implications of PWM

Question 1

Positive implications (low wage workers)

Answer 1

Low wage Singaporean and PR workers in cleaning, landscape, security sectors benefit from increase in wages and upgrade in work-related skills thereby increasing productivity

Question 2

Positive implications (government)

Answer 2

• PWM addresses the interests of key stakeholders - workers, unions who represent workers, employers
• PWM allows companies to increase the wages of low wage workers when they upskill and improve their productivity. Both stakeholders, companies and workers, benefit from PWM
• PWM is developed by tripartite committees consisting of unions, employers and the government - this allows government to set basic monthly wages customised for the sectors

Question 3

Negative implications (government)

Answer 3

The complex structure of PWM, requiring tripartite consultation and negotiation, makes the implementation and expansion of PWM slow which may reflect badly on the government’s efficiency and effectiveness in uplifting the wages of low wage workers in Singapore

Question 4

Negative implications (low wage workers)

Answer 4

• Increase in wages is gradual and take place over a span of 5 years. The pace of wage increment may be too slow for some workers who may face challenges in earning a sufficient wage to meet their daily expenses.
• Covers only 3 sectors currently though there are plans to expand the PWM to other sectors - lift and escalator maintenance (wef 2022), food services, retail, waste management
• One likely reason for the slow and incomplete implementation of PWM is its complex structure, requiring tripartite consultation and negotiation.
• Not all low wage workers are able to upgrade their skills (due to the manual nature of most of these jobs)
• Supervisory positions are open to only a few workers so there is a limit to the wage increment
• Highest wage level may not be sufficient for some workers and additional support may still be needed through Workfare Income Supplement, Workfare Skills Support Scheme and other subsidies
• Workers joining another company have to start from the lowest wage level
• Since PWM applies only to Singaporeans and permanent residents, it may have the perverse impact of increasing employers’ preference for hiring foreign workers, especially since they can be selected for age, skill, physical strength, endurance and other personal qualities that can yield higher productivity at a lower wage than elderly Singaporeans in the same labour pool who will now cost more. Thus twinning PWM with reduced foreign worker quotas is essential.
• Strengthening and enforcing employment protections must also accompany the expansion of PWM. If not, businesses might seek to meet the mandate by cutting labour costs through other means. For example, as research by one of us shows, they might cut benefits or increase the hours required for a PWM monthly wage, so that hourly labour costs remain low even as monthly wages increase. They can also change staff to contract, self-employed, part-time or casual status. These practices may result in an increase in workload/ working hours for workers or decrease their job security and income stability.

Question 5

Positive implications/consequences (employers)

Answer 5

higher worker productivity through skills upgrade may improve business profits for employers when the workers in their companies are able to provide better service standards and quality

Question 6

Negative implications/consequences (employers)

Answer 6

• Basic monthly wage increases over the span of 5 years so manpower costs would increase over time which may affect the amount of profit earned.
• The increase over 5 years might be “slow” to react to market demands. Eg security risks with Covid-19 put a strain on the security industry.
• Possible mismatch between employer expectation and employee performance when low wage worker is sent for training and yet may not acquire the skills or be able to apply the skills for the job.

Question 7

Positive implications (service buyers)

Answer 7

Service buyers may benefit from the improvement in quality of service/ work provided by the workers in sectors covered by PWM

Question 8

Negative implications (service buyers)

Answer 8

Some opportunistic companies in sectors covered by PWM may increase their prices to profiteer from the increase in wages mandated by PWM resulting in service buyers having to pay more for these services

Question 9

Positive implications (consumers)

Answer 9

Consumers may benefit from the improvement in quality of service/ work provided by the workers in sectors covered by PWM e.g. cleaner food courts

Question 10

Negative implications (consumers)

Answer 10

• Consumers may have to pay more as the increase in wages for workers in these sectors may be passed on to consumers
• Some opportunistic companies in sectors covered by PWM may increase their prices to profiteer from the increase in wages mandated by PWM resulting in service buyers having to pay more for these services and passing the cost to the consumers

Arguments addressing negative implications:
Higher wages need not translate into higher consumer prices, especially with technology application and improved management, if productivity increases as PWM intends and there are wage floors.
Wages, especially of low-wage workers, are only one, usually minor, component of total costs, which also include rents, profits and taxes. Commercial rental costs make up the lion’s share of costs for many companies in Singapore.
The Government can act to dampen any consumer price increase by reducing or delaying tax increases like GST, or handing out aid to low-income families through the U-Save vouchers.
Government can also introduce competition policy and fair trading or consumer protection rules to prevent businesses with large market shares from exercising monopolistic pricing power — a key reason for high prices.
PWM wage rates are still below those in other high-income global cities for similar jobs, so increases should be affordable for the 75 to 80 per cent of consumers who are not low-income, while enabling the lowest-income 20 to 25 per cent to better maintain basic consumption standards. Any consumer price inflation would be a fraction of the wage increase, as studies in the US on raising minimum wages have shown.
With our per capita income level among the world’s richest people, Singaporeans should be able and ought to be willing to pay the prices that global companies and their international employees based here are accustomed to elsewhere, where minimum wages much higher than our PWM levels exist.
The lifestyles of the more fortunate among us should not be subsidised by the low wages of other compatriots.
And as an advanced economy, we should compete on the basis of productivity and innovation, not low labour costs that impoverish our fellow citizens.