Oral Answer by SMS Zaqy to PQs on TWG-LWW recommendations
NOTICE PAPER NO. 669, 670, 672, 677 OF 2021 FOR THE SITTING ON 13 SEPTEMBER 2021
QUESTION NO. 1653, 1667, 1674, 1675, 1676, 1677, 1681, 1702, 1722, 1732, 1765 FOR ORAL ANSWER
NOTICE PAPER NO. 682, 683 OF 2021 FOR THE SITTING ON 14 SEPTEMBER 2021
QUESTION NO. 1757, 1767, 1770, 1771 FOR ORAL ANSWER
MP: Ms Ng Ling Ling
To ask the Minister for Manpower in view of increases in business costs with the implementation of the Progressive Wage Models (PWM), how will the Government (i) monitor that the increase in costs is fairly shared between the businesses and consumers and (ii) ensure that such cost increases will not raise the cost of living for the low wage workers such that the benefits of the PWM to them are outstripped.
MP: Mr Yip Hon Weng
To ask the Minister for Manpower (a) how often and under what circumstances will the Local Qualifying Salary (LQS) be reviewed and revised; and (b) what support will the Government provide to companies in sectors that are traditionally more reliant on foreign manpower and badly hit by the pandemic, such as the construction sector, to afford the LQS for all their local workers.
MP: Mr Liang Eng Hwa
To ask the Minister for Manpower (a) what transitory support will the Government provide to employers as the implementation of the Progressive Wage Model (PWM) is expanded especially during under pandemic uncertainties; (b) how will the Progressive Wage Mark (PW Mark) be administered; and (c) how can the public and private sectors through their procurement and purchases of goods and services encourage more businesses to obtain the PW Mark.
MP: Mr Edward Chia Bing Hui
To ask the Minister for Manpower (a) how is the Local Qualifying Salary being determined currently; and (b) how does the Ministry plan to review the monthly minimum salary regularly.
MP: Mr Edward Chia Bing Hui
To ask the Minister for Manpower (a) how does the Ministry plan to inform and support employers to pay all local workers at least the Local Qualifying Salary to qualify for their employment of foreign workers; and (b) what will be the time period given to employers for this transition.
MP: Mr Edward Chia Bing Hui
To ask the Minister for Manpower how does the Ministry ensure that wage increases in the Progressive Wage Model sectors are sustainable for employers given that wage increases may not be directly tied to productivity increases.
MP: Mr Desmond Choo
To ask the Minister for Manpower In light of the tightened Local Qualifying Salary requirement (a) whether the Ministry will provide additional financial support to low-income families to help them cope with the expected increase in the cost of goods and services; (b) what are the safeguards to prevent companies from passing the entire burden to consumers; and (c) how can we ensure that businesses do not engage in such practices.
MP: Ms Hazel Poa
To ask the Minister for Manpower how many Singaporean employees currently earning under $1,400 per month will not be covered by the changes to the Local Qualifying Salary requirement for companies.
MP: Ms Jessica Tan Soon Neo
To ask the Minister for Manpower in light of the expanding coverage of the Progressive Wage Model (PWM) and new requirement for companies pay all local employees at least the Local Qualifying Salary (a) whether any forms of support will be provided to consumers and businesses to manage cost increases; and (b) if so, what are they.
MP: Ms Jessica Tan Soon Neo
To ask the Minister for Manpower in light of the expanding coverage of the Progressive Wage Model (PWM) and new requirement for companies pay all local employees at least the Local Qualifying Salary (LQS), how can the Ministry ensure that price increases purportedly resulting from the LQS will be fair, reasonable and not attempts at opportunistic profiteering.
MP: Miss Cheng Li Hui
To ask the Minister for Manpower with the proposed increase in wages for low-wage workers, how will the Ministry ensure that businesses do not profiteer under the pretext of having to pay higher wages.
MP: Mr Sharael Taha
To ask the Minister for Manpower (a) how does the Ministry ensure that wage increases in the Progressive Wage Model sectors are sustainable for employers given that wage increases may not be directly tied to productivity increases; and (b) given that wage growth will have to outpace productivity growth at the individual lower-wage worker level, whether the Government will consider providing support to businesses to enhance firm-level productivity such that businesses will be better able to support the wage increases for low-wage workers.
MP: Ms He Ting Ru
To ask the Minister for Manpower (a) for each of the last five years, how many Singaporeans make less than the Local Qualifying Salary (LQS); (b) what is the breakdown by job type and industry for these Singaporeans; and (c) how is the LQS determined and how often is the level reviewed.
