Senior Minister of State Josephine Teo / photo: straitstimes

Manpower Minister Josephine Teo insists Progressive Wage Model uplifts low-wage workers’ pay; experts argue otherwise, citing depressed wages due to unbridled influx of migrant workers into Singapore

While Manpower Minister Josephine Teo continues to sing high praises of her Ministry’s Progressive Wage Model (PWM) in uplifting the earnings of low-wage workers in Singapore, a public policy expert and former economist have argued otherwise, highlighting the trend of depressed wages among such low-wage earners due to a high influx of foreign workers into the Republic.

Mrs Teo was quoted as saying in November last year: “More than handouts, we want a ‘hand-up’,” adding that PWM assists low-wage workers in acquiring skills, “to be assigned work that makes use of those skills, and be paid more for enlarged responsibilities or improved productivity”.

Illustrating her point, she pointed to an example whereby an entry-level landscape worker can receive a basic monthly wage of at least $1,300 under PWM.

“But this is only a starting point. As a landscape technician with the necessary training and skills to operate motorised machinery, the worker can earn at least $1,500, and more than $2,100 when he advances to the role of supervisor,” Mrs Teo elaborated.

“First,” she added, the PWM is “a ladder, not a floor, and every worker has the chance to earn more through better skills, a larger job or higher productivity”.

“Second, it takes into account sectoral differences and is not one-size-fits-all. Third, and perhaps most important of all, PWM offers a way of uplifting pay which both employers and employees can accept.”

Citing three sectors which operate via licensing – which allows companies to operate only if a minimum wage is paid to their workers – Mrs Teo shared that there are some 70,000 workers in the three sectors, namely cleaning, landscaping, and security.

She added: “Workers in these sectors have seen higher real wage growth than those at the median.

“Between 2011 and 2016, the real median gross wages of full-time resident cleaners, security guards and landscape maintenance workers increased by 5.7 per cent, 6.4 per cent and 3 per cent per year respectively, exceeding resident median income growth of 2.3 per cent per year.”

However, it should be noted that wages of workers in the three sectors do not generally exceed $1,300, which is still abysmally low, and have not demonstrated exponential growth unlike Mrs Teo’s suggestion.

Former Associate Dean of LKY School of Public Policy (LKYSPP) Donald Low wrote in a book he co-authored with Economist Intelligence Unit senior editor Sudhir Thomas Vadaketh called Hard Choices: Challenging the Singapore Consensus that “There is some evidence to suggest that Singapore’s workers in the service industries are less productive than their counterparts in other rich countries”.

He added that “Cleaners, bus drivers and construction workers are probably more productive in Sweden than they are in Singapore”.

Dr Low, however, raised a pertinent question: “[…] why has inequality increased at a time when quality education in Singapore has become widely available?”

He argued that “The democratisation of education suggests that differentials in productivity should have narrowed, which in turn suggests that wage differentials should also have been reduced”.

“Why should a lower-wage Singaporean worker, who has benefitted from the state education system, be less well-paid than his Swedish or Swiss counterpart doing a similar job? Is it possible that something else other than individual productivity determines our wages?” Dr Low questioned.

Dr Low went on to suggest that an “important determinant of market wages” in “rich countries” is immigration, given that low-skilled workers in many European countries earn more because of their tight immigration controls.

“If these countries were to import large numbers of low-skilled workers from poor countries, it is hardly conceivable that their low-skilled workers can earn the wages they do now, their relatively higher productivity levels notwithstanding,” according to Dr Low.

“A Swedish bus driver, for instance, earns 50 times [than] his Indian counterpart [does].

“If Sweden were to allow Indians and other immigrants from poor countries to enter its labour market, simple economics tells us that the wages of bus drivers in Sweden will be immediately depressed.”

“Too rapid an inflow leads not only to more competition for jobs and reduced wages,” as observed in Singapore, “but also stretches the country’s physical and social infrastructures,” added Dr Low.

Former GIC Chief Economist Yeoh Lam Keong similarly noted in 2012 that mass immigration of foreign unskilled workers has depressed the wages of working-class Singaporeans, as local companies would inevitably prioritise employing foreign workers willing to accept lower pay than their Singaporean counterparts, in tandem with the primary objective of any for-profit firm, which is to maximise their own profits.

One netizen chimed in on Prof Yeoh’s argument regarding the unrestricted open-door policy practiced by the Singapore government, stating that it might only appear to be a poorly constructed move only on the part of low-wage Singaporean workers: