Raise productivity to raise wages: PM Lee
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If hiking your staff's pay by $50 a month makes it "tough" for the company, then I think you need to rethink your business model.
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'Fluctuation clause' could help raise pay of low-wage workers
I EMPATHISE with the employers of low-wage earners, like cleaners and security guards, who are willing but unable to pay their workers more ("Tough to raise low-wage staff's pay, say firms"; last Thursday).
It appears that the main reason is that these employers are being tied down by contracts to provide their services at a fixed price over a period of perhaps two to three years.
One possible solution is to introduce a "fluctuation clause" in the contracts to cover anticipated labour cost increases arising from, for example, the National Wages Council's proposals for wage hikes within the contract period.
With such a clause in place, the clients will be obliged to disburse to employers the corresponding increase in labour costs. In the unlikely event there is a decrease in labour costs, the employers will have to reimburse their clients accordingly.
However, the relevant employers' associations must ensure that all their members incorporate such a clause in all their new or renewed contracts.
Non-member employers, who may not comply with this requirement, will be weeded out over time when they cannot afford to give their workers any wage increases.
Ng Chee Kheon
Forum, The Straits Times, Wednesday, June 13 2012, Pg A28
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staggered annual contractual pricing over a number of years has been around for sometime to include projected inflation rate (based on consumer index) as well as any other increases should also be included....
in short....% increase per annum...but employers need significant rebates and controlled levies from the govt...
the whole story and cycle must start from the govt....
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I agree with PM Lee that if the country is more productive then the economy would be better.And, this means a better pay for the employees.
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Last 30yrs we are not productivity?
That's why we still maintain at low wages.......
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We need to be cheaper better faster.
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even if we are the cheapest, best and fastest, we still need to be cheaper, better, fasterer
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Originally posted by laurence82:
even if we are the cheapest, best and fastest, we still need to be cheaper, better, fasterer
We need to grow gdp at all cost.
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Originally posted by Red5xx:
Last 30yrs we are not productivity?
That's why we still maintain at low wages.......
Yes.
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Ask the guy and his whole gang to show some productivity.
Give them some net and see how many wild boar they can catch.
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Originally posted by Medicated Oil:
Ask the guy and his whole gang to show some productivity.
Give them some net and see how many wild boar they can catch.
I don't get it.
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A fair deal for low-wage workers
Cleaners have long languished at the bottom of the pay ladder. Are new measures by the Government, wages council and unions likely to make a difference? Toh Yong Chuan and Janice Heng report
FROM 7am to 4pm, five days a week, 65-year-old Madam Kamsinah Ismail sweeps and scrubs at a Jurong secondary school, a job she has been doing for five years.She dislikes cleaning toilets but stays on the job because she is unable to find another higher-paying one within walking distance of her Housing Board flat. "Who wants to hire an old woman like me?" she laments.
For her labour, she gets $850 a month, after a $100 rise last year when she was made an assistant cleaning supervisor.
There are some 50,000 Singaporean cleaners like her, most of whom earn less than $1,000.
Last week, the National Trades Union Congress (NTUC) announced a "progressive wage" plan to gradually raise their pay to above $1,000. There will be a job ladder which cleaners can climb to get higher pay, so that cleaning is not a dead-end job, says labour chief Lim Swee Say.
The immediate target: To have 10,000 cleaners who earn at least $1,000 each. Those who do harder jobs like cleaning HDB housing estates or operate cleaning machines can earn as much as $1,500, according to salary benchmarks set by the labour movement.
That is just a start, Mr Lim tells Insight: "We will continue to identify more cleaning jobs and other sectors. Our total target is to help 100,000 low-wage workers by 2015."
Even as the momentum to raise the wages of the 270,000 Singaporeans who earn less than $1,000 a month gathers pace, a key question remains to be answered: What is a fair wage for workers like them?
The meaning of fairness
THERE are two competing concepts of what a "fair wage" might be, say economists.
One is a living wage, which is "fair" in that it allows workers to support themselves, and perhaps also their families. It thus depends on the cost of living.
A living wage ensures that workers "will be fairly treated and rewarded for the work effort that they provide, in terms of enabling them to sustain a reasonable standard of living above the subsistence level", says National University of Singapore economist Hui Weng Tat.
The second idea is the market wage, determined by the economic forces of supply and demand.
It is "fair" in that a worker is paid the worth of his job - for in economic theory, a job is worth only as much as companies are willing to pay for it.
Both concepts are in tension. If the market settles at too low a wage, workers may not be able to support themselves.
But free-market economists would argue that a living wage that is higher than the market wage distorts the real worth of a job.