MP: Miss Rachel Ong
To ask the Minister for Manpower (a) how will employers be able to verify the specific progressive wage that they need to pay their workers given the various sectors they come from; and (b) whether the verification process will form an onerous administrative burden on the employers.
MP: Miss Rachel Ong
To ask the Minister for Manpower (a) what are considerations for lowering the qualifying age of the Workfare Income Supplement (WIS) from 35 to 30 years old; (b) whether the Ministry will consider extending it to lower-wage workers below 30 years of age; and (c) whether it shifts the financial burden from the Government in paying WIS to employers via the Progressive Wage Model as it becomes more pervasive and lead to rises in personal income.
Answer
1 Mr Speaker, with your permission, I would like to take these questions together. I thank Members for their interest in the recent recommendations of the Tripartite Workgroup on Lower-Wage Workers, which the Government has accepted. Apart from my reply today, I would also encourage them to read the 88-page report of the Workgroup, where the reasoning and intent of many of the proposals are laid out in greater detail.
Achieving Progress Through Solidary and Dynamism
2 The Workgroup’s vision is for a strengthened social compact, where everyone enjoys Singapore’s fruits of growth. We want to enable our lower-wage workers to progress along with other workers. At the same time, society, employers, and the Government stand in solidarity with them. We must also recognise that for our lower-wage workers’ progress to be sustainable, Singapore must maintain a dynamic economy, where businesses can thrive and create good jobs and good careers for our workers.
Workfare and Progressive Wages as Mutually Reinforcing Efforts
3 Uplifting lower-wage workers has been a priority for the Government over the years. Workfare is the foundation of the Government’s support for our lower-wage workers. We currently spend $850 million a year on Workfare. PM has announced that Workfare spending is expected to increase to $1.1 billion a year by 2023. This is a clear commitment that Workfare will continue to be a foundation of our policy response. The Government will release more details next year.
4 Building on the foundation of Workfare, the Progressive Wage Model (PWM) provides job and training progression pathways for our lower-wage workers, and grows their wages as they improve their skills and productivity. Workfare and Progressive Wages work in tandem, and are therefore mutually reinforcing.
5 Over the last decade, our policies to support lower-wage workers have made a difference in uplifting them to enjoy good wage growth. From 2009 to 2019, real income1 at the 20th percentile of our resident workforce grew 39% cumulatively, faster than the median worker at 33%. To address Miss Ng Ling Ling’s and Mr Desmond Choo’s questions, I want to stress that these are real income gains – in other words, 39% cumulative income gains even after subtracting the effects of inflation.
6 Low-income households would therefore benefit from our Progressive Wage and Workfare policies. I am sure many members are aware that there are dedicated efforts to support our low-income households through various schemes and subsidies in education, healthcare, housing, as well as financial assistance. Households facing financial difficulties can approach MSF’s Social Service Offices (SSOs), which will look into ways to support them through schemes such as ComCare assistance. MSF regularly reviews ComCare to ensure that support remains adequate.
Sustainable Wage Increases Through Progressive Wages
7 The Workgroup achieved tripartite consensus on 18 recommendations, including significantly widening the coverage of Progressive Wages. First, we will expand Progressive Wages to new sectors like Food Services, Retail and Waste Management, as well as occupations like Administrators and Drivers. We will also extend existing PWMs to in-house cleaners, security officers, and landscape workers. Second, we will introduce a new Local Qualifying Salary (LQS) requirement; employers will need to pay all its local workers at least the LQS in order to access any foreign worker. Third, we will introduce the Progressive Wage (PW) Mark to recognise firms that pay Progressive Wages.
8 The Workgroup has not deviated from the broad principle that wages should grow in tandem with productivity over the longer term so as to be sustainable. However, it recognised that there was a case for the wage growth of lower-wage workers to outpace productivity. This is because the productivity of frontline workers is not due solely to the industriousness of the worker, but is also dependent on the firm’s operations and methods of work. The Workgroup also recommended that for the next decade, the wages of our lower wage workers should continue to grow faster than the median, or the median plus approach. However, when wages at the 20th percentile have gained sufficiently on median wage levels, this would no longer be necessary.
9 Mr Edward Chia and Mr Sharael Taha asked about the sustainability of these wage increases. One important way we will do this is to continue the Progressive Wage approach, whereby wage increases are secured by tripartite consensus.
10 These will be done by sectoral Tripartite Clusters for the Sectoral Progressive Wages, and the National Wages Council for the Occupational Progressive Wages. I know for a fact, and especially during these times, that tripartite negotiations are never easy, and for good reason as the concerns of different parties need to be balanced.
