I have some reservations about the minimum wage. Quite apart from the controversy over whether minimum wage reduces jobs, I am also concerned about the impact on the 2nd tier of the lowest income earners. The way I see it is this: If we implement minimum wage, those currently earning below the minimum wage would benefit from this, but as wages increase, cost of goods and services increase. As this affects those earning minimum wages, it is probably the cheaper goods and services that are affected more than the luxury goods/services, so the people feeling the most impact from rising cost would be those earning just above the minimum wage. This group does not benefit from the minimum wage, but will now have to pay more for goods and services – resulting in a decline in living standards. It seemed like shifting the burden from the lowest 10-15% say, to the next lowest 10-15%. Which really is not a solution at all.
Comparatively, the workfare scheme would seem a better option. It avoided the potential problem of distorting market mechanism and causing a possible drop in number of jobs, while topping up the income of the lowest wage earners. However, the debate here would be over details. What should be the income level below which the workfare scheme kicks in? How much should the wage supplement be at each wage level? The current amount reflects the current government's long standing position towards free lunches -- very conservative. So conservative, that not much effect is felt and hence we still hear occasional clamours for minimum wage. I personlly think it would be better to fight for higher amounts in the workfare scheme than implementing the minimum wage scheme.
That said, it does not address the problems faced by those earning above minimum wage levels, but are either losing their jobs to foreigners or getting lower wages than they used to before the influx of foreigners. But that will be the subject of a separate post.