Most of the developed countries around the world have already implemented the minimum wage policy. However, Singapore is one of the few that has not. In Singapore, minimum wage laws are not considered an effective way to help the lower income workers. The main concern with regards to this policy would be that it might cause gridlocks betweens unions and companies. While unions might support this law in hopes of improving the lives of their workers, companies would be less supportive as they aim to lower business and production costs by lowering wages. Supply for labour in this case, is price inelastic as a minor increase in the price for labour brings about a less than proportionate increase in the quantity of labour supplied. Thus, to achieve market equilibrium, it would make more sense for producers to decrease the price for labour such that they can spend less for the same quality and quantity of labour.
Fig. 2.0 Graphs showing impact of change in price on elastic and inelastic supply curves
Price Inelasticity
Price Elasticity of Supply measures the degree of responsiveness of quantity supplied of a good to a change in its own price, ceteris paribus. It can be mathematically expressed as shown below, In symbol,
Price elasticity of supply is always positive as price and quantity supplied change in the same direction (due to the Law of Supply). Producers are only induced to supply more when offered a higher price. The magnitude or coefficient value of the price elasticity of supply, PES, can vary from zero to infinity.
If supply is price inelastic as seen in this case (PES < 1), when the demand increases, price increases significantly while supply while quantity supplied increases less than proportionately.
Figure 3.0 Graphs showing different examples for elasticity and inelasticity of supply
Explanation
Supply for labour is relatively price inelastic since the supply for labour for immigrant students is unlikely to increase or decrease significantly even when there is a change in price. The determinant for elasticity of supply here is the existence of spare capacity. If spare or unused capacity exists, i.e variable inputs such as labour and raw materials are available, it should be possible to increase production quickly. In the context for this question, the factory is already operating round the clock where they are trying to minimise labour costs and have already employed most people in the labour market. A change in the price for labour i.e the wages of employees will thus, not have a significant impact on the quantity of labour supplied since it is not possible for suppliers to further increase production of labour. Therefore, supply of labour is inelastic.