Minimum Wage by Another Name?: The Progressive Wage Model
The government is turning to minimum wage of sorts, starting with the cleaning and security industries. Cleaners are expected to earn $1,000 at least. The devil is in the details e.g. number of hours, benefits. SMEs running cleaning services would rightly complain about increased labour costs but over time if they can attract workers and meet demand, business might work out for the better in the end.
To narrow an income gap, Hong Kong introduced minimum wage in 2011 of $HK28/hr, despite resistance from the businesses and industries as it is a departure from the city’s free market pro-business sensibilities. In 2013, the minimum wage in the SAR increased to $HK30/hr.
The progressive wage model is by no means a blanket minimum wage policy. Instead, it is sector-specific and tied to skills-upgrading to sell to employers and workers the idea that higher wages can be justified and must be earned respectively. Although it is not admitting it, the government is heading towards minimum wage in spirit, just that the style and substance is different.
The government is making the labour movement’s progressive wage model compulsory in the two industries, starting with cleaning.
Details for the security sector are still being worked out.
From September this year, entry-level pay for cleaners will be set at S$1,000 monthly, 20 per cent higher than today’s median basic wage for the sector.
For this to be effected, Environment and Water Resources Minister Vivian Balakrishnan will table a bill to introduce a mandatory licensing regime at the next sitting of Parliament on January 20.
The bill will come under the National Environment Agency’s Environmental Public Health Act.
Speaking to reporters on the sidelines of a symposium on sustainability on Wednesday, Dr Balakrishnan said a tripartite committee will regularly review what are deemed fair wages for cleaners.
The committee will consist of employers, unions and government representatives.
He was responding to a question on whether the entry level pay of S$1,000 for cleaners was set too low.
Dr Balakrishnan said: “The point is we now have a mechanism. A tripartite mechanism that would regularly review what is a ‘fair wage’, what are the appropriate terms of employment, what are the appropriate opportunities for improvement and improving productivity. We will make the necessary adjustments depending on the experience and outcomes over the next few years.”
The Labour Movement is also pushing for progressive wage to be mandated in the landscaping sector.
Arif Jumaat and his colleagues are cheering the government’s move to set basic wages for cleaners via the progressive wage model.
The 40-year-old cleaning supervisor has already benefited from the model, which his company chose to implement earlier.
The model seeks to progressively raise low earners’ salaries by increasing productivity through skills upgrading and training.
Mr Arif now earns around S$1,400 monthly.
He said: “Last time, my pay (was) just (over) S$800. I (did) not (have) enough money, but now (it is) okay.”
Cleaning businesses will soon be required, through a license, to pay resident cleaners wages that are determined by the tripartite committee.
This is regardless of whether they contract with public or private service buyers.
It means cleaners’ salaries will not fall below S$1,000 a month.
As cleaners move up the wage ladder, a skilled cleaner will get a basic wage of S$1,400 or more, while a supervisor in charge of cleaners can earn a basic pay of S$1,600 or more.
There are some 55,000 cleaners in Singapore’s resident workforce today.
There will be penalties for non-compliance under the new rules. For any breach of the progressive wage requirement, companies face having their licences suspended or revoked.
Buyers obtaining services from non-licensed cleaning firms will also face consequences under the law.
Milton Ng, director of Ramky Cleantech Services, said: “Most of the cleaning companies do not have a concern because at the end of the day it’s a pass-on cost. But I think the market itself — we have a tight labour market — if you do not even pay the progressive wage model, you cannot get workers.”
The Labour Movement believes businesses will benefit, even though wage costs may go up initially.
Lim Swee Say, secretary-general of the National Trades Union Congress, said: “Instead of looking at this, the more decent starting pay, as a business constraint… they should turn it into a business opportunity, business advantages, because with this more decent starting pay, they will be able to attract and retain their better workers better.”
Some 70,000 officers in the security sector are set to benefit, after cleaners, from progressive wage.
Similar to the cleaning industry, tripartite discussions will yield the framework for progressive wage to be mandated in the sector.
When the framework is ready, it will be incorporated into the existing licensing framework for security companies administered by the Singapore Police Force.
Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said: “It is a targeted approach, not a national minimum wage. We are using licensing rules to ensure progressive wages in these industries because of the prevalence of cheap-sourcing in the two industries. Cheap-sourcing practices discourage wages, skills and quality from moving up in the way they do in most other industries.”
To help firms defray costs, the Labour Movement has started a S$5-million Progressive Wage Incentive to subsidise up to 10 per cent of contract values.
The funding is capped at S$150,000 per contract.