Washington (AFP) – Small and well-run Singapore, New Zealand and Hong Kong are the world’s easiest places to run a business, while global giants China, Brazil and India remain far down the list, according the World Bank.
Three small but hot Pacific economies led the Bank’s annual “Doing Business” report, released Wednesday, which focuses on where businesses are best helped and least hindered by government.
The top 10 was filled out by Denmark, South Korea, Norway, the United States, Britain, Finland and Australia, mostly the same developed economies as in previous years.
But the report, despite revisions to its methodology after upsetting China in past years, left emerging market giants far down the list, fast growth and success in drawing investment notwithstanding.
China ranked 90th out of 189 countries and territories, barely improved from 93 a year ago; Brazil is 120th, also up three places; and India was ranked at 142, two spots worse than before.
All three ranked lower than troubled economies and difficult investment environments like Russia and Greece.
But that only underscored the admittedly narrow focus of the survey, in terms of assessing a country’s success.
“‘Doing Business’ measures a slender segment of the complex organism that any modern economy is,” admitted World Bank chief economist Kaushik Basu in a forward to the report.
“An economy can do poorly on ‘Doing Business’ indicators but do well in macroeconomic policy or social welfare interventions.”
The scores measure the operating environment for a business, including how easy it is to start a company, to transfer a property or resolve a commercial dispute; the time and cost of clearing imports and exports through a port; how easy is it to get an electricity connection, and other issues that face business owners in any country.
– Smart regulations –
By those measures, Singapore was, as in recent past years, on top with a score of 88.27, and New Zealand close behind with 86.91.
The top 30 countries all had more than 74 points, while the bottom five, with isolated and authoritarian East African pariah Eritrea at the very end, all scored below 40.
The contrast between the best and worst underscored why Singapore is highly praised and successful.
Entrepreneurs in the Southeast Asian island nation need just 2.5 days to open a business, 31 days to get electric power and four days and $440 to import a container.
Meanwhile in Eritrea, a similar businessman would need on average 84 days to start a company and 59 days to get electricity, while importing goods takes 59 days and $2,000 per container.
Basu stressed that the survey is not a measure of the level of government intervention in an economy.
“A significant number of the top 30 economies in the ease of doing business ranking come from a tradition where government has had quite a prominent presence in the economy,” he noted.
“The top-performing economies… are therefore not those with no regulation but those in which governments have managed to create rules that facilitate interactions in the marketplace without needlessly hindering the development of the private sector.”
“Ultimately, ‘Doing Business’ is about smart regulations that only a well-functioning state can provide.”
“The secret of success is to have the essential rules and regulations in place — but more importantly to have a good system of clearing decisions quickly and predictably, so that small and ordinary businesses do not feel harassed.”
There are few policies more popular than increasing the federal minimum wage. In a 2013 Gallup poll, 76 percent of respondents approved of the idea. It seems to make economic and moral sense on an intuitive level. President Obama reflected this sentiment in his Oct. 11 weekly radio address, saying, “We believe that in America, nobody who works full time should ever have to raise a family in poverty. … America deserves a raise right now.”
Yet most economists oppose the concept of a minimum wage at all, and data back them up. In fact, the minimum wage harms those it is intended to help.
The federal minimum is now $7.25 an hour, but it is higher in some states and municipalities. There is a movement, headed by the president, to raise this to $10.10 an hour, with the ostensible goal of reducing poverty and inequality. Some states and cities are on board. California will raise its minimum to $10 on Jan. 1, 2016, and San Diego will raise it to $10.50 on the same date, with another dollar on top of that a year later. SeaTac, Washington, the area around Seattle-Tacoma International Airport, has already raised its minimum to $15 an hour with unhappy consequences, as we shall see.
Most economists agree that the minimum wage cannot achieve its aim. Harvard economist Greg Mankiw’s “Ten things economists believe” is a list of statements that members of the economics profession finds uncontroversial. Here is one of the statements: “A minimum wage increases unemployment among young and unskilled workers.” This proposition is supported by 79 percent of economists.
