Friday, May 04, 2012

A Story of Wages

You have to thank the world’s socialist for bringing us a public holiday devoted to the idea that we should celebrate labour, more popularly known as the sweat we need to put into get our daily keep. This year’s Labour Day in Singapore has been particularly interesting because after years of trumpeting the importance of economic growth, we’ve now decided to focus on the issue of equality or to be more accurate inequality.

Singapore is a well-known economic success story. However, in recent years, it’s become a noticeably unequal society. One Nominated Member of Parliament went as far as to describe the situation in Singapore as having a small group who earn some of the highest wages in the world and pay some of the lowest cost for basic labour. A report by the Monetary Authority of Singapore, the nation’s central bank, pointed out that two-thirds of the population earns less than the national wage.

Working professionals in Singapore compare their salaries with peers in London and New York. Unskilled labourers compare wages with their peers in Dhaka and Manila. Actually, we’ve moved people from London and New York by giving them a premium on-top of what they were getting at home. At the other end of the social scale, we pay wages slightly higher than in Dhaka and Manila and then proceed to make cost so high that they were actually no better off than if they stayed at home. It doesn’t take an economics degree to realize that when it comes to wages, Singapore is both a first world and a third world country rolled into one.

Thanks to a prominent economics professor, this situation has come into the spotlight. The said professor has suggested that there needs to be a major wage and job restructuring where we jack up the pay of the low wage earners (S$1,500 a month and less) and freeze the pay of those earning high wages (above S$15,000 a month and more).

The government (filled by the world’s best paid politicians despite a recent pay cut) has gone on the war path. Minister after minister has come out to denounce the proposal. As far as the powers-that-be are concerned, you cannot have a raise in wages until there is a rise in productivity.

Having been a small businessman (glorified free-lancer) for the last decade, I’m in an interesting position to look at this issue.

On one hand it’s frustrating dealing when the people who pay you live under the impression that you don’t need to eat, sleep, bath or use the toilet and therefore have the superhuman ability to work for them for the sheer love of it. I’m sorry but what I do happens to be called work and I need money to survive. I do well enough for the people who pay me and I get frustrated when I’m told that I’m worth so many dollars less than what I’ve done. Now, if I can feel that way about bashing things out on a computer and making phone calls, I can imagine how many times people who do heavy lifting or running 12-hours a day must feel about the pay they get for the work they do. I hate it whenever people think they’re doing me a favour when I do work for them.

There is a flip side to this too. Just as I get frustrated with people who think they’re doing me a favour when they give me work, it’s equally frustrating to deal with people who think they’re doing me a favour when I give them work. I’m still traumatised by a bad hire I made for a two-day project a month ago. The so called hire decided that it was acceptable to throw a tantrum just as I needed to deal with a minister’s press secretary. This particular hire decided that it was acceptable to sms a mentor of mine and her brother to complain that she bored and being victimized.

What this particular hire forgot was the fact that I was paying her money and providing her with exposure to the highest profile group she had ever been exposed to. She blamed her behavior on constipation and I guess to be fair, her behavior improved with the clearing of her bowls.

So, where does this leave the wage debate? Well, I believe that people, who hire, need to be fair about the wages they pay. Just as the business needs task to be done well, people need to have enough money for them not to worry about how to pay their bills. A job is essentially a trade-off between the employer’s money and the employee’s time. Fairness in this trade isn’t an airy-fairy concept. It’s common sense. If you want to get an employee to give their all to you, you have to ensure that he or she has a wage that covers basic living expenses and to build a future.

Having said that, I don’t think government legislating things like a government mandated minimum wage won’t necessarily make things better. If I’m expected to pay high wages to people like my bad hire, I’d rather do things myself.

I also find the idea of keeping jobs for certain people of certain races or nationalities to be downright offensive. As a business, I take the risk and I need to manage my cost and talent to reap the necessary rewards. It is not the job of businesses to hire based on a government’s political needs nor is it the job of business to create social policy. Businesses should hire the people who are most hungry for the job because they’ll be best at it.

Funnily enough, the two examples that come to mind are from the military. In the US Army, it’s been found that Blacks tend to perform better than Whites. The American Army is the one place where you’re likely to see more blacks bossing whites around than in any other organization in the nation. The reason is simple, the average black soldier looks to the army as way up in life while the average White Soldier looks at the army as a dead end job.

The same is true in the British Army, where they found that you’re average Gurkha makes a better solider than your average British Squaddie. The average squaddie’s came from families where the army was a better than nothing job while the Gurkha’s saw service in the British Army as way up in life.

