Singapore seeks to raise wages of bottom-rung workers

Senior minister Tharman Shanmugaratnam said the country needs to raise the salaries of workers at the bottom of the ladder.
By: | January 15, 2021

The pandemic has brought to the fore the importance of essential workers, especially those who are low-income earners. 

“It can be done. It requires collective solutions, and it requires economic strategies that ensure we can continue to create jobs up and down the ladder,” Tharman said. 

He added that though the lower-income Singaporeans at the 20th percentile of the income ladder have seen their real incomes increase by about 40% in the last 10 years, part of the increase was playing “catch-up” for events that happened in the preceding decade, including the bubble burst, SARS and the global financial crisis, which impacted low-wage workers adversely. 

To make matters worse, the wage increase in low-income workers have not kept pace with median incomes in the country which grew 65% in real terms in the last two decades due to Singapore’s economic strategies, system of education and skills upgrading. 

There is therefore a real need to help the lower-income group level up with the rest of the population. 

Tharman said Singapore’s approach to sustaining income progression for a broad spread of workers is a combination of Progressive Wage Model (PWM) or a “minimum wage-plus”; Workfare – which is effectively a negative income tax to boost the income of low-wage workers; and economic strategies for job creation. 

On the much-debated issue of a minimum wage versus the “minimum wage plus” PWM, Tharman said these two approaches were similar theoretically, but different in design and application. What matters is how each approach would help the least skilled and most vulnerable workers. 

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Unlike many advanced countries where youth unemployment is the main concern, the group of greatest concern in Singapore is the older generation. Half of the bottom 10% of workers are above the age of 55, and of these, two-thirds did not complete secondary school. That is why a fine-tuned PWM approach is needed, the minister said.  

As for job creation, Tharman noted that in Singapore, the higher-skilled end of the workforce is essentially competing increasingly globally, whereas lower-skilled workers are competing with lower-wage labour forces in the region.