On Minimum Wages, Singapore Is Playing Catch Up

On Minimum Wages, Singapore Is Playing Catch Up
Photo Credit: Reuters / TPG Images

What you need to know

Singapore’s government recently agreed to long overdue increases in the minimum wage for cleaners. By many standards, it is far from sufficient.

Singapore’s government recently agreed to proposals on increasing the minimum monthly wages for cleaners. But it is far from enough.

To show how the increases are insufficient, I compared the minimum wage of Singapore’s cleaning sector with the minimum wage in other high-income advanced economies.

Singapore does not have a national minimum wage, unlike most other advanced economies. It is only in recent years that minimum wages are being set for specific industries, such as in the cleaning, security, and landscape sectors. While in the Nordic countries and Switzerland, collectively-bargained wages are generally higher than minimum wages in other high-income countries, the wages under Singapore’s “Progressive Wage Model” (PWM) are lower than countries with a similar GDP per capita — contrary to its name.

In fact, while the minimum wage of outsourced resident cleaners in Singapore will increase to S$1,274 (US$953) next month, it will still only be on par with the national minimum wages of countries like Portugal and Greece, which have 30% to 40% the GDP per capita of Singapore. Even countries which have close to half of Singapore’s GDP per capita, like Spain and Slovenia, have minimum wages 30% to 40% higher than Singapore’s.

Countries closer in range to Singapore’s GDP per capita, like Luxembourg, Ireland, and the Netherlands have national minimum wages two to four times that of Singapore’s minimum wage for cleaning workers. A higher GDP per capita also reflects the higher prices of goods and services in a country, which thus exposes how Singapore's workers are being severely underpaid.

Note too that the minimum wages set for cleaners in Singapore applies only for outsourced resident workers. Non-resident workers are not covered under the PWM, giving rise to concerns that the wage increases “might push more employers to hire foreigners to lower manpower costs.”

A 2019 study conducted by researchers from Singapore’s public universities found that Singaporeans aged 65 and above would need a minimum of S$1,379 (US$1,032) for a basic standard of living in Singapore, while those aged between 55 and 64 would need S$1,721 (US$1,287) . It is reasonable to assume that younger Singaporeans would need even more. Progress Singapore Party’s Nominated Member of Parliament Leong Mun Wai calculated that the government would need to implement a living wage of S$2,055 (US$1,537) .

As it is, the minimum wage of S$1,274 (US$953) for cleaning workers is only three-quarters that of what a person aged between 55 and 64 would need, and only 60% of Leong’s proposed living wage.

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(Source: Eurostat)

Nonetheless, due to the depressed wages in Singapore, the government has accepted plans for a “six-year schedule” to increase the wages of outsourced resident cleaners, Senior Minister of State for Manpower Zaqy Mohamad said.

After 2022, the minimum wage of cleaning workers will be increased by S$258 (US$193) in 2023 followed by S$170 (US$127) annually for the subsequent five years after — until it reaches S$2,420 (US$1,810) in 2028.

Zaqy added that “compar[ing] Singapore’s progressive wage model to the minimum wage system implemented in other countries, such as the U.S. and U.K., [...] the progressive wage model has brought about sustained wage increases in Singapore over almost a decade.”

However, the reality is this: the PWM came into effect only in September 2015 — for only six years (not a decade), and since that year, minimum wage has increased by a larger amount in countries with a similar GDP per capita as Singapore’s: S$448 (US$335) in Luxembourg, S$421 (US$315) in Ireland, and S$284 (US$212) in the Netherlands. But it increased by only S$274 (US$205) in Singapore for cleaning workers under the PWM over the same period. Moreover, minimum wage in these countries are S$3,536 (US$2,644), S$2,768 (US$2,070), and S$2,706 (US$2,023), respectively, as compared to only S$1,274 (US$953) that Singapore’s outsourced resident cleaners will receive starting next month.

