GE SPECIAL: POST-GE2020

Singapore GE2020: Minimum wages or progressive - Which will help more?

The opposition has called for a national minimum wage. But the Government says its progressive wage model is better, as it is not just a payout, but also a ladder for a continued career. Insight relooks this longstanding debate.

In the lead-up to polling day on July 10, one of the issues that resurfaced in opposition party manifestos and campaigns was a call for a minimum wage and redundancy insurance.

The Workers' Party (WP), for instance, proposed a national minimum take-home wage of $1,300 a month for full-time work, the amount an average four-person household in Singapore needs to spend on basic necessities such as food, clothing and shelter each month.

The party also proposed a redundancy insurance scheme for workers, under which they pay $4 a month, matched by employers, into an Employment Security Fund which pays out 40 per cent of their last-drawn salary for up to six months if they are retrenched.

The payout would be capped at $1,200 a month, with a minimum payout of $500 a month for low-wage workers.

Workers can receive more payouts only if they actively seek a new job or go for retraining.

Other parties, such as the Reform Party and the Singapore Democratic Party (SDP) also called for a minimum wage, with SDP chairman Paul Tambyah, who contested in Bukit Panjang SMC, saying that a minimum wage must apply to foreigners as well as locals so that qualified people come to work here and are not exploited by being made to work at a lower salary than others.

But Senior Minister Tharman Shanmugaratnam said at a live talk show on July 7 that Singapore's progressive wage model is better than a minimum wage because it is a ladder, of which a minimum wage would be only the first step.

The model sets out minimum salaries for local workers in various roles along a career and skills progression framework.

Mr Tharman said that the model, which is compulsory in the cleaning, security and landscaping sectors, will be spread across all sectors.

He added that the Government's approach of providing jobs for everyone and improving jobs over time requires a step-by-step approach, "not a sudden or drastic approach that risks people losing their jobs, but a steady approach that gives people confidence that they are improving in their jobs, and gives employers confidence that the Government is going to work with them to help them to upgrade productivity".

Prime Minister Lee Hsien Loong also addressed the issue in his online Fullerton election rally on July 6, saying that calls for a minimum wage or a universal basic income are "fashionable peacetime slogans, not serious wartime plans", referring to the Covid-19 crisis.


In a live talk show on July 7, Senior Minister Tharman Shanmugaratnam said that Singapore's progressive wage model is better than a minimum wage because it is a ladder, of which a minimum wage would be only the first step. In a Facebook post on July 14, the Workers' Party's newly elected Sengkang GRC MP Jamus Lim said that the model gives too much room to employers to cut corners, without redressing power differentials. ST FILE PHOTO

He said that a minimum wage would add to employers' costs and pressure them to let even more workers go.

LONG-TIME DEBATE

The calls for a minimum wage and unemployment insurance are not new.

For example, in the lead-up to the 2001 General Election, SDP chief Chee Soon Juan called for a minimum wage of $5 per hour.

He also said the Government should pay retrenched workers their last-drawn salary for six months, half the last-drawn salary for a further six months and then a quarter for a further six months. During the 18 months, the worker should be allowed to reject only three job offers.

Dr Chee has also said in the past that the Workfare Income Supplement scheme, which tops up the incomes of lower-income workers aged 35 and above and earning up to $2,300 a month, reinforces a master-servant arrangement both economically and psychologically.

In 2006, in the WP's first manifesto since 1994, it called for the minimum wage in collective agreements between unions and companies to be strictly enforced, and for unemployment insurance with payouts starting at 75 per cent of last-drawn pay. Singaporeans in dire straits should be allowed to draw on their Central Provident Fund savings, it said.

The issues have also come up between elections, such as during Budget debates.

Economist and former Nominated MP Walter Theseira, during the supplementary Budget debate in April, suggested that all Singaporeans receive $110 a week for 12 weeks amid the Covid-19 crisis, funded through a temporary personal income tax hike of 4.25 per cent, paid next year when the economy is expected to have recovered.

Under his proposal, dubbed the Majulah Universal Basic Income Scheme, the less well-off will benefit more, while the high-income will help to finance it.

 
 
 

The WP also launched an online paper in December 2016 proposing an unemployment insurance scheme.

PM Lee had said in his May Day Rally speech earlier that year that Singapore has a better approach in which the Government funds programmes to support workers making the effort to get back into a job and upgrade their skills to make themselves more valuable.

