After the National Day Rally speech, there seems to be some confusion as to the announcement that Singapore companies will have to pay employees of local citizens / PR a minimum of S $ 1,400 per month.
Judging by the comments posted online, many people seem to encourage it as an introduction to the national minimum wage for all Singaporeans. This is incorrect.
In reality, not only is it not a minimum wage, but it has existed in Singapore for years and its purpose is quite different.
What Prime Minister Lee Hsien Loong was referring to Local qualification salary (LQS): A solution to counter the abuse of foreign workers at the expense of Singaporeans.
It applies not more to companies that want to hire foreigners making sure that a minimum number of Singaporeans find their first job there and with a sufficiently high minimum wage, which is set by the LQS.
It is only after reaching the quota of properly paid Singaporeans that companies can hire foreigners (particularly with a better paid S-Pass instead of a work permit).
Here is an overview of several measures aimed at regulating the foreign workforce in Singapore over the past five years and the role LQS plays among them:
LQS was put in place to ensure that laws are not respected by dishonest employers trying to access cheap foreign labor.
It’s easy to imagine how they could dodge the laws simply by paying a few hundred dollars to the fantastic “employees” (friends or family) just to fill the required quota that would allow them to hire foreigners, without actually providing employment to the locals.
This minimum wage requirement is intended to encourage the creation of real jobs for the poorest Singaporeans before the employer can hire foreigners.
Following the latest revisions, the minimum level of LQS has already risen from S $ 1,000 in 2016 to approximately S $ 100 per year to S $ 1,400 in 2020.
However, so far it also offered an additional level of 700 to 1,400 US dollars, which would be counted as 0.5 local employee. For example, if a company employed two Singaporeans for $ 1,000 a month, it would count (for its share determining how many foreign workers it can hire) as a Singapore employee.
With yesterday’s announcement, the yellow-marked part will disappear and $ 1,400 will be the absolute minimum for everyone.
Therefore, although it is not a minimum wage as such, it is used to:
- Protect the poorest Singaporeans
- Ensure employment for locals before cheap foreign labor
- Ensure a minimum wage for Singaporeans employed by companies wishing to take advantage of foreign workers
Protection of Singapore and Singapore companies alike
Depending on the industry, there are different limits of maximum dependence on foreign workers who have S passes and basic work permits. For manufacturing, construction, process and marine shipyards, these levels may seem very high, from 60 to 87.5% of the total workforce.
But only 18 to 20% of employees can work at the S-Pass level, with a minimum wage of $ 2,500 S and taxes, which will be reduced to 15% from January 1, 2023. Almost all others foreign workers carry only a basic work permit and be among the highest paid in the company (with a salary that no one would accept).
These regulations are intended to ensure that middle and upper level employees are mostly local, while business owners are allowed greater flexibility in the low end, in jobs that Singaporeans would not take on due to ‘a very low salary.
In other words, the system not only seeks to protect local employment, but also provides gradual incentives to hire Singaporeans in increasingly well-paid and responsible jobs.
At the same time, it allows a very cheap influx of labor to perform minor tasks for which there is a lack of local labor, thus increasing the productivity of Singapore companies, keeping costs relatively low and productivity high. .
In addition, through a rather complex tax system, it allows the government to draw billions of dollars each year from the differences between the low labor costs of foreigners and the high labor costs of locals, while keeping general labor costs low enough. for Singapore. companies.
It is a form of taxation of foreign employment that provides healthy income to the national budget, while it is another tool used to fine-tune the local labor market, encouraging or discouraging the influx of workers from the foreign in specific industries.
A more sophisticated system
Given the complexity of the above, it should now be very understandable why local government resists calls to implement a global minimum wage. It is simply a much older solution than the one Singapore already uses.
Judging by public comment, many people seem to mistakenly believe that the city-state – which is ranked as the most business-friendly country in the world – is a kind of free capitalism for everyone.
The reality is, however, that Singapore is easy and straightforward where it is needed, and is regulated very precisely in areas that can have a negative impact on society.
While Western populists tend to confront workers with employers, Singapore recognizes the need to address the needs of both parties, both through dialogue and with careful, personalized and adjustable legislation, so that the whole country continues to grow.
“Make a dirty word profits and Singapore dies,” Lee Kuan Yew commented 40 years ago. Businesses driven to make money is what makes the economy thrive, for the benefit of all. That said, this momentum cannot get out of hand and happen at the expense of the workers who contribute to it.
A thoughtless and baffling minimum wage would bother not only many foreign companies (in fact, they would probably care less as they tend to operate in more developed industries), but mainly many small domestic family businesses that would be forced to deal with them. heavy bureaucracy when friends or family provide services for them or hire ad hoc help.
At the same time, there are specific solutions such as the Progressive Minimum Wage (PMW), which will now be extended to new industries, focused on larger companies and professions that do not have a clear trajectory, such as cleaning or security, and could leave relatively more impoverished people over time.
PMW not only sets the minimum wage for the most vulnerable jobs. It actually provides a career plan that leads to much higher wages than a typical minimum wage would guarantee, helping those at the bottom not only ensure a basic living wage, but also climb the ladder. with the time.
Both PMW and LQS are just some of the tools of a precise and highly developed system of rules, levies, quotas and ceilings covering various sectors of the economy.
Its goal is to provide a healthy balance, ensuring easy access to meaningful employment at all premises they want, while allowing companies great flexibility in hiring foreign workers to fill the gaps they need to maintain competition. world and keep Singapore as a whole growing.
Featured Image Credit: Prime Minister’s Office