11 Tripartism is our strength, some say our secret sauce, to make Progressive Wages work for the foreseeable future. I am confident that through such robust discussions, these established tripartite bodies will arrive at a common ground that is sustainable and benefits all stakeholders.
12 If wage growth of our lower-wage workers outpace productivity growth in the medium term, the sustainable response is for businesses to use this period to urgently enhance their firm-level productivity to better support wage increases for workers. To Mr Sharael Taha’s query, the Government will continue to support firms through the Productivity Solutions Grant, as well as more specific efforts enabled by the Industry Transformation Maps.
13 For many years, firms hiring foreign workers have been required to pay at least the LQS to the local workers that they need to count towards their foreign worker quota, or Dependency Ratio Ceiling (DRC). So, this is a policy that our businesses are already familiar with. The Workgroup studied this carefully and decided to leverage on the LQS to broaden our coverage of Progressive Wages. From September next year, firms hiring foreign workers will have to pay all local workers the LQS. This builds upon regular increases in the LQS level over the years, such as from $1,000 in 2016 to $1,400 in 2020.
14 To Ms He Ting Ru’s query, there are 103,000 full-time resident employees earning a gross monthly income of below $1,400 in 2020, which is about 5.3% of the full-time employed resident workforce. I’d also like to take the opportunity to highlight, that in 2020, many of our lower-wage workers were impacted by the economic impact of Covid-19 and faced reduced work-hours or allowances. These employees work in a wide range of industries from Food Services to Administrative and Support Services, and occupy a diverse range of jobs, from cleaners to office clerks to shop sales assistants. This was also why the Government provided special support of $3,000 to this segment of workers through the Workfare Special Payment and other social support schemes.
15 With the new LQS requirement, an estimated 77% of these employees should see their wages rise to at least $1,400 a month. Many in this group would also see their wages further uplifted beyond LQS, by the Sectoral and Occupational Progressive Wages. The Workgroup expects the PWMs to continue to set the pace on wage growth, with Progressive Wage levels expected to be above LQS. For example, workers in the Cleaning and the Landscape sectors can potentially earn at least about $2,400 a month by 2028.
16 To Ms Hazel Poa’s query, the remaining 23%2 would be in businesses that do not hire foreign workers. The vast majority of these businesses are very small, hiring fewer than 10 workers, and include small family operations such as hawker stalls and heartland shops. We are all familiar with such micro-businesses, familiar faces in our neighbourhoods and typically having family members – spouse, children, relatives helping out. They don’t have the business scale or reach, and we are mindful that sudden wage shifts to these micro-businesses can result in business failure.
17 While not formally covered by the LQS requirement, these workers here should still see meaningful increases in their wages over time due to market forces. The Progressive Wages will cover 8 in 10 full-time lower-wage workers, and the PW Mark is expected to bring the coverage of Progressive Wages to up to 94% of full-time lower-wage workers.
18 Some Members, including Mr Yip Hon Weng, have asked how the LQS is currently being determined, and under what circumstances it would be reviewed. As the Workgroup’s Report explains, the LQS is a stable benchmark that has been in place for many years. It has been revised four times in the last five years.
19 We recognise that the new LQS requirement in 2022 will have significant impact on employers. Hence, we have no plans to further increase the LQS for now, but will focus on the implementation of the new LQS rules, and also for the other Sectoral and Occupational Progressive Wages to establish their relevant wage benchmarks.
20 I urge Members not to look at each measure in isolation, but to bear in mind the overall and holistic impact on not just workers, but also on employers.
Implementation is Key
21 Members have also asked about implementation details. I would like to give the assurance that the intent of MOM is for firms to be well-informed of the moves, and to have adequate time to adjust before the implementation.
22 To Mr Edward Chia’s query, firms that hire foreign workers are already familiar with the concept of LQS for many years. Together with tripartite partners, the Government will continue our outreach to firms before the new LQS requirement and other new Progressive Wages kick in on 1 September 2022. The initial period beyond its introduction will be a run-in period, during which MOM will focus on educating employers on the various Progressive Wage and LQS requirements that they will need to adhere to. In other words, MOM will not jump straight into strict enforcement, but will initially focus on improving awareness and compliance. This is the same approach that was adopted when new Employment Act obligations were introduced in 2016.