James M. Buchanan, Nobel Prize winner for economics in 1986, put it thus:
“Just as no physicist would claim that ‘water runs uphill,’ no self-respecting economist would claim that increases in the minimum wage increase employment. Such a claim, if seriously advanced, becomes equivalent to a denial that there is even minimal scientific content in economics, and that, in consequence, economists can do nothing but write as advocates for ideological interests.”
The overwhelming majority of empirical studies into the effects of the minimum wage find that it erodes employment. In 2007, David Neumark of the University of California-Irvine and William Wascher of the Federal Reserve surveyed over 100 minimum wage studies published since the early 1990s. They discovered that over two-thirds of them found negative effects on employment, while only about an eighth found positive effects. Worse, those studies that focused on the low-skilled people including youths found particularly bad damage done.
Wascher and Irvine also looked at the quality of the studies. They found 33 studies that were robust to most criticisms, of which 28 found negative employment effects. (Notably, much of the evidence for positive employment effects in the larger sample came from the United Kingdom rather than the United States, and that those studies may have failed to account for complicating factors during the 1980s, when the UK had sector-specific minimum wages. But the more recent evidence from the UK’s introduction of a national minimum wage in 1997 mirrors the American evidence.)
The federal minimum wage was raised in 2007, and again in a couple of steps until 2009. There has been recent research into the effects of that increase. One study, by Aspen Gorry of the University of California-Santa Cruz, focuses on the effect on youth unemployment. He found that minimum wages effect unemployment, especially youth unemployment, “because they interact with a worker’s ability to gain job experience.” While the minimum wage increase pushed the general unemployment rate 0.8 of a percentage point higher over the study period (compounding the misery of the economic downturn), the unemployment rate for 15- to 24-year-olds surged by almost 3 percentage points.
Gorry also looked at youth unemployment in France, where the minimum wage is about $12 per hour, considerably more than America’s, and where the youth unemployment rate has hovered around 24 percent, double the U.S. rate. Gorry finds that the different minimum wage levels account for nearly the entire difference between France’s and America’s youth jobless rates. That means France could find jobs for about half its unemployed youngsters by reducing its minimum wage to American levels.
Such a preponderance of evidence is reflected in official studies. When the Congressional Budget Office earlier this year reviewed the probable effects of a minimum wage increase to $10.10 an hour, it took into account the findings of over 60 studies on the issue. The CBO report suggested that the increase would help lift 900,000 families above the poverty line, as the president touted, but at the cost of killing the jobs of half a million other people.
The minimum wage transfers resources not from the rich to the poor, but among the poor. Some of America’s least well-off workers would get a raise, but many more others would see theirs hours cut, or lose their jobs entirely. Obama’s radio address concluded, “America should forever be a place where your hard work is rewarded.” But those whose jobs are destroyed by a minimum wage increase have neither hard work nor reward.
So why is the minimum wage so popular? The answer is that there are economic effects that are seen and others that are not seen, as the great French economist Frederic Bastiat noted. As he explained, any new economic policy “gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause — it is seen. The others unfold in succession — they are not seen.” In the case of the minimum wage, what is seen is the increase in many workers’ pay packets. What is not seen is workers losing their jobs.
The public may not attribute those job losses to a minimum wage increase, blaming instead other factors such as increasing automation, a company’s contraction, or an employer’s greed. Yet the underlying reason is the same in all these cases: A corporation invests in a machine because it is less expensive than paying workers the higher minimum wage, the company contracts because it cannot afford to keep the same number of workers with the same wage budget, and the employer, far from being greedy, sees the new wage cutting into his bottom line and he chooses to do other things rather than pay a marginally effective worker more than he thinks he is worth.
Yet job losses are just the beginning of the unseen effects. There are other workers, particularly inexperienced young ones, who will not be hired in the first place because the cost of their wages is too high. As Gorry found, jobs that never come into being prevent potential workers from gaining experience. Young would-be workers are denied the chance to gain basic job skills. Instead, they set off down the road to long-term unemployment. This is what is happening in France.
Those who lose their jobs or never get them are not the only ones to suffer. Even those workers who keep their jobs and are paid a higher wage and are “lifted out of poverty” often fail to account for these changes.
