Progress report: Inside Singapore’s fight to lift wages at the bottom

SINGAPORE – When Mr Hamdi Hayee took a job as a cleaning supervisor 16 years ago, he wanted to leave the catering business to reduce contact with food and drink forbidden for Muslims to consume, such as alcohol and pork.

But over the years, his wages stagnated at around $1,000 a month, and finances were tight.

“I had to be careful with what I spent on,” said the 62-year-old, whose wife is in the same line. His two sons were still in school at the time, and holidays and meals at restaurants were luxuries for his family.

But this started to change 10 years ago, when Singapore adopted a unique strategy known as the Progressive Wage Model (PWM), which sets out sector-specific minimum salary levels tied to a worker’s skills and productivity improvements.

Formulated by unions in consultation with the Government and private sector, the model was implemented in 2014 and began to raise the salaries of workers that had remained persistently low.

Today, as a cleaning supervisor at Chye Thiam Maintenance, managing 10 cleaners, Mr Hamdi’s base salary has more than doubled to at least $2,455, excluding other skill-based allowances.

ST looks back at Singapore’s answer to the minimum wage, which has grown to cover more than 155,000 lower-wage workers across nine sectors and occupations in the past 10 years.

The PWM is first and foremost a wage floor, said Associate Professor Ong Ee Cheng from the National University of Singapore’s economics department.

It mandates a minimum wage for workers in certain sectors and occupations.

It also establishes career pathways where salaries rise as workers meet stipulated training requirements.

The aim is to uplift wages for Singaporeans and permanent residents whose incomes are in the bottom 20 per cent, she said.

The 20th percentile for wages is the benchmark used to identify lower-wage workers.

Associate Professor Walter Theseira, an economist from the Singapore University of Social Sciences (SUSS), said: “As Singapore’s economy diversified from the 1980s and onwards and education levels rose, average wages kept increasing.

“But there is a group of less-educated or older workers doing lower-skilled work who were left behind.”

This was the group that needed help.

Former labour MP Zainal Sapari recalled: “When I joined the union back in 2011, I was surprised to find that some of the cleaners I represented had a basic salary of around $600, which was the same as what my father earned in a similar job 20 years ago.

“I really felt that this was not right. It couldn't be – because for the past 20 years, we had invested a lot in encouraging workers to go for training, and national productivity indicators had also been increasing.”

The situation spurred public debate on how wages could be raised.

One suggestion that made waves came from economist Lim Chong Yah in 2012, whose proposal to address the extremes in Singapore’s wage system came to be known as “Shock Therapy II”.

This plan entailed raising the pay of all workers earning below $1,500 a month by 50 per cent over three years, giving smaller pay increases for those earning between $1,500 and less than $15,000, and freezing salaries for those earning $15,000 or more during the same period.

Professor Lim argued that lower-wage workers in Singapore had been underpaid by more than 100 per cent compared with their counterparts in countries with comparable national affluence, such as Japan or Australia.

But the late professor’s suggestion – which echoed an earlier set of “shock therapy” interventions between 1979 and 1981 under the National Wages Council’s wage correction policy when he was chairman – met resistance from the Government, employers and NTUC.

Then labour chief Lim Swee Say said the moves could push wages above productivity levels and these higher labour costs could lead to businesses reducing hiring or even cutting jobs.

Mr Tan Chuan-Jin, then Minister of State for Manpower, acknowledged that more had to be done to push up the salaries of lower-wage workers, but said this had to come about through “efforts to improve productivity and restructure our economy”.

Mr Zainal, who retired from politics in 2020 and is assistant director-general at NTUC, said the unions and Government had previously attempted to tackle the wage issue through various tripartite committees with employers.

One outcome of this was the Workfare Income Supplement, which topped up the incomes and Central Provident Fund (CPF) accounts of lower-wage workers.

Mr Zainal said: “Despite these interventions, we noticed that the wages of workers below the 20th percentile of incomes were still stagnant.

“They didn’t seem to be enjoying the growing economy. We had to think out of the box.”

Mr Lim then conceived the idea of introducing enforced wage growth in specific sectors over time, with increases tagged to skills development to ensure productivity kept pace. This would avoid the potential economic fallout from other wage-raising models, such as Shock Therapy II or blanket minimum wage policies popular in the West.

He tasked Mr Zainal and his team, the NTUC Unit for Contract and Casual Workers, with working with the Government and employers to see how this idea could be made a reality.