23 In designing the system to support the new moves, we will make the compliance process as smooth as possible. To Miss Rachel Ong’s query, we will keep additional reporting requirements minimal by tapping on existing processes such as CPF salary declarations and returns to MOM’s Business Census. Employers will also be able to refer to MOM’s website to check the job descriptions of workers eligible for Progressive Wages and the required wages. We will also explore ways to allow employees to check that they are paid the Progressive Wage due to them. We note that the Singapore Business Federation has acknowledged that the Report of the Workgroup has taken into consideration their feedback on minimising the burden of compliance for firms.
24 To Mr Liang Eng Hwa’s query on how the PW Mark will be administered, we will tap on the same systems that I have just described, to ensure that only firms that pay Progressive Wages are awarded the PW Mark. This will assure companies and consumers that when they purchase from firms with the PW Mark, they are directly supporting the lower-wage workers in these firms. The public sector will take the lead and require its suppliers to obtain the Mark. As the support of private sector buyers is also essential, the tripartite partners will also work with the various Trade Associations and Chambers to raise awareness of the PW Mark, promote its adoption, as well as encourage businesses to purchase from other businesses with the PW Mark.
Uplifting Lower-Wage Workers is a Whole-of-Society Responsibility
25 Uplifting lower-wage workers is a whole-of-society responsibility, and the cost of raising their wages will have to be shared. Workers will need to adopt the right mindset and be ready to adapt and learn new skills to be more productive. Employers will need to increase productivity at the firm-level, which would help them better absorb the additional wage costs.
26 The Government will do its part too. With respect to employers, the Government recognises that employers will need some time to adjust their operations, especially as the economy is still recovering from the COVID-19 pandemic. As such, to the queries of Miss Jessica Tan and other Members, the Government has accepted the recommendation of the Workgroup to provide transition support, and is carefully studying the details of that support. This will be announced in due course, and before the implementation of the first moves in September 2022.
27 With respect to workers, I have already touched on the Government’s commitment to expanding Workfare. So to Ms Rachel Ong’s question of whether there will be shift away from Workfare to employers paying for the wages of our lower-wage workers, the answer is no. The Government is committed to Workfare as a permanent scheme; at the same time, employers do their part by offering progressive wages.
28 Ms Rachel Ong asked why we are lowering the Workfare qualifying age to 30 years old, and whether we will lower it further below age 30. Below the age of 30, most workers would have just started work, and earning starting salaries. Most will have greater potential for future income growth. Therefore, it will be too premature to consider them for Workfare. They could be better supported through training and upskilling efforts, such as SkillsFuture, to help them access better jobs and grow their wages in a sustainable way.
29 For workers aged 30 to 34, however, some continued to remain in the lower-wage range despite the upskilling efforts. At this age, they are just starting their own families or are looking to buy their first home. We believe that Workfare will help them better cope with their current expenses, and to start saving for their retirement.
30 Miss Cheng Li Hui and other Members asked if businesses will unfairly raise prices. In the Food Services and Retail sectors, where there are many firms competing and barriers to entry are not high, firms will be expected to think carefully about cost increases. It is also fair to say that we have to expect some degree of cost increase to accommodate higher salaries for our lower-wage workers. This is where we as consumers have to do our part in support of our lower-wage workers.
31 I therefore hope that Singaporeans will not unfairly accuse firms of profiteering, but let’s also work together to address any unreasonable price increases or practices. One reason why the Workgroup recommended that the National Wages Council help to provide guidance on wage growth is to enable the tripartite partners to carefully weigh the impact of wage growth, inflation and general economic conditions every year, before finalising their guidance.
32 Because the growth of Progressive Wages is negotiated through tripartite consensus, we have more assurance that wage increases will be sustainable for workers, employers, and consumers.
Conclusion
33 The effort to uplift our lower-wage workers is a massive undertaking, spanning the next decade and beyond. To do this well, we will need to go beyond a whole-of-government approach, or even a tripartite approach. We will need the whole of society – workers, consumers, employers, unions, the Government, members of the public – to come behind and support this effort.
34 The Government has committed to providing transitional support and increasing spending on Workfare. Tripartite partners have agreed on a roadmap to chart the progress of lower-wage workers over the next decade. Many businesses and consumers already recognise that they will need to do their part by paying a little more for goods and services. There has also been heartening support from society-at-large. Let us continue on this course, to bring society together behind the goal of supporting our lower-wage workers.
1Gross monthly income (including employer CPF) from work of full-time employed residents, deflated by Consumer Price Index for all items at 2019 prices (2019=100). Source: Comprehensive Labour Force Survey, MRSD, MOM
2Estimate is an upper bound as it includes workers for whom there is insufficient data to ascertain whether they work in a firm that hires foreign workers or not.