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Higher Wages. At What Cost?

Higher wages. At what cost?

A few years ago, our girls’ kindergarten informed parents they would have to increase school fees, which had been kept the same for the previous 10 years.

We greatly appreciate the love, care and education our girls received from their kindergarten teachers, and believe the fee increase was justified. Otherwise, how could the kindergarten continue to pay competitive wages to hire and retain good teachers, of whom our girls were direct beneficiaries? Furthermore, having no fee increase for the previous 10 years in effect meant the school fees we paid had fallen year by year, when we take inflation into account.

We acknowledged the letter and agreed to the higher fees.

One parent was unhappy with the fee increase. The irony was this was a well-off family (I gathered this from watching the family roll up to the kindergarten in a Volvo most days). The parent started to canvas other parents to protest the kindergarten’s fee increase.

When the parent-in-question came round to us, we politely informed her: 

“It was unfair to expect OUR OWN WAGES to continually rise, but expect our kindergarten teachers’ wages (aka our costs) to remain unfairly low.

That was hypocritical, not to mention foolish; not paying market-level fees would only result in the school not being able to hire good teachers, and our children would be the ones losing out.”

I do not think we got through to that parent, who I don’t recall ever spoke to me again.

But I am thankful the fee increase went through, because it is fair to pay more for better goods and services, which our girls benefitted from. I am also grateful that we could afford that justifiable fee increase.

Higher Productivity for Higher Wages

Singapore Prime Minister Lee Hsien Loong’s 2021 National Day Rally announced a stronger thrust of support for lower-wage workers. These include:

  1. Extending Progressive Wages (essentially what used to be sector-specific minimum wages that rise annually) to more sectors and more occupations
  2. Requiring companies employing foreign workers to pay at least the Local Qualifying Salaries to ALL local staff
  3. Accrediting companies that pay all their workers Progressive Wages with a new “Progressive Wage” Mark (a new requirement to sell to the public sector)

This is a significant step, because the Singapore Government is now also looking at EMPLOYERS and CONSUMERS to bear the burden of the increased wages.

Paying higher wages to workers directly affects payroll costs for businesses. The higher costs might also be passed to customers in the form of higher prices, depending on the price elasticity of demand. That extra dollar must obviously come from somewhere.

Higher costs are not easy to bear, especially when many companies and many workers have been negatively-impacted by COVID. As a business ourselves, we understand it fully and feel it directly.

Higher wages for low productivity is unsustainable. The market will ensure that. Neither is a race to the bottom for wages the way forward for Singapore.

Instead, what we must have is higher wages for higher productivity. This is the very mission statement of ArcLab:

Higher productivity only comes about with technological progress, more and better capital, and a better-trained workforce.

Higher productivity is a positive sum game for the business and for the worker, because output increases and/or quality improves. This means justifiably higher prices for goods and services, which funds the higher wages. Higher wages also means better spending power, which flows back to businesses.

The data speaks for itself:

Higher productivity simply makes good business sense.

Here, ArcLab comes in to support. 

Use ArcLab’s mobile learning SaaS platform to easily author, distribute and track training modules and digital SOPs for your workforce. The way that companies like Fei Siong Group, 4Fingers use our platform for.

Using ArcLab saves you training cost, cuts down training time, and helps your business do more with less. This means higher productivity and better bottom line.

The savings enables your business to pay better salaries to your workforce, who are then better taken care of, more highly-motivated, and have higher spending power too.

Singapore is taking our first step towards this virtuous cycle.

Higher Wages for a Better Economy. And a Better Society.

ArcLab is encouraged that societies are taking more concrete steps at addressing income (or rather opportunity)-inequality issues. That may be one of the silver linings of COVID-19, where we have newfound recognition for our frontline workers, many of whom are lower-income workers.

Yet more than inclusiveness, higher wages for higher productivity is simply good business, and a positive sum game for all.

ArcLab believes that’s the best way for our companies, our workers, and our society to succeed.

We’re building that sort of organisation at ArcLab, and helping many companies build theirs. Companies like Fei Siong Group, 4Fingers and many more.

Shall we help you build yours?

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