The unions zoomed in on several sectors where wages had been severely depressed by practices stemming from “cheap sourcing”, including cleaning, landscaping and security.

Most businesses requiring these services outsourced them to vendors that often submitted low bids to secure contracts, resulting in depressed wages across the entire sector.

Because these jobs were low-skilled and the work performed was largely the same from company to company, workers were easily replaceable and had little bargaining power.

The nascent PWM was specifically designed to combat the ills stemming from these practices, Mr Zainal said.

“When we started, we focused on the lower-wage workers in the ‘outsource sectors’,” he said.

“One of the reasons was that in terms of job specifications, their work was quite uniform across the sector, and it was easier to come up with a common wage structure.”

While the plan was initially rolled out as a voluntary scheme in 2012, it was later made mandatory for employers to comply with PWM wage structures in order to be licensed to operate.

The cleaning sector was the first to fall under mandatory PWM through the licensing regime in 2014, followed by security and landscaping in 2016.

Now, entry-level general cleaners working in an office earn a basic salary of at least $1,740 – almost triple the wages of about $600 Mr Zainal said he encountered pre-PWM.

General cleaners have to complete at least one workplace safety and health module and one Workforce Skills Qualifications (WSQ) module.

Those who wish to become supervisors, can take more advanced WSQ courses to acquire the skills they need, such as managing inventory, priming them to draw an even higher salary of $2,455 or more.

The lift and escalator maintenance sector was phased in between 2017 and 2021, with PWM compliance becoming mandatory in 2022.

On why this sector needed intervention, Senior Minister of State for Manpower Zaqy Mohamad said: “It was quite odd that very highly trained personnel… were coming out of ITE (Institute of Technical Education) or polytechnic, and they were paid about $1,000-plus.

“No one's going to join your sector in the long term if you continue like this; What's the point of being highly trained and skilled and the salaries are very low?”

In a 2020 op-ed, academics Linda Lim and Irene Ng described the PWM’s roll-out as “too little, too late” for Singapore’s lower-wage workers.

They argued that to effectively raise wages and productivity while curbing the risk of labour market distortions, the scheme should be implemented faster across more, if not all, sectors.

They also said enforcement should also be tightened to ensure that employers are indeed investing in productivity-enhancing measures.

Since then, more sectors have been included under the model and other wage policies, such as the Local Qualifying Salary, have been introduced, resulting in nine out of 10 lower-wage workers being covered by the suite of progressive wage moves.

In October 2020, the Tripartite Workgroup on Lower-Wage Workers was formed amid the Covid-19 pandemic.

Chaired by Mr Zaqy, the workgroup made 18 recommendations in August 2021, all of which the Government accepted.

One recommendation was to expand the PWM to the retail, food services and waste management sectors, which many lower-wage essential workers are part of.

The pandemic underscored the need to support these workers, whose sacrifices helped tide Singapore through the challenging period.

In an offshoot from the previous sectoral approach, the workgroup also called for progressive wages to be introduced in March 2023 for two occupations: drivers and administrative workers.

This was because there were many lower-wage workers in these roles, which cut across sectors, though the skills needed are relatively consistent for each role.

Additionally, PWMs for cleaning, security and landscaping were extended to in-house workers starting in 2022.

The nine wage ladders, which apply to Singaporeans and permanent residents working full or part-time, cover more than 155,000, or five in 10, lower-wage workers.

In September 2022, the Local Qualifying Salary was tightened to shore up wages of local lower-wage workers not covered by the sectoral PWM or Occupational Progressive Wages.

Currently, firms employing foreign workers must pay all full-time local workers at least $1,600 or an hourly rate of at least $10.50 for part-timers.

This covers an additional 105,000, or three in 10, lower-wage workers in Singapore.

The Progressive Wage Mark covers another one in 10 lower-wage workers. This mark is an accreditation for companies following any relevant PWMs and paying the rest of their local workforce at least the local qualifying salary.

All in all, these various wage floors cover the vast majority of lower-wage local workers.

At Force-One Security, which deploys security officers to residential and commercial properties, about two-thirds of its 150 employees are covered by the PWM.

The model’s clear requirements on how workers can climb up the rungs and the guarantee of recognition for higher pay have motivated staff to pick up new skills, said the firm’s director, Ms Lorraine Lim.

“It made career progression more visible,” said the industry veteran of 18 years, who is also deputy president of the Security Association Singapore.

But security agencies’ higher staff costs had to be passed on to their service buyers.