One unintended consequence is that taxes on wage earners go up. A higher minimum wage can make employers less inclined to offer non-wage benefits such as generous leave policies or insurance, as well as on-the-job perks such as free meals and parking. Non-cash perks such as parking and food are not taxed. But when these non-wage benefits are converted to wages, they become subject to income and sales taxes. So not only do workers have to pay for perks that used to be free, they get taxed for them, too.
SeaTac provides an informative example. There, Northwest Asian Weekly reporter Assunta Ng asked hotel workers who had received the wage increase whether they were happy with it:
“Are you happy with the $15 wage?” I asked the full-time cleaning lady.
“It sounds good, but it’s not good,” the woman said.
“Why?” I asked.
“I lost my 401(k), health insurance, paid holiday, and vacation,” she responded. “No more free food.”
The hotel used to feed her. Now, she has to bring her own food. Also, no overtime, she said. She used to work extra hours and received overtime pay.
What else? I asked.
“I have to pay for parking,” she said.
Another interviewee, a waitress, claimed that she had seen a decrease in her tips. When the minimum wage was $7, her tips increased that to more than $15 an hour, but the differential was now less. She now has to bring her own food and pay for parking, both of which used to be provided by her employer at no cost to her.
Annual or holiday bonuses can also suffer. There is an interesting natural experiment that illustrates this in the Westfield Valley Fair mall in California. Half the mall is in San Jose, while the other half is in Santa Clara. When San Jose raised its minimum wage to $10 in 2012, Santa Clara’s remained at $8. The mall has two competing pretzel shops, one in each jurisdiction. When San Jose instituted its raise, the pretzel shop there, Wetzel’s Pretzels, was unable to raise its prices because of the competition across the mall, and the owner was reluctant to cut staff as that would have affected customer service. Instead, she took the hit in the form of lower profits.
The lower profits hurt workers, too. The store owner’s policy was to share 15 percent of profits in the form in an annual bonus. Reduced profits led to smaller bonuses. This is not the sort of thing that an aggregation of statistics picks up.
Consumers don’t escape the malign effects of increased minimum wages, either. Prices often increase when business face a shortfall in profits. Businesses that use large numbers of minimum wage workers, such as the fast food industry, tend to raise their prices the most. A 2008 study by Daniel Aaronson and Eric French of the Chicago Fed and James MacDonald of the U.S. Department of Agriculture found that fast-food restaurants pass through 100 percent of the wage increase to their customers in higher prices. Another study by Sara Lemos of the Institute for the Study of Labor found that a 10 percent increase in the minimum wage led to a 4 percent increase in food prices and an overall increase in prices of just over half a percentage point.
That may sound small, but consider where the effects fall hardest. Workers earning minimum wage are more likely to patronize fast food restaurants than anyone else, and food in general forms a much bigger part of their budgets. A significant part of the minimum wage increase is, literally, eaten up by higher food prices. The effect is all the more significant for those who work at those restaurants and may no longer have access to complimentary shift meals.
Obama claims that a minimum wage increase means those who get it “have more money to spend at local businesses, which grows the economy for everyone.” But, per Bastiat, that is only in the short run, providing the immediate “seen” effect. In the medium and long run, price increases cancel out the minimum wage hike’s stimulative effect, and the gains are reversed. Aaronson and French, in another study, find the long-term effect on the economy of a minimum wage increase to be virtually nil, as the unseen effects take over.
Most of the winners from a minimum wage increase are large businesses, which can afford to take on extra payroll. The mom-and-pop store down the road might not be able to follow suit. If, as sometimes happens, it is forced to close, customers are driven to the big retailer. Big companies often lobby for increases in the minimum wage. Walmart publicly favored the 2009 federal increase to $7.25 per hour. While it has not supported current proposals for a $9 or $10.10 hourly minimum wage, it is not opposing them, either.
The benefit to big companies is apparent even when a minimum wage hike does not increase their payroll costs. Costco, which pays all of its employees well above minimum wage, would not be directly affected by most proposed minimum wage increases, but its smaller competitors would. A combination of increased payroll and reduced hours or fewer employees hits small competitors. This means higher prices and fewer employees to serve customers, which drives more customers to Costco and other bigger companies.
