By Leney Ang, Editor
Globally, an estimated 90% of nations in the world have a minimum wage. [1] Singapore, along with Scandinavian countries like Norway, Iceland, Switzerland fall within the 10%, without an implementation of a minimum wage. [2]
In recent years, the minimum wage (MW) has become an incredibly contentious issue, with proponents of the MW or living wage often being disparaged. In the United States (U.S.), political figures supporting increases in MW - such as Bernie Sanders and Alexandria Ocasio-Cortez - have been branded as socialists, an insult for those residing in the capitalist U.S. [3]
Back home, this issue proves to be just as controversial. MW has been brought up in every General Election (GE) including GE2020, with debates often being slanted for or against implementing a blanket living wage. Opposition parties hold firmly to their arguments for a MW across all sectors while the incumbent party has continuously emphasised the downsides to implementing it.
Earlier into the new parliamentary term, a fiery debate on MW took place between Dr. Jamus Lim from the Worker’s Party (WP) and 8 other People’s Action Party (PAP) members [4]. The WP has called for a MW of $1,300 a month. [5]
However, debate on this topic has been around for far longer in the nation. Various opposition parties have advocated for the MW for close to two decades. In the lead-up to the 2001 GE, Dr. Chee Soon Juan from the Singapore Democratic Party called for a MW of $5 per hour (estimated to be $7 today). In WP’s 2006 manifesto, they also called for a minimum salary in collective agreements between unions and companies.
Through it all, the incumbent party has remained disapproving of adopting a MW. It has reiterated arguments on how such a blanket approach would result in unsustainable economic growth in the long run. This would adversely impact lower skilled workers by making it more difficult for them to find employment. [6]
To alleviate the economic burden felt by this demographic, the government has instead introduced a Progressive Wage Model (PWM) as the sustainable alternative in 2012. [7] PWM is a minimum wage with a ‘ladder component’, a productivity-based wage ladder. In essence, wages become tied to an employee’s efforts in upskilling.
This structure encourages employees to seek out new training opportunities to increase their wages. Currently, the scheme has been implemented in three sectors - Cleaning, F&B and Conservancy, [8] with plans for further sectoral expansion.
However, Singaporeans have remained polarised on this issue. Some laud the PWM for incentivising workers to upskill themselves, while others criticise the model for its narrow scope and inability to ensure that all lower-skilled workers earn sufficient pay for sustenance.
With these precedents, I would like to delve into the three frequently cited arguments against a minimum wage - that the MW reduces productivity, reduces employment and that the PWM though imperfect, is sufficient as the better model for low-skilled workers in Singapore.
Does minimum wage kill productivity?
Opponents of the MW have argued that implementing such a policy compromises the nation’s values of hard work and self-reliance. They claim that MW’s “welfare support” would disincentivize low-skilled workers to upskill themselves as they will be guaranteed a minimum wage regardless of their work capabilities or productivity. [10]
The Singaporean government has adopted this line of argument, emphasising that MW fails to contribute to long-term economic growth due to the reasons stated above. [11] Intuitively, this feels like a valid argument. However, there have been studies that dispel this conception and instead argue that a ‘decent’ minimum wage improves worker productivity. [12]
With a minimum wage, it could help ensure that those in poverty are able to plan for the longer term and invest in their skills for the workforce, instead of focusing solely on day-to-day survival needs given their vulnerable economic situation.
Moreover, the lessened economic burden could improve work performance of these individuals by reducing their psychological and emotional stresses resulting from income concerns.
It is hence over-simplistic to say that implementing an MW would kill productivity. Instead, it could bring about an increase in productivity and sustainable economic growth, through alleviating material concerns and encouraging investment in education or skills upgrading for the lower-skilled workers in our economy.
Does minimum wage reduce employment?