Neither the US or the UK is about to go through a reduction in recruiting less Blacks in favour of Whites or less Gurkha’s in favour of local Brits (though admittedly this may slow and stop thanks to the Maoist politicians in Nepal.) Part of the reason is culture. In the US there is a need to provide black people with good jobs and since the army does a good job of it, nobody will think of stopping the army from hiring blacks. In the UK the link with the Gurkha’s is historical and part and parcel of Britain’s place in the world.

However, there’s a more important underlying reason. Both armies believe in hiring the best people to fight wars. As such, the Blacks in the US Army have earned their place by merit as have the Gurkha’s in the UK.

What is true of the military should be true of business. Hire based purely on merit. Yes, Singaporeans are more expensive than say Filipinos and many other Asians. However, cost isn’t the only factor in deciding who to hire. Deal with any service industry in Singapore and you’ll find that if you get decent service, it’s from Filipinos. I remember the head of a prominent shoe shop chain telling me, “If I could, I’d sack all the Singaporeans and replace them with Filipinos. The Singaporeans are so grouchy they kill any incentive my customers have to buy. The Filipinos on the other hand manage to smile at work even when there’s a personal tragedy – they produce the work environment that I want.”

I remember my previous CO, Colonel Toh Boh Kwee’s line,” Nobody owes you a living.” It’s something people like my bad hire need to understand. Contrary to what many of Singapore’s alternative thinkers might think, foreigners are not there to screw Singaporeans. They cannot be blamed if they’re hungry and manage to work the “EQ” required in today’s market.

Let’s face it; we also live in a world of “outsourcing.” Technology has made it such that even you kicked out all the foreigners, many of the jobs would simply move to cheaper locations. Think of the call centres around the world. You can kick out the Indian entrepreneur who owns a call centre in your country. However, that particular Indian entrepreneur can simply relocate back to India and instead of having a situation where you had one or two jobs for the locals; you have a situation where there are NO jobs for the locals.

A compromise of sorts needs to be achieved. While I may not believe an enforced minimum wage would make things better, I think there should be guidelines of sorts as to what constitutes a reasonable salary and reasonable perks. Unfortunately in the Asian context, too many employers think of employees as cost and thus try to push wages to subsistence levels.

Employers need to understand that human assets are simply that – human and assets. People work to provide for their basic needs. People ‘go-all-out’ for things that will not only provide their basic needs but also help achieves aspirations. Blacks and Gurkha’s in the US and British Armies see their jobs as fulfilling aspirations and hence they work harder than their respective White and British counterparts.

It’s not just about money. If employers want to maximize the potential of their employees, they have to find ways to make people feel like they can achieve their aspirations by working for them. Both Google and 3M practice allow employees to devote 15 percent of their allotted work hours to personal projects. It’s no coincidence that these two companies are regarded as amongst the most innovative in the world.

Then there’s the fact that employees are customers too, especially if you work in the FMCG sector. Henry Ford paid his workers an unthinkably high US5 an hour back in the 1890s because he wanted his workers to buy his cars. If you look at things this way, the most reasonable wage to pay someone enough for them to be your customers. I remember having this argument with one of my early clients who sold top grade pillows – they were not paying me enough to be a customer (The GM of this company came up with a unique solution – he paid me in pillows, which I had to give up as part of my divorce settlement – I did get the Harry Potter book).

Having said that, I think employees need to be responsible for their own development. A job is not an entitlement and in this day and age of outsourcing and free people movement, you cannot expect your passport to give you a job. Organisations are focusing on being lean and looking to hire the best.

Personally, I think we need to look at the concept of a job as being an ‘exclusive’ to a particular company. You look at the average eight-hour day and you need to question how many of those hours are actually productive.

I think there is a situation where the employees are becoming more like ‘journeymen’ in the old ‘apprentice’ system. Once you have a skill of sorts, you should have the freedom to sell your hours accordingly and to the highest bidder. Businesses will only pay for hours where real work is done and people do not need to be dependent on a single entity for a living.

There are, of course, many issues at stake but it’s worth looking at what really needs to be done and what can be outsourced. The traditional job structure has many benefits and in many cases will remain as it is. However, as the nature of businesses changes, so does the nature of jobs. Outsourcing may kill traditional jobs but it provides a way of living to many and in balance that outweighs the cost. Rather than try and legislate it away, let’s see how we can maximize it.

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