Raising low wage workers' pay an uphill task

This story was first published in The Straits Times on July 3, 2013

IN RECENT years, much effort has gone into finding ways to increase the salaries of low wage workers. But so far, success has been limited.

Last year, eight in 10 unionised companies followed a National Wages Council (NWC) recommendation on wage rises for workers earning up to $1,000.

But away from union influence, firms were less generous. Only three in 10 gave a raise of at least $50 as recommended. Four in 10 gave none at all.

This year, the NWC has suggested a built-in pay rise of at least $60 for workers earning $1,000 or less a month.

How can this be implemented?

One way is to unionise the companies.

The other way is to make NWC guidelines part of the licensing requirements for cleaning firms. NWC guidelines can also be made mandatory to other industries with licensing regimes, such as security.

A third way is being tried by NWC. It wants companies that buy the services of cleaning and security firms to be willing to pay more in their contracted prices, so the latter can raise wages of workers.

Service buyers

COMPANIES providing cleaning and other services are often reluctant to raise the pay of their low wage workers. This is because they are awarded contracts on the basis of competitive bidding.

Cleaning companies say that wages form about 80 per cent of costs. Assuming a firm's workers were already earning $1,000 a month, awarding a $60 wage rise per worker would therefore mean a 4.8 per cent rise in costs.

Employers in these sectors may not be able to absorb such pay increases, says MP Zainal Sapari, who also heads the National Trades Union Congress (NTUC) unit for contract and casual workers: "Service buyers need to increase their contract sum to enable service providers to pay more to their workers."

Like other union leaders, he argues that service buyers have the upper hand when it comes to signing and renewing contracts, and need to be persuaded to pay more so the service providers downstream can raise pay for workers.

The public sector is trying to lead by example.

Government contracts are now awarded only to accredited cleaning firms with the progressive wage model. This sets out career ladders and pay benchmarks in low wage sectors. From next year, all cleaning companies need to follow these benchmarks to get licensed. But the public sector's impact is limited, as it covers only 10 per cent of the cleaning industry.

Most companies still abide by the principle of awarding service contracts to the lowest bidder. Unionists and employers say it is hard for service providers to negotiate higher rates for fear of contracts not being renewed.

"The social responsibility should be on the service buyers," says Mr Nasordin Mohamad Hashim, president of the Building Construction and Timber Industries Employees' Union.

This union has branches in more than 20 cleaning firms. Many found it hard to follow last year's recommendation to raise wages by at least $50 a month.

This year, the NWC appealed to service buyers to include annual wage adjustments in their contracts, or allow for contract values to be adjusted if pay is raised.

One such buyer is NTUC Centre, which engaged Ramky Cleantech Services to provide facility maintenance services. The 46 cleaning staff there are guaranteed at least a 4 per cent or $60 pay rise this year, whichever is higher.

To make the pay rise possible, NTUC Centre has committed to pay more for this outsourced service. "We wanted to be a model service buyer," says Mr Ong Keau, director for administration of the NTUC administration and research unit.

"Of course we hope that if we take the lead, other service buyers will follow," adds Mr Ong.

Another method NTUC uses to encourage service provider companies to raise wages is to promote "best sourcing". This encourages service buyers to award contracts based not just on price, but also considerations of quality, track record and human resource practices.

From January last year till May this year, there were 43 contracts under this Best Sourcing Initiative, covering 1,542 local low wage workers.

But service buyers have their own problems.

Industry players say it is not always easy for them to grant increases. As Singapore Business Federation chief operating officer Victor Tay notes: "The whole point of the tender is locking in the price." After all, procurement officers are appraised based on how they contain costs, he adds.

Firms say that it is more common for service buyers to agree to raise contract sums upon renewal, not midway as the NWC recommends.

Even so, the Singapore National Employers Federation (SNEF) says it will step up publicity efforts this year to nudge companies towards adopting NWC guidelines.

Some Singaporeans have suggested naming and shaming companies that don't give their workers pay rises. But SNEF executive director Koh Juan Kiat doubts naming and shaming - or even naming and praising - will work. "It's better to persuade them to institutionalise the adoption of the NWC guidelines, as this is an annual matter," he says, adding that firms generally do not welcome even good publicity of their financial practices.

Consumer pressure may not work very well either. Few consumers are likely to care how much the management of a shopping mall or office building is paying for its cleaning service - let alone boycott one that squeezes the contractor, thus forcing cleaners' wages down.

But market forces and labour shortage may soon compel service buyers to change their mindset.

The security industry, in particular, faces a "huge shortage of workers", says Association of Certified Security Agencies president Robert Wiener. Service buyers and providers are realising that if they do not pay enough, they may end up without any workers.

The latest available wage data shows that from 2010 to 2011, the median monthly gross pay of guards rose from $1,367 to $1,550. It was not just more overtime: Basic wages rose from $650 to $730.

The tight labour market puts pressure on bosses to raise wages. That pressure feeds through to service buyers. Over time, then, low wages in these sectors are likely to creep up.

But for now, getting Singapore's 70,000 cleaners and 40,000 security guards a monthly pay rise of $60 or more remains an uphill task.

This story was first published in The Straits Times on July 3, 2013

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