There is evidence that high minimum wage laws also increase crime because they condemn some people to chronic unemployment. Some turn to economic crime, dealing drugs, or fencing stolen goods to make ends meet, while others turn to crimes of idleness, such as vandalism and assault. A study by Andrew Beauchamp and Stacey Chan based on National Longitudinal Survey of Youth data from 1997 to 2010 finds that, in states that increased their minimum wages during that time, “crimes increase among minimum wage-bound workers and most strongly among teenagers, and that these increases occur among both monetary and non-monetary crimes. … [A]ffected 14-16 year-olds are 8.4 percentage points more likely to commit crimes, and 17-19 year-olds increase crime by 3.4 to 4.1 percentage points.”
Increased crime takes a toll on perpetrators as well as victims because they acquire criminal records, which blight their chances of getting a job in the future.
Breaking out of poverty is difficult for many people, and the evidence is that a minimum wage adds to the difficulty. Workers are fired, hours are cut, jobs are not created, non-wage perks, including insurance, free parking, free meals, and vacation days evaporate, annual bonuses shrink, prices rise, (squeezing minimum wage earners themselves), big businesses gain an artificial competitive advantage over their smaller competitors, and crime rates rise. It is a bleak litany.
Raising the minimum wage remains popular because only the visible effects are usually considered. Fortunately, the public may be willing to consider the unseen effects when they are pointed out. Following the March release of the CBO study, Bloomberg News asked asked people if they supported a minimum wage increase to $10.10 an hour. With that simple proposition, 69 percent were in favor and 28 percent opposed. Bloomberg then asked, “A recent report by the Congressional Budget Office says that raising the minimum wage to $10.10 over the next three years would increase the incomes of 16.5 million Americans while eliminating 500,000 jobs. Does that trade-off seem acceptable or unacceptable to you?” When put that way, 34 percent were in favor and 57 percent found it unacceptable.
It is time for politicians to learn what the public is so quick to perceive.
Iain Murray is a vice president at the Competitive Enterprise Institute in Washington, D.C. Ryan Young is a fellow at CEI.
Posted: 10/27/2014 11:06 am EDT Updated: 10/27/2014 12:59 pm EDT
Raising the minimum wage is a polarizing issue. One side worries that raising it will lower employment. The other side downplays the impact on employment and plays up the positive impact on the living standards of the poor. Both sides are able to cling to their beliefs as the evidence, much of which comes from high-income (“advanced”) economies, is mixed.
The majority of the global labor force, however, is in the emerging markets. Moreover, for a number of these countries, instituting a minimum wage or raising it is squarely on the policy agenda. But little is known about the impacts of minimum wages on employment and living standards in emerging markets.
My recent work with Yi Huang and Gewei Wang tries to fill this gap by studying the impact of minimum wage policies on employment in China. As China accounts for nearly 25 percent of the global labor force, this evidence is important in its own right; it may also be more relevant for other emerging markets than the evidence from high-income countries.
Our study is the first to use data on minimum wage changes for over 2,400 counties in China. We combine the information on minimum wages changes with employment data from the Annual Survey of Industrial Firms, which covers over 70 percent of China’s manufacturing employment. While China instituted a minimum wage system in 1994, enforcement of compliance with the law was significantly tightened only in 2004; the results described below are based on post-2004 data.
So what does the evidence show? On average across all firms, we find that an increase in the minimum wage leads to a small decline in employment: a 10 percent increase in the minimum wage lowers employment by a little over 1 percent. The impact differs across firms, being greater in low-wage firms than in high-wage firms. This is shown in Figure 1, where firms are grouped into deciles based on the average wage. In the decile of firms with the lowest wages, a 10 percent increase in minimum wages lowers employment by nearly 1.8 percent. The impact declines steadily such that for the decile of firms with the highest wages, the impact is 0.6 percent.
We also find that the impact of the minimum wage on a firm’s wages depends on where the firm stands in the distribution of wages. On average, an increase in the minimum wage raises wages by about 1 percent. But, as shown in Figure 2, for firms in the lowest decile, the increase is about 2.5 percent. The effect declines steadily and there is essentially no impact for the highest decile.
