Singapore’s government hopes that new subsidies for low-wage workers will fix two problems: pressure on company profits, and income inequality. But in doing so, it will just create new problems later on.
The concern is what happens to companies’ costs when the subsidies end in 2016. Imagine a worker paid S$3000 a month gets a five percent raise a year over the next three years. After the payouts stop, the employers will need to fund future increases – including the S$190 paid by the government as its 40 percent contribution in the third year – entirely out of their own resources. By then, employees may also have grown to expect generous salary increases. Full story
