Oral Answer by Senior Minister of State Mr Zaqy Mohamad on the Progressive Wage Model

NOTICE PAPER NO. 479, 473, 470, 498, 500, 502 OF 2021 FOR THE SITTING ON 5 JULY 2021
QUESTION NO. 1194, 1195, 1207, 1208, 1260, 1297, 1322 FOR ORAL ANSWER

NOTICE PAPER NO. 473, 480, 481, 500, 501, 511 OF 2021 FOR THE SITTING ON 6 JULY 2021
QUESTION NO. 1184, 1197, 1198, 1204, 1205, 1206, 1210, 1213, 1233, 1311 FOR ORAL ANSWER

MP: Miss Cheng Li Hui

To ask the Minister for Manpower in the past decade, how does growth in the wages of the bottom 20 percent of workers compare with (i) median wage growth in Singapore and (ii) income growth of bottom 20 percent of workers in OECD countries.

MP: Miss Cheng Li Hui

To ask the Minister for Manpower (a) how has the COVID-19 pandemic affected lower wage workers; and (b) whether the pandemic has delayed implementation timelines for expansion of the Progressive Wage Model to other sectors and other efforts to uplift lower wage workers.

MP: Mr Desmond Choo

To ask the Minister for Manpower (a) how will the revised wages for the cleaning sector under the Progressive Wage Model impact the wages of other lower wage workers; (b) what are the future plans for sectors with lower wage workers; and (c) how will this build a stronger social compact.

MP: Ms Yeo Wan Ling

To ask the Minister for Manpower (a) why is the wage ladder under the Progressive Wage Model (PWM) for the cleaning sector determined only in 2021 when the announcement for a 6-year wage increment under the PWM for that sector was made in 2016; (b) what are the considerations for the 6-year rollout period; and (c) whether the cleaning industry has been consulted on wage quantum and rate of increments.

MP: Ms Yeo Wan Ling

To ask the Minister for Manpower (a) what skillsets has the Ministry planned for workers in the cleaning sector to possess to remain relevant in the move towards cleaning automation; and (b) what is the Ministry’s plan to ensure that the cleaning industry will continue to provide viable livelihoods in the long term.

MP: Mr Yip Hon Weng

To ask the Minister for Manpower with the adjustments to cleaners’ wages under the Progressive Wage Model (PWM) (a) what will be the overall increase in costs to the industry in a year given the additional manpower required due to the COVID-19 pandemic; (b) how will businesses and the community be impacted by such additional costs; and (c) how is the Ministry engaging the industry to increase mechanisation to raise productivity and cut manpower needs.

MP: Mr Yip Hon Weng

To ask the Minister for Manpower (a) what are the roll-out plans for the Progressive Wage Model (PWM) for the retail and food services sector; (b) what is the plan to implement PWM for other vocational roles that are not currently covered under the PWM; and (c) how will PWM contribute to shifting away from reliance on foreign manpower.

MP: Mr Gan Thiam Poh

To ask the Minister for Manpower (a) how is the wage ladder under the latest Progressive Wage Model (PWM) for the cleaning sector decided upon; and (b) whether the Government will provide support to cleaning companies with existing contracts that are tendered based on the previous PWM wage recommendation.

MP: Mr Edward Chia Bing Hui

To ask the Minister for Manpower (a) whether the Tripartite Cluster for Cleaners (TCC) discussed ways to ensure that the higher cost arising from enhanced wages under the Progressive Wage Model (PWM) for the cleaning sector will be fairly borne by cleaning companies, service buyers and the public; (b) what are some of the feedback the TCC received from cleaning companies and their service buyers; and (c) what lessons can be drawn from this as the PWM is expanded to other sectors.

MP: Mr Don Wee

To ask the Minister for Manpower how will the cleaning industry be impacted by the recent announcement on the Progressive Wage Model for cleaners.

