Singapore can rightly be proud of what it has done to increase wages at the lowest end of its workforce. Four years ago, it introduced the Progressive Wage Model (PWM) in a concerted effort, led by the National Trades Union Congress, to uplift the lives of tens of thousands of low-skilled workers whose wages had remained stuck at the bottom. There were calls then to mandate a minimum wage, which is the preferred way in many countries that have also struggled with the same problem. But the Government eschewed this, arguing it had not achieved the desired results and had made these workers less employable. Instead, working with the labour movement, it developed the PWM in the cleaning, landscaping and security sectors. The idea is a simple one - work with industry to develop a career path for these workers, raising their salaries when they achieve new levels of skills and experience. A wage system tied to capabilities and productivity is superior to one where the state legislates an arbitrary number that bears no relation to what is happening in these industries.
The early results have been encouraging: According to one study, median wages of cleaners, labourers and related workers rose from $1,000 in 2012 to $1,200 a month last year, a 20 per cent increase, compared to a 16 per cent increase for workers overall. In the three sectors where the PWM is in force, about 85,000 resident workers have benefited, including 40,500 cleaners, 42,000 security officers and 3,000 landscape workers.
But it's not all hunky-dory for workers in companies that obtain work through competitive tenders and whose wages have risen through the PWM. They suffer when their companies fail to win the next bid. The winning company often re-hires these out-of-work staff, but resets their wages back to entry levels, thus negating all the gains they had made. This is highly regressive and makes a mockery of the PWM. The affected workers have lived up to their end of the bargain - moving up the wage ladder through skills and productivity improvements - but alas they have been undone. There is obviously a loophole in the scheme when new companies can disregard the skills and experience of workers. A solution has to be found or the PWM will fail to deliver on its promises.
One way is to allow licensed contractors to hire only a certain proportion of workers at entry-level wages. Another is to frame tender contracts in PWM industries in such a way that service standards expected are pegged to the skills and experience of workers. If silent on this point, cheap sourcing will remain the order of the day and be at odds with the service quality and mastery of skills that are to define the future economy. It is imperative for employers to also assist in finding solutions so that the claim that the PWM works better than a minimum wage will not ring hollow.