The politics of the minimum wage: Hong Kong, Malaysia… and Singapore?

Warning: Everyone and their grandmother has written about the pros and cons of the minimum wage. That is not the subject of this piece. Irrelevant comments solely about how the minimum wage is the bee’s knees or devil spawn will be deleted.

Why do countries adopt a minimum wage? Surprise, surprise: there are arguments on both sides for the minimum wage. Economists don’t agree. And it’s no wonder. Wage dispersion and unemployment are affected by many factors other than the minimum wage, so the literature on minimum wage will always be inconclusive. In other words, we’ll never be able to say whether the minimum wage, as a general rule, is a good or bad thing. Rather, the best we can do is to find out whether it helped or hurt in a specific instance where a minimum wage was implemented or raised. And before it’s implemented, we can argue all we like but it is next to impossible to model or predict the likely effects. Even in the UK (whose economy is far better studied than Singapore’s), pre-minimum wage fears of job losses have been recognised even by the Conservatives to have been unfounded. So I think if a minimum wage were ever to be implemented in Singapore, the decision would be taken on political grounds, not econometrics. In this piece, I’m not making any judgement on the merits of the minimum wage; instead, I want to focus on the politics of the minimum wage—what makes the introduction of a minimum wage likely or unlikely.

I don’t think it’ll happen in Singapore anytime soon. Here’s why: our labour movement is well-integrated with the government, and the media and political opposition is weak. Having taken care of three possible sources for minimum wage demands, it is difficult to imagine another source for minimum wage demands to emerge and gain political traction. And the progressive wage model which has recently come into effect (albeit only for cleaners) may, instead of leading up to a minimum wage law, defuse demands for the introduction of a minimum wage.

To the best of my knowledge, in the region the minimum wage has been implemented most recently in Hong Kong (legislated 2010, implemented 1 May 2011) and Malaysia (legislated 2012, implemented 1 January 2013). I’ll take each of those cases in turn. (Myanmar also implemented a minimum wage in 2013, but there’s just too little written on it to work on. The UK implemented theirs in 1999, and two good policy analyses for that can be found here and here.)

Could demographic change drive values change?

Summary: values change is often argued to push fertility rates down. But what about the reverse? That is, low fertility rates could drive values change. Fertility rates could recover in a generation if (for instance) more religious or conservative people have larger families, and their children go on to have larger families as well. But this would have implications for what we might think of as liberal, progressive values.

Some demographers have argued that people in North America, Europe, and East Asia are having fewer children because value systems have changed (for instance, people prize career and independence over family; some articles that argue this are Atoh 2001, Goldstein et al. 2003, McDonald 2000, 2006). This can be explained either purely through cultural change, or with reference to changing incentives. For instance, it’s plausible that having large families in some societies today invites stigma—that’s an example of cultural change. On the other hand, the fact that divorce has become more widespread and acceptable means that women want to ensure financial stability in case of a breakdown in the marriage, which in turn encourages them to stay in the workforce and discourages them from taking breaks to have children—that’s changing incentives. These two sorts of explanations are not mutually exclusive. But what they have in common is that a demographic outcome is a result of changing views on the good life.

And the result? According to Goldstein et al. (2009), in 2002 about 700–900 million people lived in areas with total fertility rates below 1.3 (that is, based on birth rates that year, women would have 1.3 children on average), including many countries in Europe, most of developed East Asia, as well as anywhere between 6–12 provinces in China.

But how about looking at things in reverse? What I mean is, could changing family structures have an impact on value systems? Last Saturday the New York Times carried an article about the disappearance of the liberal Jewish voter bloc—60% of Jewish children in the NYC area live in Orthodox Jewish homes, which means that in a generation they will form a large voting bloc. In that piece, Samuel Heilman argues that as Orthodox Jews gain political influence, they will clash with “American values” (by which he seems to mean liberal-secular values).