A glimpse behind the scenes
Teasing out the impact of the minimum wage on employment is a difficult task. A firm’s employment can be affected by many factors, not all of which can be accounted for easily. Hence there is often a concern that the impact attributed to changes in the minimum wage may in fact be due to some factor that remains unaccounted for or is unobservable to the researcher.
To guard against this, the evidence presented above is based on analysis in which numerous other factors that could affect employment are accounted for, as described in detail in the working paper. One strategy we use is akin to the study of twins in many areas of research — the idea there is that since twins share much of the same genetic make-up, any observed differences between them are likely not due to genetic reasons but to other factors. In our study we make the assumption that firms in contiguous regions are more likely to have similar employment trends.
We then estimate the impact of the minimum wage on a firm’s employment, controlling for developments in employment at its ‘twin firm’. Without such controls, the estimated impact of the minimum wage is qualitatively similar to that shown in Figure 1 above but quantitatively smaller on average (see an earlier blog for details).
Information on the employment and wage impacts of minimum wage changes is a critical ingredient in deciding where to set the level of the minimum wage. Our study provides the first comprehensive estimates of these impacts for China, which has a large labor force and whose experience may be relevant for several other emerging markets.
Our evidence suggests that a 10 percent increase in the minimum wage lowers employment by 1 percent. Impacts of this magnitude have been found in studies for high-income countries but generally for sub-groups such as teenagers or low-skilled workers.
We also find significant differences in the impact of minimum wages on employment and wages across low-wage and high-wage firms. In low-wage firms, raising the minimum wage lowers employment but raises wages more than in high-wage firms. The setting of the minimum wage has to be sensitive to these differential effects. As in the case of other labor market institutions, the design of a minimum wage system has to balance considerations of equity and efficiency (see Blanchard, Jaumotte and Loungani, 2014 for a fuller discussion). Minimum wages can help the cause of equity by ensuring that workers, particularly low-wage workers, have enough to live on. But if raising the minimum wage lowers employment, and ends up excluding low-wage workers from employment prospects, it may have adverse effects on both welfare and efficiency.
From time to time, I get to meet people serendipitously. People whose life story uplifts and warms. Josiah Tan is one such example.
I met Josiah during my visit to the SAF’s Imagery Support Group (ISG); he was one of the NSFs serving there. Josiah did not need to be in that unit or, in fact, any unit. He was born deaf and was, appropriately, medically downgraded and exempted from National Service.
But at age two, life took a better turn for him. Josiah was among the very first Singaporeans to receive cochlear implants. It changed his life. Hearing impaired persons usually have problems with speech too, but Josiah speaks normally. In fact, he speaks very well and it’s because he could hear normally from very young.
When the time for NS enlistment came, Josiah, on his own, appealed for his medical status to be changed because he wanted to fulfil his duties and perform NS. Josiah went on to complete his BMT and is now serving at the ISG.
He is working in the team whose expertise we need when Singapore or countries in the region get hit by natural disasters.
Josiah heard the call of duty and stepped up.
– Ng Eng Hen
We’re humbled by our own best
A great Singapore son…admire!
Must be show cased at our 50th Nation Celebrations. The Making of a Nation.
Thats The Spirit Of Singapore Josiah Excel and Go Beyond our disadvantage into Good use
Wow Wow , Jia You, perseverance , determination & a fighting spirit ,pushes one forward …. to achieve greater goals in life
ISG, pls take care of this Singaporean Son! Josiah, we thank you for stepping up and be counted as part of the Int family.
Now that is a remarkable specimen of a extraordinary young man!
The pursuit of happiness is an endless and timeless one.
It also causes misery and frustrations. These can manifest in many ways: on the Internet it becomes bitter, vapid and nasty comments; and through our wallets it feeds into an endless cycle of consumerism.
That’s just two examples. It can be extremely fulfilling too, of course.
But for Singapore, it seems to have manifested in the stereotype it’s a nation of “complain kings”/”queens”, materialism, and an unfounded sense of entitlement.