MP: Ms Hany Soh

To ask the Minister for Manpower (a) what has been the average wage increase of cleaners under the Progressive Wage Model (PWM) over the years; (b) whether the PWM has improved the quality of cleaning; (c) whether the PWM has caused a reduction in the number of cleaners employed, especially for those smaller scale F&B outlets; and (d) whether the PWM has a knock-on effect on food prices.

MP: Mr Sharael Taha

To ask the Minister for Manpower under the Progressive Wage Model (PWM) for workers with wages at the bottom 20% of the workforce (a) what is the number and percentage of workers from the cleaning, security, landscape and lift and escalator industries who can benefit; (b) what is the additional number and percentage of workers who will benefit from the expansion of PWM into the food, retail and waste management industries; and (c) what lessons can be drawn from the implementation of the PWM to expedite its expansion.

MP: Mr Edward Chia Bing Hui

To ask the Minister for Manpower whether the Workfare Income Supplement (WIS) will be adjusted such that enhancements to wages under the Progressive Wage Model are not entirely offset by lower WIS payouts.

MP: Mr Liang Eng Hwa

To ask the Minister for Manpower whether the income qualifying criteria for Workfare Income Supplement (WIS) will be adjusted in line with the new Progressive Wage Model (PWM).

MP: Mr Sharael Taha

To ask the Minister for Manpower how will Workfare Income Supplement (WIS) complement the Progressive Wage Model (PWM) so that an increase in wages of workers through PWM is not offset by a reduction in WIS payouts.

MP: Miss Rachel Ong

To ask the Minister for Manpower given plans to adopt a vocational approach for the Progressive Wage Model (PWM), how will progressive wages be extended to workers who are employed by companies in sectors not currently covered by the PWMs and whose majority of rank and file workers will not be on PWM, without disrupting the pay and cost structure in such companies.

MP: Mr Gerald Giam Yean Song

To ask the Minister for Manpower (a) whether the Government intends to increase labour productivity of the cleaning sector in tandem with the projected doubling of the wage floor from the current $1,236 to $2,420 by 2028 under the latest updates to the Progressive Wage Model (PWM) for this sector; (b) if so, how will this doubling of productivity be brought about; and (c) whether workers in this sector will face higher unemployment if this productivity increase cannot be achieved.

Answer

1. Many Members have filed questions related to our lower-wage workers. I thank Members for sharing our keen interest in uplifting them. Mr Speaker, with your permission, I would like to take these questions together.
   

   
   What are we trying to achieve?

2. Our fundamental objective is to make sure that as a society, we take care of every worker. We cannot progress as a society and achieve economic progress with a strong social compact and national identity, if there is a group of workers who are left behind. We must ensure that every worker who is prepared to work hard will be able to earn fair wages and prosper along with the rest of Singapore.
   

   
   Workfare and PWM are making a difference to uplift lower-wage workers

3. Uplifting our lower-wage workers has been a priority of the Government. Introduced in 2007, Workfare is the foundation of the Government’s support for lower-wage workers. It supplements the incomes of lower-wage workers in cash and helps them save more for retirement. This encourages them to work regularly, rather than rely on welfare measures. Studies have shown that Workfare has led to an increase in employment rates, with the highest increases among older workers.
   
   
4. Close to a million lower-wage workers have since benefitted from nearly $7.8 billion in Workfare payouts.

    

5. Workfare also supports lower-wage workers to upskill themselves, increase their productivity, find better jobs and earn higher wages. Another $600 million has been paid out to employers and workers through the Workfare Skills Support Scheme, to enhance their skills and employability.

    

6. On top of Workfare, the Progressive Wage Model (PWM) provides job and training progression pathways for our lower-wage workers, to grow their wages as they improve their skills and productivity.

    

7. Our policies to support lower-wage workers have made a difference in uplifting them, helping them to enjoy good wage growth over the last decade. To Miss Cheng Li Hui’s question – from 2009 to 2019, real wages¹ at the 20^th percentile of our resident workforce grew 39% cumulatively, faster than the median worker at 33%. This has allowed our lower wage workers to gain ground and progress faster than the median.

