Adopt progressive wage model, companies urged

May Day messages highlight bosses' role in boosting workers' skills, pay
By Toh Yong Chuan, The Straits Times, 30 Apr 2013

THE need for companies to boost the pay of low-wage workers by adopting the progressive wage model was highlighted by both the Manpower Ministry and Singapore National Employers Federation (SNEF) yesterday in separate May Day messages.

"I urge employers to work with the unions to press on with progressive wages for their workers," said Acting Manpower Minister Tan Chuan-Jin.

Echoing the call, SNEF president Stephen Lee noted that companies in the cleaning, security, landscaping and hospitality sectors have already adopted the progressive wage models.

"I strongly encourage employers to make concerted efforts to work with the labour movement to enhance the skills, employability and wages of our low-wage workers," he said.

The progressive wage model is an initiative by the National Trades Union Congress (NTUC) to systematically boost the pay of low-skilled workers by training them to take up higher-paying jobs in the same sector.

The model, mooted by the labour movement last June, has been accepted and cited by the Government as a means to improve the lot of low-income Singaporeans, together with Government programmes like Workfare.

Besides adopting progressive wages, Mr Tan also called on companies to create more opportunities for seniors and back-to-work women.

He added that his ministry is studying employment practices in other countries, and promised that it will consult unions and companies on how to ensure locals "are given fair consideration at the workplace".

Giving an update on impending Employment Act changes, Mr Tan said unions and employers have "unanimously agreed" that workers deserve more protection - a goal to be achieved by the changes that will be tabled in Parliament this year.

He also reiterated the Government's priority of keeping unemployment low and working with unions and employers to create better jobs for workers.

In SNEF's message, Mr Lee contrasted the painful labour law reforms in other countries to the support given by Singapore unions, employers and the Government to amending the Employment Act.

He attributes the consensus reached to tripartism and "extensive consultations" but underlined the need for the labour market to "remain flexible and globally competitive so that we can attract investments... grow the economy and create good jobs".

He also reminded companies they cannot raise productivity on their own: "While management plays a pivotal role in raising productivity, employers must also recognise that the support and cooperation of workers and unions are crucial."

These two May Day messages are the latest in a series of messages and speeches the NTUC has planned in the run-up to Labour Day tomorrow.

Prime Minister Lee Hsien Loong will release his May Day message today and speak at the May Day Rally tomorrow.

Onus is on bosses to pay their workers more

By Janice Heng, The Straits Times, 30 Apr 2013

INTRODUCED as a labour movement initiative a year ago, the "progressive wage model" is now held up by the Government as a central pillar of Singapore's efforts to help low-wage workers.

The idea is to set out career ladders in low-wage sectors with pay benchmarks for each rung. Workers climbing up earn more.

Models have been rolled out for eight sectors from transport to cleaning, with more in the works.

For instance, the model for the food & beverage and retail sectors suggests at least $1,000 a month for service crew, rising to at least $1,800 for supervisors, $3,000 for managers, and so on.

But by tying wage gains to an upward climb by the worker, the progressive wage model has two main flaws.

First, this helps those who are able to move up, but not those who stay on lower rungs.

Second, it may not address the worry that low-skilled jobs may be underpaid to begin with.

In the progressive wage model (PWM), workers earn more if they move up into better jobs. A waiter earns more by becoming a supervisor. But not all workers can do that. Some may be unable or unwilling to take on larger roles, or remain waiters.

Even if some become supervisors, there will always be a need for many workers at the bottom rung. If wages for those at the bottom are very low to begin with, Singapore will always be saddled with a low-wage worker problem.

Some commentators have indeed argued that jobs at the bottom are paid too little to begin with.

Banyan Tree Holdings executive chairman Ho Kwon Ping and veteran economist Lim Chong Yah both alluded to this last year, noting that low-wage workers here are paid less than those in other developed economies, and that the wage gap between the low- and high-skilled is greater here.

Mr Ho's solution was to raise wages while incentivising firms to boost productivity. Professor Lim proposed a three-year wage hike ahead of productivity gains, arguing that the low-income are underpaid for their contribution.

But how can market-determined wages be considered "too low"? Doesn't a free market correct itself?

In an article in last month's International Labour Review, National University of Singapore economist Hui Weng Tat argues that employers have more bargaining power than workers, forcing workers to accept overly low pay. This understates the full social cost of labour, resulting in an inefficient or distorted outcome. The influx of low-skilled foreign labour in earlier years lowered workers' bargaining power further, he adds.

There is another sense in which one can argue that low-wage jobs pay too little: when it barely covers a household's basic expenses.

Based on the latest Household Expenditure Survey, the average monthly household expenditure for the bottom fifth was $1,760 in 2007/2008. This is more than the pay even for some "higher-rung" jobs such as cleaning supervisor, for which the progressive wage model suggests at least $1,600.

Even the Government's Workfare Income Supplement, which tops up the pay of low-wage workers, is a recognition that jobs do not pay "enough to get by", says UOB economist Francis Tan.

He adds that Workfare's impact is limited, as it is "just about increasing disposable income." It does not tackle the root problem: that some jobs do not pay enough to support an individual or a family. Prof Hui says Workfare could even encourage firms to perpetuate low wages by putting the burden of helping the low-income on the Government instead.

What is the best way then to raise the pay of low-skilled jobs?

The obvious way is to raise productivity, whether this takes the form of automation, training, or job and process redesign.

But there are limits to productivity increases. Drivers, for instance, can make only so many deliveries without speeding or working dangerously long hours.

One could also tighten the supply of cheap alternatives, that is, foreign labour. This is already being done, causing firms to raise pay for locals in low-skilled jobs.

Another simple step forward is for the progressive wage model to be more ambitious and set more benchmarks above current norms.

The current model sets pay benchmarks which reflect existing wages or are even below market rates in some sectors. For instance, housekeepers' benchmark pay is $1,000, but one hotel paid housekeepers $1,300.

The benchmark pay under the PWM for hotel attendants last year was $1,000. The latest available wage data for June 2011 data shows that median basic pay for hotel attendants was $1,100, higher than the benchmark.

The problem is that the PWM relies on moral suasion without the force of law. Companies can ignore it.

Ultimately, therefore, the onus lies on firms themselves to accept the need for higher wages as Singapore restructures.

This may even mean raising pay ahead of productivity gains, and accepting thinner margins or passing costs on. And if costs are passed on, consumers must be prepared to pay more in the name of fairer wages.

One could, of course, ask why we should care about low wages.

There are many pragmatic reasons. Too-low wages could increase the burden on Government to support the poor; deter Singaporeans from taking up such jobs, thus worsening the dependence on foreign labour; or hurt social cohesion if the gap between the haves and have-nots grows.

But there is a more basic reason to care, and it is the principle that someone doing an honest day's work should be able to make an honest living. In affluent Singapore, the existence of jobs that pay too little is all the more regrettable.

Perhaps we should not be content that workers have a chance to improve their skills and earn more by becoming supervisors. We should ask if we want to be the sort of country where jobs at the bottom pay so little to begin with.

Related

PM Lee's May Day message

May Day Rally 2013