Economic theory suggests that when the price of labor increases, firms’ demand for labor falls. Following this theory, MW would inadvertently result in no wage, as firms are forced to retrench some workers, resulting in unemployment in target sectors. [13]
Some experts have argued against this notion of unemployment from a MW in Singapore’s context, especially for low skilled jobs. [14] This is because firms struggle to attract locals to these jobs at the outset due to their labour-intensive nature coupled with low pay. Higher minimum wages in sectors unpopular with local workers (e.g. construction sector) could instead attract more Singaporeans to fill such positions, increasing employment.
Arguably, this is quite presumptuous as certain blue collared jobs like construction work are unappealing to locals because of the social stigma attached to them. [15] Having a MW in these sectors thus may not necessarily translate into job opportunities for Singaporeans.
Hence, there is no clear answer as to whether a MW reduces employability, as there is great uncertainty about the correlation between MW and blue-collar employment. [16]
Is the progressive wage model progressive enough?
The final argument by MW critics is that the PWM remains an appropriate and feasible substitute to having a living wage.
Theoretically, the PWM sounds ideal for a growing workforce. It encapsulates the national spirit of “you work for what you want, and you get what you work for”.
But in reality, how has the PWM squared? Since the introduction of the PWM in 2012, only 20 percent of unionized companies under the labor movement have implemented this system. This falls short of the 2015-end target to have at least one in two companies adopt an aspect of progressive wage.
Furthermore, only 18 percent of companies followed the National Wage Council recommendations in giving their low-wage workers a pay raise of at least $60 last year. [17] The lukewarm results for PWM can be attributed to the easy access to cheap foreign labour and imbalance in bargaining power between workers and their employers.
Other shortcomings of the PWM include the limited number of sectors in which it has been implemented and the fact that it is relatively difficult for more aged low-skilled workers to upskill themselves.
However, we should not ignore the successes of the PWM. 78,000 workers across the three sectors have seen a 30 percent increase in their wages from 2013 to 2018. These workers belong to the lowest 20th percentile of salary ranges. [18] The government has also stated plans to expand the PWM in the lifts and escalator maintenance sector in 2022. [19]
Minister of Manpower Josephine Teo has also stated that from next year, a PWM mark would be given to companies that voluntarily pay progressive wages. By recognising companies that engage actively with the PWM for the betterment of their employees, this could encourage more firms to do the same for their workers. [20]
With these in mind, I am of the opinion that the PWM is still a potentially better system than a flat minimum wage, with the ‘ladder’ component being its main draw as I believe it can foster sustainable economic growth by raising the productivity of workers.
But as aforementioned, there remains limitations to the PWM. As a society, we should thus continue to question the ability of the PWM to meet the needs of the most economically vulnerable in Singapore.
Conclusion
Overall, there are both valid concerns and gray areas for the MW and PWM, reflecting a need for careful consideration by our policymakers. A balance thus has to be struck between more pragmatic concerns and ‘compassionate’ benefits in policymaking for our low-skilled workers.
Credit has to be given to the Singapore government for rolling out numerous initiatives to help the socio-economically vulnerable in society, but there is no silver bullet [21]. Since it is difficult to determine the MW’s and PWM’s exact impacts on the ground, only time will tell if the current model lives up to its expectations and whether we should shift to implementing a MW. Till then, we can keep abreast of this MW debate and form more discerned opinions of it through future parliamentary debates on this matter.
Bibliography:
[4] https://www.channelnewsasia.com/news/singapore/parliament-jamus-lim-tharman-minimum-wage-13079634
Leney is a Year 2 business student who is currently an Editor for The Convergence. She believes in the importance of being in tune with global and local developments. She hopes that her articles would encourage readers to think more critically and allow for greater discourse. During her downtime, she vegges out and goes down a rabbit hole of Youtube videos, from watching conspiracy theories to listening to random podcasts. When the Youtube algorithm gets too crazy, she indulges in reading books. A fanatic collector of books (horder), she has amassed a collection of books, where half are still unread (yikes!).