“Smaller buyers feel the pinch, but this goes into motivating them to adopt more technology,” Ms Lim said.

At the same time, security staff are upskilled in using such technology.

With CCTV cameras and telepresence kiosks, for instance, some compounds that needed to be manned by five officers can now operate with just two officers per shift.

This allows security agencies to service more properties with the same number of workers.

Ms Lim does not foresee technology completely displacing on-site officers any time soon. “Sometimes, it’s the presence of the familiar face that residents want.”

Ms Sivamani Taigrajan, a security supervisor at Aetos Guard Services, said wage increases and higher skills visibility have also attracted younger workers to the field and changed perceptions about its viability as a career.

Ms Siva, 49, who has been in the sector since 2005, said: “When I first started, it was quite a manual job. You had to enter a lot of things by hand – technology wasn't very advanced.”

She has since picked up new skills, such as operating multiple surveillance systems in a security command centre.

It is now also easier for employees to get a fair wage and increments, she added.

“Previously, employers would be resistant to giving wage increases… Now with the PWM, these are mandatory,” she said, referring to the scheduled increases to pay and the pay rises tagged to climbing the ranks by upskilling.

Ms Siva has completed courses in supervision, crowd control and command centre operations, which allowed her to move up from being a security guard on the ground earning about $1,400 a month, to becoming a security supervisor with a basic pay of about $3,250.

She is certified under the PWM to hold positions up to that of chief security officer.

Currently, an outsourced security officer’s minimum basic wage is $2,650, up from $1,650 a year before.

The security sector’s wage ladder has been laid out till 2028.

Ms Lim said: “What everybody is curious about now is what will happen from 2029 onwards because some contracts are already lasting till 2032.”

A case that came to light in February 2023 put the PWM to the test, and the Union of Security Employees had to step in.

A security agency tried to lower its staffing costs by demoting 300 of its security officers to a lower pay rung, drawing flak from the labour movement and wider public.

After negotiations, the agency and union reached a confidential settlement on behalf of the affected officers later that month.

On the flip side, some companies have even gone beyond the stipulations of the mandated wage model, despite it adding to overheads.

Starbucks Singapore, for one, said it “anticipated and embraced” the change when PWM for the food services sector was implemented in 2023.

Among the industry-wide wage increases, the PWM mandated that waiters’ pay rise from at least $1,850 to at least $2,015 between 2023 and 2024.

Starbucks Singapore said it is paying above the stipulated PWM wage across all job levels.

About 1,400 of its 2,000 employees are covered by the PWM, but increases to the company’s staffing costs were compounded as it chose to ensure pay equity across all job levels.

“While the PWM sets the minimum wage for baristas, we chose to extend wage adjustments to our supervisors and managers to maintain fairness across roles,” a spokesperson said, adding that the company regularly reviews salary adjustments to ensure they align with employee skills and market conditions.

More than two in three firms polled by the Singapore National Employers Federation (SNEF) reported an increase in wage cost to meet PWM requirements, with the retail, food services, security and cleaning sectors most significantly impacted.

“These industries typically rely more heavily on manpower, making it challenging to absorb sustained increased labour costs,” a spokesperson said.

To be sustainable, it is crucial that wage increases are matched by corresponding improvements in productivity, SNEF stressed.

But for employers, “one concern is that the increase in wage cost also apply to other adjacent jobs, in order to maintain parity”.

Manpower shortages also mean that many companies find it challenging to send their workers for the required PWM training, SNEF noted.

It reiterated calls from employers for more and better-targeted Government support, including recognising alternative pathways to meet PWM training requirements, such as structured on-the-job training that reduces time away from work.

For its part, the Government is co-funding wage increases at each PWM rung from 2022 to 2026 under the Progressive Wage Credit Scheme to help soften the impact on companies.

The co-funding levels were increased for 2024 from a maximum of 30 per cent to 50 per cent. The wage ceiling will also be raised from $2,500 to $3,000 in 2025. Both moves are funded by a $1 billion top-up to the $2 billion initially set aside.

While Singapore’s wage measures now cover about 94 per cent of full-time lower-wage workers, salaries in the bottom bracket have a lot of catching up to do.

Labour MP Melvin Yong, who now helms the PWM at NTUC, said: “Income at the 20th percentile is about 55 per cent of median income.”

In other words, lower-wage workers in 2023 earned $2,500 or less, compared with the median salary of $4,550, excluding employers’ CPF contributions.

