What the progressive wage and minimum wage debate is about
How the different wage models will affect our cost of living and employment in Singapore.
You might have heard of the ongoing debate about the Progressive Wage Model (PWM) and the proposed implementation of a minimum wage in recent debates in Parliament.
We spoke to a couple of youths to better understand what the debate is about and what young Singaporeans think about them.
What is the Progressive Wage Model?
First introduced in 2012 by the National Trades Union Congress, the PWM aims to “uplift low-wage workers in the cleaning, security and landscape sectors”, according to the Ministry of Manpower. It currently does not cover other sectors.
Under PWM, there is a set minimum pay and training requirement to improve worker skills and raise their pay progressively. As productivity increases, this helps to increase profits for businesses while consumers enjoy better quality products.
Currently, around 80,000 workers across the three sectors are covered under PWM.
As of September 2020, there have been discussions in Parliament to move towards a universal PWM after the current pandemic crisis. A PWM Mark was also introduced to promote the voluntary adoption of PWM to the food and beverage industry as well as retail trade sectors.
What is minimum wage?
The call for minimum wage was first brought up during the 2020 General Elections by multiple leading opposition parties.
“(A minimum wage model is) when the government legally mandates employers to pay their employees a minimum amount. That minimum wage is legally binding and companies cannot pay their workers any less or they could be subject to regulations,” explained 19-year-old Jia Yi, an arts and social science undergraduate.
Workers’ Party Member of Parliament (MP) Jamus Lim of Sengkang GRC proposed a minimum wage model in his maiden speech in Parliament and called for the need for more “compassionate policymaking” to address the problems faced by Singaporeans that include low wage workers.
In a recent Facebook post, Workers Party chief Pritam Singh cited the issues of the PWM taking too long to implement for other sectors and proposed a minimum wage amount of $1,300.
The proposed $1,300 is an estimate of the total cost of basic needs in Singapore.
The wage models are a highly debatable issue, most notably on areas such as inflation, unemployment and the suitability of implementation in Singapore.
1. Access to opportunities
During a debate in Parliament, NTUC deputy secretary-general Dr Koh Poh Koon revealed that only a “small number” of 1.7 per cent of the workforce, or 32,000 full-time employees, take home less than the proposed $1,300 minimum wage.
In response, Mr Singh said it is “not acceptable” that any Singaporeans are earning below $1,300 and asked that low-wage earning workers should be covered quickly if possible.
On the issue of equal opportunities, 19-year-old Clarinda, a business and communications undergraduate, felt that a minimum wage can “create more opportunities in society which is important especially in Singapore”.
Referring to the number of Singaporeans earning below $1,300, she said: “[A minimum wage] will give them enough income to live a decent life. I feel that there is a significant number of people that fall below the stipulated minimum wage”
For families paying for their kids’ education, Clarinda feels that it is unfair to have to choose between food and educational opportunities.
She said: “A minimum wage will not solve all the issues we have, but it is a good start.”
2. Rising cost of living and unemployment risks
In his proposal, Dr Lim acknowledged that a national minimum wage could lead to higher costs and unemployment. However, he said that it is evident Singaporeans are willing to pay for more essential services and that the impact of lost jobs on low-wage workers are limited.
In response, Senior Minister Tharman Shanmugaratnam said that raising the standard of living for the poor is “complicated” and involved considering issues such as maintaining the ability and pride of holding a job and earning a wage for a wage-earner.
Mr Tharman also noted that the PWM allowed for minimum wages to be set at suitable levels for each sector. A single national minimum wage would force a decision that might become an issue of being too high or too low.
The issue of a high minimum wage, as explained by Manpower Minister Josephine Teo in 2018, is that it might deter employers from hiring due to the high costs for the lowest-waged workers.
For 23-year-old Zhi Hao, a Business and Management undergraduate, he felt that the proposed minimum wage amount is not enough when factors like inflation are considered.
“Then my other concern is [that the minimum wage is] not adjusted for inflation. Inflation is always going to happen every year, regardless of the percentage. And there will come a time where $1,300 of take-home pay is just not enough to get by anymore.”
He added: “Things will rise accordingly… Unless we keep reviewing every year, adjusting that minimum wage level to cope with inflation and the poverty line.”
On the other hand, Clarinda felt that the minimum wage model will not affect unemployment too much.
“The target audience for minimum wage provides essential services like cleaning and construction. The demand is always there, so employers will always have to hire people to take up the job and provide such services,” she said.
However, she also added that all this is in theory, and that “you never know how [the market will] work in the end”.
This is a running sentiment echoed among the youths – that in a debate of economics, the effectiveness of a policy can only be rendered after acknowledging both of its short and long term effects.
3. Effects on productivity
The PWM is a four-pronged approach that includes skills upgrading, career advancement, salary progression and improving productivity.
Zhi Hao views the PWM positively and mentioned that this system is a “long-term plan” that expects workers to up-skill themselves.
“If today anything happens to their job security, they can just find another,” he said.
However, he believes that the issue of its delayed implementation should be changed. The question on the future expansion of PWM becomes a problem that “sticks out like a sore thumb”.
“It is taking too long and we don’t know, and we don’t quantify whether people are just going through the motion for courses or are they really getting the skills,” he said.
On the effectiveness of PWM, Jia Yi shared: “I think it’s a good way to motivate workers because they get the incentive to keep rising up to earn more income.”
However, she mentioned issues such as a possible lack of education or access to programmes as issues that might hinder workers from moving up the labour force.
For the PWM to be sustainable, she feels that education and training programmes are important for workers to “go higher in the labour market” and “to increase productivity and goods and services”.
The importance of the wage debate
The topic may be a complex one, but it is one the people we spoke to found important for youths to be educated on.
Clarinda said: “For youths, there will be one day that we will have to grow up and be of age to face that kind of issue. The issue of adults [today] will become our issues if it is not solved and we have to pay attention to what is going on in our world.”
“I think it’s a good thing, we are getting people thinking about it.”
Zhi Hao believes it’s good that the discussion on minimum wage is steered towards improving the wage model and poverty issues in Singapore. He hopes that this topic is kept open for further discussion.
As Singapore faces an ageing population, there needs to be a preparation for this predicament our parents might face, he said.
“If there’s a certain direction where I want this to go, I want to see how we can reconcile both models,” he said, hoping both models can work together to address the issues of inflation and expansion to other industries.