Many of these countries have had minimum wage for decades. For example, Luxembourg implemented an automatic wage indexation system in 1921 that automatically increases minimum wage based on the consumer price index of a basket of goods and services, in order to “preserve purchasing power.” The system has been in place for 100 years, which explains why Luxembourg today has among the highest minimum wages in the world.

Moreover, while Zaqy claimed that the PWM “has brought about sustained wage increases in Singapore over almost a decade,” the truth is, other countries have also been increasing their minimum wages. In fact, even with these “sustained increases.” Singapore’s minimum wage for cleaning workers remains as low as countries with GDP per capita of only 30% to 50% that of Singapore (in the thick red line in the chart below) — hardly what one would consider significant.

In fact, we can compare Singapore with countries with a similar level of wages. In Portugal, the minimum wage increased by S$300 (US$224) or by 31.7% over the past two decades. It increased by S$565 (US$422) or 46.5% in Spain, and S$375 (US$280) or 29.5% in Slovenia, but only 27.4% in Singapore.

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Clearly, Singapore's minimum wage for cleaning workers falls way behind other similarly-wealthy countries.

As shown in the chart below, the six-year schedule of minimum wage growth for cleaning workers will increase wages to S$2,420 (US$1,810), but in reality, Singapore is merely playing catch up from its current depressed state.

Due to Singapore’s wage suppression over the last few decades, it now has to increase wages by two to four times if it wants to catch up with countries with a similar GDP per capita and cost of living, like Luxembourg, Ireland, and the Netherlands.

However, the wage increase for cleaning workers to S$2,420 (US$1,810) in 2028 will only increase wages by 1.89 times. But as it is, these three countries already have minimum wages 2.77, 2.17, and 2.12 times higher than what cleaning workers earn in Singapore this year.

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In fact, while Singapore is aiming only to allow cleaning workers to earn a minimum of S$2,420 (US$1,810) by 2028, the minimum wage in Luxembourg, Ireland, Belgium, the Netherlands, Germany, France, and the United Kingdom have already achieved similar wage levels in 2006, 2007, 2013, 2015, 2017, 2018, and 2019, respectively. In other words, Luxembourg and Ireland would have already achieved similar minimum wage levels 20 years earlier than Singapore, Belgium and the Netherlands would have achieved it about 15 years earlier, and Germany, France and the United Kingdom would have achieved it about 10 years earlier.

Singapore is only playing catch up.

Note that by the early 2000s, Singapore’s GDP per capita had already caught up with these countries, and by 2010, Singapore’s GDP per capita had surpassed Belgium, the Netherlands, Germany, France, and the United Kingdom. Even so, wages in Singapore have fallen behind them and been largely depressed for the last two decades.

Under the PWM, the S$1,721 (US$1,287) that Singapore’s researchers calculated as minimally required in 2019 for basic needs for Singaporeans aged between 55 and 64 will only be achieved in 2024 — a five years delay from 2019. The S$2,055 (US$1,537) Progress Singapore Party’s Leong Mun Wai calculated as the living wage will only be achieved in 2026 — a five year delay from today.

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In fact, unlike what Zaqy said, it is the other countries, not Singapore, that have been seeing “sustained increases in their minimum wages,” adjusted regularly to their cost of living and inflation. When we look at how the minimum wages in these other countries might grow based on their historical trends, Singapore’s minimum wage for outsourced resident cleaning workers under the PWM schedule will still not catch up to these countries by 2028.

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Based on the planned increase, it would in fact take until the next decade for Singapore’s minimum wage for outsourced resident cleaners to reach parity with these other countries.

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There is, however, no guarantee that the minimum wages for outsourced resident cleaners will keep increasing after 2028 at its current rate (the increase schedule is only planned until 2028), seeing how it took until 2015 for Singapore to finally implement the PWM. It is also until this year that the government implements a meaningful strategy to increase the wages to a level more commensurate to the cost of living.

What is worse, the lost wages of these workers due to the wage suppression over the last two decades will not be returned to them.