SUSS’ Prof Theseira said: “I think there has to be discussion about, at the end of the day, are the wages they’re paid considered to be living wages?

“Are people able to provide for their families, and to what extent are they still going to be needing to rely on government support to make ends meet?”

Mr Yong acknowledged that Singapore still has “some way to go” compared with international benchmarks.

One reason for this, NUS’ Prof Ong said, is that the PWM does not address the power imbalance between employers and workers – a major factor in persistently low wages.

She said: “Each worker, on his own, wields very little power. But collectively, they could compel employers to agree to a more equitable distribution of the profits.”

She also noted that many lower-wage workers, including gig workers and those employed by unregistered or unlicensed companies, fall through the cracks. She suggested that the PWM could coexist with a minimum wage model, ensuring that all workers in all sectors are covered.

A similar point was raised in Parliament by Sengkang MP Jamus Lim from the opposition Workers’ Party in 2020. He criticised the PWM for having “so many additional conditions that the incentives for upskilling turn into loopholes employers use to retain workers on the lowest rung of wages”.

The WP has for years called for a universal minimum wage, arguing that introducing a blanket wage floor will ensure that all workers have a decent shot at making a living.

Associate Professor Lim, an economist, said there was evidence that most Singaporeans would be willing to pay more for essential services and that the employment impact of a minimum wage is likely to be very limited. He later conceded that the pandemic was not the right time to implement such a policy.

But arguments against a blanket minimum wage from the time of PWM’s conception still stand today, Mr Zainal said.

Referring to discussions back then, he said: “There were concerns that a minimum wage could be seen as a maximum wage and form a cap on what employers would pay. Or no wage, because no employer would employ someone if their productivity wasn’t commensurate with income.”

There were also concerns that it could lead to “sticky wages”, where it would become very difficult for wages to increase, he added.

Prof Theseira said: “To most economists, (the PWM) does look like a minimum wage, but a schedule of minimum wage levels for different sectors and skills.”

The traditional problem with a standard flat minimum wage is that it may not fit the needs of all workers and may push workers out of employment for various reasons, such as not being productive enough to justify their salaries.

A schedule of minimum wages, such as the PWM, minimises some of these inefficiencies, but is not without cost to maintain, as keeping up with the intricacies of each sector is an endless task, he said.

Prof Theseira said that in the end, more research and data is needed to see if the PWM has raised wages up more than what the market would have done on its own.

He said: “Average wages have increased in the occupational sectors – and aggregate employment hasn’t fallen – so if these are the goals, they seem to have been met.

“But it’s hard without further research to tell which workers retained the jobs, or who ended up paying for the wage increases – companies or consumers – and whether productivity has really increased.”

Mr Yong noted that between 2017 and 2022, workers in the cleaning, landscaping and security sectors saw a cumulative wage increase of 11 per cent, outpacing the growth of median incomes.

From 2022 to 2028, workers covered by the PWM can expect cumulative wage increases of up to 80 per cent, he said.

The intention is to continue outpacing the likely growth trajectory of the median wage to close the gap, he added.

Sectors faring well under the PWM may be approaching a crossroads.

The security sector is one of two sectors that have done particularly well, Mr Zaqy said.

Many workers in the sector earning around $3,000 and above, like Ms Siva, are rising past the 20th percentile for wages.

The wages of in-house senior security supervisors have been left to market forces since the PWM was extended to this sub-segment of the security sector.

The lift and escalator maintenance sector, where complex and technical tasks require highly trained staff, is another promising sector.

Entry-level roles such as assistant lift and escalator specialists must currently be paid at least $2,300 in basic wages.

According to Mr Zaqy, there is more room for wage and productivity growth with the adoption of technology or other value-added services that customers “can and are willing to pay for”.

He added: “So these are some of the areas in which you might find some jobs actually taking a trajectory of their own, such that market forces are able to see the value of the jobs they do.”

While certain sectors may eventually be eased out of the PWM – a possibility to be considered in future reviews – there are no definite plans to do so as yet, he stressed.

Mr Yong said the labour movement will also be engaging companies to form company training committees and start productivity initiatives to sustain wage increases.

“NTUC will continue to champion the PWM and will expand PWM into adjacent and new sectors,” he added.

But where the policy hits home, sustained wage increases have given workers like Mr Hamdi some breathing room.

He said: “When my children got into polytechnic about 10 years ago, I had to spend more on books, fees and whatever else they needed for their studies.

“Without the wage increases, it would have been harder.”