mindsets that end up producing unfavorable results for the economy as a whole. Especially after reading this blog post of yours.

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