If Singapore hopes to reach parity with these countries sooner, the minimum wage for cleaners will need to increase at a faster pace. Instead of increasing wages by S$258 (US$193) in 2023 and then S$170 (US$127) annually thereafter, an annual increase of S$258 (US$193) will allow the minimum wage to attain the target within this decade — by 2028 or 2029.

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As such, the update to wages under the PWM for cleaning workers is merely Singapore’s wages finally catching up with the cost of living in Singapore — albeit one that will take another 10 years or so to be on par with similarly-wealthy countries.

The latest PWM plan should be seen as an attempt to reverse wage stagnation and to lift Singapore out of its current predicament, rather than a congratulatory effort for the government. It will take up to the end of the decade or early next decade for minimum wage to reach international norms. This is also not accounting for the wage losses that workers have suffered for the last two decades, and will not be returned to them.

Wage data does not provide the complete picture of workers’ purchasing powers. As I pointed out in a previous article, citizens in other high-income countries receive basic healthcare for free and free or close to free university education. There are unemployment benefits that equal 50% to 90% of pre-unemployment wages, and minimum pension for elderly citizens. But all of these are not available in Singapore, which means insufficiently paid Singaporeans have to spend further out-of-pocket expenditure for basic social protection. Singapore’s “public” housing is also not cheaper than that in other high-income countries but is as expensive as “private” housing in the Netherlands, Ireland, and Belgium.

It is therefore not sufficient for Singapore’s wages to “catch up” with these countries. Singapore’s wages would need to go beyond these countries to make up for the additional burden that Singaporeans need to bear for their social protection. If not, by 2028, the wage gap between Singapore and similarly-wealthy countries will be larger than the wage data is telling us.

Finally, as noted, the PWM will only cover resident workers, but there are far more foreign than resident workers earning below the base wage under the PWM.

Based on the current income distribution in Singapore, there are 50,600 full time resident workers earning less than S$1,000 (US$748) in Singapore.

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However, there are currently 848,200 migrant workers on work permit passes in Singapore (instead of the S or Employment passes for higher-salaried workers), many of whom earn only about S$500 (US$374) to S$600 (US$449).

Including this group of workers into the income distribution in Singapore will result in a highly-skewed income distribution structure, as shown in the chart below. Migrant workers on work permits earning low wages make up as much as 40% of the resident workforce in Singapore.

Accounting for work permit holders, this means that there are today about 40% of resident and work permit workers in Singapore who earn less than S$2,000 (US$1,496), or poverty wages based on the international poverty definition of 50% of median income of S$4,000 (US$2,991).

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Singapore’s policies have turned the country into a highly classist society. When drilling down the data into the finer income breakdowns available, we can see three distinct income classes of Singapore’s full-time resident workers (not including migrant workers on work permit passes), as in the chart below: a first lower-income group earning below S$3,000 (US$2,243) — with the majority earning between S$1,000 (US$748) to S$2,500 (US$1,869) — a second middle-income group earning between S$3,000 (US$2,243) and S$14,000 (US$10,468) — with the majority earning between S$3,000 (US$2,243) and S$4,000 (US$2,991), and a third higher-income group earning above S$14,000 (US$10,468) — with the majority earning above S$20,000 (US$14,956).

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One reason for this is that Singapore’s policies segregate workers by education and income: students from Singapore’s polytechnics and Institute of Technical Education colleges who make up 60% of the student cohort in Singapore have persistently earned lower median starting salaries of between S$1,500 (US$1,122) and S$2,500 (US$1,869) over the last decade or so, while university graduates comprising 40% of the cohort have seen their median starting salaries start upwards of S$3,000 (US$$2,243) to S$5,500 (US$4,112). Singapore’s work pass schemes for foreign workers are also tiered in a strictly classist manner, with the minimum salary requirement of S passes for “mid-skilled foreign employees” such as “technicians” set at S$2,500 (US$1,869), corresponding to the starting salaries of polytechnic students; and the minimum salary requirement of Employment pass holders for “foreign professionals” in “managerial, executive, or specialised job[s]” set at S$4,500 (US$3,365), corresponding to the salaries of university graduates.