    

8. While we see robust real income growth for them, this is not the case for most OECD countries². For example, workers at the 20^th percentile in the UK saw no real wage growth, while those in Japan and US saw only cumulative real wage growth of 3% and 6% respectively despite having the minimum wage over the same 10-year period. We should not take our progress for granted. It is not inevitable that this is so.
   
   

   We will redouble our efforts to support our lower-wage workers even more, especially given the pandemic

9. While COVID-19 has resulted in a fall in the earnings of lower-wage workers to $2,340, government schemes such as the Workfare Income Supplement (WIS) and the one-off Workfare Special Payment (WSP)³ in 2020 helped to mitigate this impact. After taking this into account, the incomes of the first 20% of income earners in 2020 were actually similar to wages in 2019.
   
   
10. As we helped our lower wage workers cope with COVID-19, it was also timely that we look to strengthen their prospects and progression for the long-term. This is why we formed the Tripartite Workgroup on Lower-Wage Workers last year. The Workgroup will be releasing its recommendations in the coming months.

     

11. The Government’s aspiration remains to cover all sectors with Progressive Wages. Currently, Progressive Wages benefit 85,000 workers. The Workgroup has already announced that it will introduce PWMs in three new sectors: Food Services, Retail and Waste Management. It will also bring in-house cleaning, security and landscaping workers into the Progressive Wage system. These moves will significantly expand coverage to up to 218,000 workers. The Workgroup is also looking at introducing Progressive Wages to other lower-wage occupations that straddle multiple sectors, as raised by Miss Rachel Ong.
    

    
    PWM – Strong and sustained wage growth
    

12. Agreeing which sectors should start the PWM is just the first step. The hard work of making sure it achieves the objective of progress for lower wage workers, and sustaining high employment, is in the details. These are carefully negotiated by the tripartite partners.

     

13. When it was first introduced in 2012, the mindsets of employers and service buyers were different, much effort went into getting their support and buy-in.

     

14. There were concerns – whether wage increases were sustainable, whether they would lead to higher costs for essential services in our daily life. Today, all PWM stakeholders buy into the same vision, and work together to support our lower wage workers. Employers now better understand the benefits of PWM to them and their workers.

     

15. This win-win outcome is why the cleaning sector has been able to agree to a much more ambitious rate of wage growth, in its most recently concluded round of review.

     

16. To Ms Hany Soh’s question – cleaners’ wages have risen by 26%⁴ cumulatively from 2014 to 2019 and we have seen local employment rise by 3%⁵. Overall, while businesses have had to adjust to the wage increases, they have been able to do so without adverse impact. Mr Desmond Choo asked how they will impact wages of other lower-wage workers. For related jobs, there could potentially be some positive wage spillover effects. Nevertheless, if we want to achieve more broad-based progress for more lower wage workers, more of them will need to be brought directly into the Progressive Wage system – hence the Tripartite Workgroup’s discussions to include new sectors.

     

17. Some Members, including Mr Gan Thiam Poh, wanted more information of how the future wage increases for the cleaning sector were determined. Mr Speaker, the essence of the Progressive Wage Model is tripartite negotiation and consensus. Hence, the representatives from the cleaning sector are part of the Tripartite Cluster for Cleaners (TCC) which negotiated the wage increases. The TCC, which oversees the Cleaning PWM, consists of representatives from unions, employers, service buyers and the Government. The TCC consulted widely with the industry and had numerous vigorous discussions among its members to find common ground that benefits all stakeholders.

     

18. The TCC was clear in their collective desire to raise the wages of our cleaners in a sustained manner, and revalue the work of cleaners who have been integral in our fight against COVID-19. This is the uniqueness of Singapore’s approach because PWM progression is brought about through tripartite consensus.

     

19. Mr Edward Chia and Mr Sharael Taha asked about the lessons drawn from our experience with the Cleaning PWM. A key takeaway is that the negotiated approach of the PWM helps address concerns and allows the sector to raise wages at a pace suitable for them.

