Implementation of minimum wage in Singapore impractical for employers, may encourage unemployment: Minister for Manpower Josephine Teo

The prospect of implementing a uniform minimum wage in Singapore remains impractical, as doing so would corner employers into paying their workers a higher salary than the market rate, producing the effect of a “tax” on employment, said Minister for Manpower Josephine Teo on Friday (26 Oct).

Speaking at a panel discussion at the Institute of Policy Studies’ 30th Anniversary conference at Marina Bay Sands, Ms Teo argued: “Not all employers would want to employ workers at this rate, which could lead to lower levels of employment.”

As a consequence, she said, “some workers may even choose to work illegally below the minimum wage” simply to secure any form of employment, “which makes them even more vulnerable” to exploitation.

Ms Teo added that the Singapore government is already channelling efforts into alleviating the problem of low salaries via its Workfare Income Supplement Scheme (WIS).

She qualified that “there’s a crucial difference” between WIS and minimum wage.

Ms Teo explained that “the cost of WIS is borne by the government, with no risk of inducing unemployment or illegal employment of such workers,” while  “minimum wage, on the other hand, will be borne by the employers.”

According to her, the WIS, which encourages low-wage workers to work regularly by providing support to the bottom 20 per cent of such workers, is “a permanent feature of our social security system”.

Under the scheme, workers may receive 60 per cent of WIS as CPF top-ups to build up their retirement savings, and 40 per cent of WIS in the form of cash supplements to assist their daily expenses.

The WIS payouts may make up an additional 30 per cent of the worker’s monthly income, which will potentially result in the total amount being the equivalent of a minimum wage.

Noting that while such initiatives have improved the wages of low-earning workers,  Teo insisted that the real solution to the problem lies in encouraging the sustainable growth of wages.

This is where the Progressive Wage Model (PWM) developed by the tripartite partners, according to her.

“Unlike minimum wage which specifies a floor, PWM specifies a ladder. In fact, there are four inter-linked ladders for skills, jobs, productivity and wages.

“A worker can be paid a higher wage on the basis of his improved skills, enlarged job or heightened productivity,” said Ms Teo.

“The rungs of the ladder provide an upward path, so the worker is not stuck earning minimum wages.”