In Other Words

Perspective

In Singapore there is no minimum salary. In Australia there is. What does this mean? Well, over the last few months I've had the privileged of finding out. (minimum salary is where the government says 'this is the minimum amount that you can pay somebody.)

I don't think many 'normal' people have really taken the time to truly think about the question of minimum salary and what it means for an economy. I mean they have thought about it in the way of 'minimum salary is good for those that make little money' or 'minimum salary is bad because it does not allow complete freedom for the market' and more of that distracted philosophical and meta economical mumbling, but how many have realised the impact is has had on their own lives?

Well I have moved from a country where there is no minimum salary (singapore) to one where there is a pretty high one (Australia) and I have noticed some very interesting and disturbing things.

I used to be strongly pro minimum salary and still am, actually. Yet I've found there are some aspects of minimum salary which are actually quite harmful for the society.

Yes, minimum salary helps those people that would earn below it or previously did earn below it. For those people minimum salary is certainly very advantageous. By raising the bar these people earn more and therefore have more to spend. Yet here is the interesting question, who gets harmed most by a rise in minimum salary?

Most people would say 'the rich' or 'the companies', but I think they might be wrong. Who I think gets hurt most by minimum salary is those people that were just a tiny bit above that salary before it was installed or were right on the dot. These people would experience no income rise.

So why would they be harmed? That is easy enough to explain. Because they would have to pay more for everything. Especially for products that are normally very cheap (i.e. food). They would have to pay more because in the end the only way that a company can make the extra money to pay for the new minimum salary is by raising the prices of its products. This rise isn't very much, but is most noticeable on cheap products that you buy a lot of, such as food.

The rich don't really suffer, because they only spend a very small percentage of their disposable income on these types of products (rich or poor the quantity of food doesn't really change much). Those that were just above the minimum wage though don't earn any extra money and need a large chunk of their income to buy these types of cheap products. For them a rise in prices is far more noticeable and painful.

That is why foodstuff in Perth is so much more expensive then in Singapore. In Singapore they dare make people work for near to nothing, over here that is illegal. So over here we need to pay for the minimum wages of the truck driver, the shelfer, the check out girl, the fruit picker and the security guard.

Don't get me wrong, I'm still for minimum wages. They come back in other ways (i.e. the poor have more spending capital to spend on things like food) and mean that the not so well of can still lead a decent life. But still, being stuck in a situation where you can feel the minimum wage and the high tax rates eating away at the little bit of the money you're making and you do start feeling a little different about these types of things.

posted by Symbol @ 14.4.05