It is simplistic to shrug some of these sentiments as #firstworldproblems, but these two statements can be traced from a study concluding Singapore as the “least emotional country in the world” – neither positive, nor negative.
But Singaporeans do think that this negativity needs to be addressed. This mini-documentary tackles that based on selected interviews with people from all walks of life.
Watch this mini-docu by Sean Ng, Caleb Quek and Nick Guan:
The interviewees comprise entrepreneurs, creatives, an undergraduate, and a hawker. They respond the pessimism, sharing their perspectives on the issue and how they relate to the wider narrative.
A persuasive counter-argument about the soul of the nation, a necessary and consolatory pat on the back , or a wake up call about happiness with a shift in perspective? You decide.
Nick from Amok Films share his thoughts on this initiative: “We felt it was important to counter to the stereotypical image of Singaporeans – complain kings/queens, materialistic, spoilt, paper chasers etc.
“There’s more to Singaporeans than this. We are way better than that. Therefore, we decided to focus our efforts on gathering opinions from positive Singaporeans making a difference – both big and small. Also, we were hoping to spur debate through our theme and interviewees.
“It’s crucial that we engage in debate and discussion to strengthen our identity as Singaporeans.”
Keeping it within the independent spirit of Obey, the mini documentary also features music from Singaporean artists Kevin Lester, DJ KoFlow and music labels Syndicate and Darker Than Wax.
Bloggers Han Hui Hui and Roy Ngerng, who led a protest march that disrupted a YMCA event at Hong Lim Park, turned up at the Police Cantonment Complex this morning.
Today Newspaper reported that Her lawyer M Ravi confirmed that Ms Han will be returning to the complex at 2.30pm to collect her charge sheet, and said she will most likely be charged on Monday with public nuisance.
TODAY understands Mr Ngerng and four others will also be charged with public nuisance, but it is unknown if it will also be on Monday.
Netizen response to Han Hui Hui and Roy Ngerng on Hong Lim Park heckling incident.
– These 2 should be put away super nuisance
– They don’t represent me. Throw these 2 out of Singapore . Getting sick of them
– Pls revoke her citizenship, she is not welcome here
Odd One Out
Among the unison condemnation of Han Hui Hui and Roy Ngnerng on the Hong Lim Park heckling incident, One single opposing voice stood out and provoked more anger among netizen.
This person said
“Han Hui Hui and Roy took real tangible actions and sacrificed themselves for Singaporeans. I am truly grateful and appreciative of their effort to speak truth to tyranny. They have shown me there are still courageous people who will do the right thing in a country where everyone is afraid of intimidation. Let the PAP hired trolls insult, your conscience is clear and you have my respect like Nelson Mandela. Please stand for elections one day and serve the people with the same indomitable spirit. One day when we get back our CPF, you will be legend. Thinking ahead of our times, you are the real reason why Singapore progress.
Who is Alex Tan Zhixiang?
This person is Alex Tan Zhixiang, the administrator of therealsingapore.com, A site that is known by netizen for posting articles exploiting race and religion crack line in Singapore and incite fear, hatred and xenophobia.
More interestingly Alex Tan Zhixiang was with Han Hui Hui and Roy Ngerng in the heckling of Special Needs Children in Hong Lim Park.
Han Hui Hui’s lawyer M Ravi faces fine over professional misconduct. The Lawyer’s Lawyer Eugene Thuraisingam urged the tribunal to consider Mr Ravi’s BI-POLAR condition which is now under control but which sometimes leads him to act uncharacteristically.
On the day when Han Hui Hui was assisting in the investigation, it is interesting to know instead of informing her close partner Roy Ngerng of her status, Han Hui Hui informed Dr Leong Sze Hian. Dr Leong did a live cast in his Facebook page on Han Hui Hui’s status.
Many Netizen asked, did Han Hui Hui started the lie or was it Dr Leong who created the spin.
In the meantime, Netizen’s comments in Straits Time’s Facebook on this new spin was fast and furious.
If you are wondering how does the petition to revoke Han Hui Hui’s citizenship goes…On press time it was