Meanwhile, work permit passes are given to the lowest-wage workers in the “construction, manufacturing, marine shipyard, process, or services sector[s],” who comprise 70% of the total foreign workforce. When we include migrant workers on work permit passes into the income distribution, it becomes even more apparent how classist Singapore is. If we include the 558,400 work permit holders working in the construction, marine shipyard and process sectors, and the foreign domestic helpers who earn an average of S$500 (US$374) to S$600 (US$449), and another 289,800 work permit holders who could be earning between S$1,000 (US$748) and S$2,000 (US$1,496) or so (the breakdowns are based on estimations due to a lack of available data), a fourth and much lower-income group of workers appears, highlighting how divisive and classist Singapore’s society has become.

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As it is, there are today still 40,400 resident cleaners, laborers, and other workers who earned less than S$1,000 (US$748) last year, in spite of the PWM — a system supposed to protect workers. There are clearly still workers being left behind.

While Manpower Minister Tan See Leng might claim that there are employment quota and qualifying salary requirements in place to prevent companies from “hir[ing] foreigners to lower manpower costs,” as long as migrant workers are left to their own defenses, to earn excessively low wages of S$500 (US$374) to S$600 (US$449), this continues to present as a loophole that will abet the exploitation of local workers as well.

One assumes that the PWM wage increase plans would go someway into mediating the class-divisions in Singapore, however it is clear that the divide between resident workers and migrant workers on work permit passes will continue to widen, and further contribute to the exploitation and discrimination of workers.

There is a lack of transparency and accountability over how the PWM wage increases are calculated.

In addition, the latest PWM proposals do not include calculations as to how the wage increases are determined, or how they correspond to the cost of living or inflation. The wage determinations are therefore arbitrary. The question that could be raised is why wages should be raised by S$170 (US$127) annually from 2024 to 2028, and why not S$200 (US$150) or S$300 (US$224).

The lack of a regulatory mechanism like in Luxembourg to ensure that wages are automatically adjusted in line with inflation, or benchmarks (such as against the cost of living) creates the risk that after 2028, the government can decide to let wages stagnate again if there is no electoral pressure to increase them. There is also the issue that if a sudden spike in inflation occurs prior to 2028, that the arbitrarily-decided wage levels would not keep up. While it is good to develop a projection on how wage levels should be adjusted, the lack of transparency and accountability in how these levels are decided creates systemic risks down the road that the wage levels can face other political or business pressures to be manipulated against the interests of workers. Indeed, the lack of strong and independent labor unions also compromises the rights of workers to partake in the decision-making of wage setting.

Other than developing proposals for a “six-year schedule” to increase wages, this is a recognition that wages have been depressed, and there also needs to be a counter fact-finding investigation to identify the factors behind the wage stagnation over the last two decades, and to develop regulatory and institutional mechanisms to plug the loopholes that enabled the stagnation.

If the PWM changes become an episode of papering over the subsistence wage stagnation over the last two decades, it not only prevents past mistakes from being publicly acknowledged and addressed, it also allows perpetrators of wage theft to be let off and for the mistakes to be repeated.

This move also comes in the footsteps of concerted efforts by the opposition to advocate for the implementation of a national minimum wage in Singapore to protect workers. Without pressure from the opposition, the latest PWM proposal move might not have occurred.

This is a reminder that in spite of minimum wages being implemented in specific industries, there are industries which are still not covered by the PWM, which continues to leave low-income workers vulnerable to poverty without the enactment of a national minimum wage.

In the end, while the PWM is a long overdue move by the government — over two decades late — it still does not do enough to bridge the gap with the cost of living in Singapore.

READ NEXT: Taiwan’s Economy Is Growing Fast. Workers Still Await Their Share.

TNL Editor: Bryan Chou, Nicholas Haggerty (@thenewslensintl)

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