Singapore’s unique system to improve wage growth is superior to the Minimum Wage system

Singapore’s unique system to improve wage growth is superior to the Minimum Wage system

The local qualifying salary (LQS) is not a minimum wage scheme.

The minimum wage applies across the board and carries many risks, including limiting wage growth.

The LQS has been around since 2007 and it doesn’t apply to all workers but only to companies that employ foreign workers to prevent them from cheating the system by enrolling “phantom” workers. In other words, the LQS is not applicable to enterprises which do not employ foreign workers.

The Workfare Income Supplement (WIS) provides a top up of wages from the government to supplement income of lower-wage workers (LWW) and at the same time, increase their CPF savings for retirement whilst encouraging them to upgrade themselves through the Workfare Skills Support Scheme. It improves employment while at the same, it does not over burden employers’ operational costs, drive up inflation, and put pressure on costs of living. Workfare helped to increase LWW by more than 30 per cent between 2009 and 2019.

The PWM 2.0 is customized to needs and requirements of different sectors and provides not just a wage floor but also a wage escalator to motivate workers to upgrade themselves, increase their salaries, and improve productivity. As wage increase is in tandem with productivity, the government does not have to top up wages through WIS. In other words, it mitigates additional spendings by the government.

These initiatives are part of a holistic system which includes Wage Credit Scheme which encourages employers to increase the salaries of their workers, and Inclusive Growth Program which offers financial incentives to companies that raised salaries in tandem with increase in productivity. The National Wages Council has also regularly recommended increase in wage supplement for lower-wage workers.

Singapore’s unique tripartite model includes looking at improving training system, job design, and productivity improvement to look after workers and ensure that SG remains competitive.

The authorities are also looking at ways to attract and groom higher value-added enterprises so as to offer a wider spectrum of higher paying and more enriching jobs.

As consumers, we have to do our part to pay more for some of our purchases so that workers can enjoy a higher salary, and to help foster a more inclusive and equitable, and kinder society.

Singapore’s unique system to improve wage growth is superior to the Minimum Wage system. It offers far more advantages while overcoming its downsides.

– By Grace Yeo

[irp posts=”7358″ name=”Minimum Wage vs Progressive Wage Model: A Closer Look”]


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