The Government has rolled out schemes such as professional conversion programmes, which fund part of the course fees and the salary or training allowance for mid-career professionals, managers, executives and technicians (PMETs) entering new occupations or growth sectors.

It launched the Career Support Programme in 2015 to provide salary subsidies to employers who hire retrenched or long-term unemployed Singaporean PMETs, as well as a hiring incentive this year for employers who hire local workers through certain reskilling and training programmes.

THE EXISTING MODEL

The progressive wage model was first rolled out by the National Trades Union Congress in 2012, under then labour chief Lim Swee Say, in sectors such as cleaning, transport and education.

At the start, the wage benchmarks were recommendations, but they later became compulsory as part of licensing conditions for the cleaning, security and landscaping sectors. They are compulsory for lift maintenance firms in order to be awarded government contracts.

Accordingly, they function as sector-specific minimum wages for workers of various skill levels.

The model is also updated so that the wages rise over time.

For example, when the model became compulsory for full-time resident cleaners under new contracts in September 2014, those in offices and hawker centres had to be paid basic monthly wages of at least $1,000, while town council cleaners had to be paid at least $1,200.

 
 
 

From July 1, their basic wages must be $1,236 and $1,442 respectively.

Supervisors had to be paid at least $1,600 in 2014. Now, the base salary is $1,854.

Mr Tharman said in his July 7 speech that the model has helped workers in the lower-income group, around the 20th percentile of the income ladder, see their wages rise by close to 40 per cent in the last 10 years in real terms, or after inflation is taken into account.

In nominal terms, the pay of the 20th percentile worker has risen from about $1,500 10 years ago to $2,500 now, he said.

He added that the Government also provides Workfare and the Special Employment Credit - a wage subsidy for employers of older workers - which come up to an extra 40 per cent on top of what employers pay the workers.

Minister of State for Manpower Zaqy Mohamad also told Parliament in March that between 2013 and 2018, the real median monthly gross wages of full-time cleaners, security officers and landscape workers grew cumulatively by around 30 per cent, 31 per cent and 32 per cent respectively. This was faster than the growth of 16 per cent at the median over the same period, for residents in full-time work.

However, WP's newly elected Sengkang GRC MP Jamus Lim said in a Facebook post on July 14 that as the progressive wage model ties wages to job function, it gives too much room to employers to cut corners, without redressing power differentials.

"It also leaves those who simply cannot upskill in the lurch, and earning below a living wage," he said.

At the start, the wage benchmarks were recommendations, but they later became compulsory as part of licensing conditions for the cleaning, security and landscaping sectors. They are compulsory for lift maintenance firms in order to be awarded government contracts. Accordingly, they function as sector-specific minimum wages for workers of various skill levels.

Dr Chee has in the past referred to the progressive wage model as an instance of the ruling People's Action Party copying SDP's proposed universal minimum wage, but in piecemeal.

"(They) call it by another name, but it's still the minimum wage for selected industries," said Dr Chee in the lead-up to the 2015 General Election.

DISCUSSION CONTINUES

Even after the July 10 General Election, the debate on the need for a minimum wage continues, which many have said is a good situation.

Associate Professor Lim's Facebook post also said that minimum wage "is not unabashedly good policy", but it would not have to cost the Government as most minimum wage models have no fiscal impact, with three quarters of the burden borne by higher prices consumers pay, and one quarter by firms.

Some people criticised him for not having talked about the cost increase previously, which former Non-Constituency MP Yee Jenn Jong, who was in the WP team which contested in Marine Parade GRC this year, sought to address in a separate Facebook post in which he cited a recent survey commissioned by The Sunday Times which found that eight out of 10 Singaporeans are willing to pay more for essential services such as cleaning and security if the extra amount goes to the workers themselves.

Mr Tharman, who is Coordinating Minister for Social Policies, had himself said at the talk show earlier this month that as wages rise for lower-income workers, some costs will go up, such as costs of conservancy in condominiums and cleaning of offices.

But in keeping with his promise in an earlier national broadcast last month that the Government will provide greater support for lower-and middle-income Singaporeans and build a fair and just society, he added: "All of us as Singaporeans will have to pay slightly higher costs. But that is a small cost to pay for building a fairer and more equitable society, where everyone is moving up together."

A version of this article appeared in the print edition of The Sunday Times on July 19, 2020, with the headline 'Minimum wages or progressive: Which will help more?'. Print Edition | Subscribe