     

20. The robust wage increases for the Cleaning PWM are the fruits of almost a decade of close tripartite collaboration and consistent effort by the TCC. The TCC has learnt over time to harness the PWM design to benefit their workers and sector. Cleaning companies recognised that Singapore’s resident workforce is ageing, and that, in addition to better wages, they needed to redesign jobs to better retain and attract workers to the sector. Their support also assures us that the wage increases are sustainable.

     

21. Through negotiation, the PWM allows stakeholders to take sector-specific circumstances into account. One example is the six-year wage schedule, as highlighted by Ms Yeo Wan Ling. The TCC did so to provide employers and service providers with clarity for long-term planning. Cleaning firms can price in the wage increases in their multi-year contracts with service buyers. There is also a mid-point review so that the TCC can ensure that the wage increases remain sustainable.

     

22. This pandemic has shown us how the PWM approach is superior to a blunt minimum wage. The sectoral approach has also enabled us to advance PWM for Cleaners, as well as other sectors that are able to adjust to PWM progressions in the short-term. A blunt minimum wage may not have been able to achieve consensus or as ambitious a wage growth. Sectors such as tourism, aviation, hospitality and others, that are severely impacted would not have been able to agree to such a move. Our targeted approach enables the tripartite movement to advance PWM at a pace depending on how the different sectors perform in the market.

     

23. The Tripartite Clusters for the new sectors, such as Food Services and Retail, will similarly take into account market conditions and what each sector can manage, as they recover from the economic impact of the COVID-19 pandemic. Mr Yip Hon Weng would be happy to know that these sectors are making good headway in developing their PWMs. Notwithstanding the challenging economic conditions, they are committed to submitting their recommendations before the end of the year.

     

24. The Cleaning PWM is also not pursuing wage increases without considering skills, productivity and industry transformation. To Ms Yeo’s question on re-skilling, the TCC has upgraded the training requirements for cleaners. This ensures that our workers continue to be upskilled, and helps reduce the sector’s reliance on low value-added manpower, including foreign manpower, as raised by Mr Yip.

     

25. Members have raised questions on how businesses and consumers will handle the additional cost, and also how productivity in the sector can be increased.

     

26. Indeed, if we as a society would like to see our lower wage workers make good progress sustainably, all of us have a role to play. Employers have to drive productivity improvements in their firms, through better technology and processes, as raised by Mr Don Wee. They may also have to explore new business models or services to value-add to their customers. Service buyers have to embrace outcome-based contracting and contract durations that encourage investment in new technology. These are indeed directions that the industry has articulated in their Industry Transformation Map for the Environmental Services sector. Consumers also contribute by sharing the cost of wage increases and pay slightly more for services and products as the sector implements the PWM.

     

27. Mr Gerald Giam asked how the Government will increase productivity in the cleaning sector. The Government cannot legislate productivity. Productivity growth is the result of workers and firms working together, to grow the business, and then fairly distribute the fruits of the growth. This is why the tripartite movement believe the Progressive Wage Model is better than a blunt minimum wage. Each PWM implemented is agreed via a tripartite process, which gives greater confidence that such wage increases can be supported by the market and by society, and will not put employment at risk.
    

    
    Government Support and Workfare

28. Finally, Members, including Mr Liang Eng Hwa, have asked whether Government support for firms and workers will be provided. This is something the Tripartite Workgroup is looking at as part of its deliberations.

     

29. MOM has been reviewing and enhancing Workfare, with significant improvements made recently in 2017 and 2020. At each review, the wage growth of our lower-wage workers has been taken into consideration and qualifying criteria adjusted accordingly. The Government will continue to review Workfare regularly to ensure that our lower-wage workers remain adequately supported.
    

    
    Conclusion
    

30. The Government and tripartite partners are working closely together to make Progressive Wages a reality for all sectors of our economy – sooner rather than later. I urge this House and all Singaporeans, to support our lower-wage workers.