For labour Member of Parliament Zainal Sapari, the concept of a living wage is more relevant to low-income workers: "These workers need higher wages to cope with the rising cost of living."
How much might a living wage be? In Parliament last month, Nominated MP Laurence Lien asked for the Government's estimate of a Singaporean family's minimum expenditure.
A four-person household will need $1,250 for necessities such as food, clothing and shelter, replied Trade and Industry Minister Lim Hng Kiang. Nearly 5,000 four-person households here, with one working adult, earn less than that. But these families get help from the Government, added Mr Lim.
Coincidentally, $1,200 is also what union leader Hareenderpal Singh considers - in his personal view - a "fair starting point" for security guards' monthly pay.
The security and cleaning sectors are two in which wages remain low. Most of the 40,000 guards here have a basic pay of less than $1,000, but can earn as much as $1,500 a month with overtime.
The labour movement does not support the idea of a legislated minimum wage. But Mr Singh, an executive council member of the 11,000-strong Union of Security Employees, believes it is important to have a fair pay cheque so that security guards continue to be drawn into the sector.
Both the labour movement and the Government, however, have been reluctant to move away from the concept of a market wage.
Their stance is that wage increases must be supported by higher productivity. Pay goes up only if the job is worth more.
Demand and (foreign) supply
THOUGH the Government believes that wages should be set by the market, it nonetheless wields considerable influence over the market and has taken steps to nudge wages upwards.
Chief among them is the tightening of foreign labour supply through measures such as higher levies for foreign workers, and lower caps - or dependency ratio ceilings (DRCs) - on the share of foreigners in a firm.
A ready supply of low-skilled foreign workers in earlier years kept wages at the bottom low, say economists. Accordingly, a tighter foreign labour policy should give wages room to go up.
"It is forcing employers in these sectors to face up to the reality that they will have to offer higher wages in order to draw in Singaporeans to take on these jobs, rather than rely on foreign workers to make up the numbers," says Singapore Management University economist Davin Chor.
In practice, no clear trend has yet emerged. In 2009, before government measures to tighten foreign labour began, the average monthly wage for cleaners and labourers was $1,000. It fell to $960 in 2010, but rose to $1,020 last year.
Officer cleaners' pay has risen from $767 in 2009 to $800 in 2010. But industrial cleaners saw their pay plummet from $850 in 2009 to $572 in 2010.
Last year, figures for both groups were merged. The average cleaner in offices and other establishments made $815 a month.
The wage stagnation puzzles NUS economist Basant Kapur, who had expected that tightening foreign labour supply would be "rather effective" in raising wages.
However, Professor Hui is sceptical about the effectiveness of a tighter foreign worker policy. Higher levies may not reduce numbers, he says, as employment agencies may recruit foreigners on lower salaries than before, to compensate.
Meanwhile, DRCs have fallen only marginally. In the cleaning sector, foreigners can make up 45 per cent of a firm's staff, down from half. "This will have minimal impact on the use of foreign workers and its wage depression effects," says Prof Hui.
Persuading bosses to pay
IF MARKET measures have limited impact, what else can be done to raise wages at the bottom?
This year, two ideas surfaced but were rejected. Former National Wages Council (NWC) chairman Lim Chong Yah's proposed shock therapy - raising the pay of those earning less than $1,500 a month by 50 per cent over three years - drew rebuttals from the Government, unions and employers.
A legislated minimum wage will not work either, said NTUC's Mr Lim, because unions and companies can hit a gridlock over what that wage should be.
But Mr Lien feels the idea of a minimum wage should not be dismissed: "It can be voluntary, and it can start in some sectors."
Some industry players think that best-sourcing efforts in the cleaning sector - where service buyers consider factors other than cost - may result in something like a voluntary minimum wage.
In March, the Government announced that it would require its agencies to lead by example, by hiring only accredited cleaning companies. The accreditation scheme is under review, and may eventually include guidelines on paying cleaners "appropriate wages". But some cleaning company bosses are wary of such a change. One says it would be "like having a minimum wage" and affect the whole sector.
Insight understands that the review committee, led by the Manpower Ministry and National Environment Agency, is looking at setting cleaners' pay at between $900 and $1,200, for companies that seek accreditation. The scheme is thus one way in which employers might be persuaded to pay workers more, in order to be accredited and land government contracts.
Currently, cleaning companies engaged by the Government employ 6,000 cleaners, about one-tenth of the 69,000 cleaners in Singapore.
But Prof Hui argues that persuasion alone may not work, because companies will not take their eyes off the bottom line.
NTUC's best-sourcing drive, for example, which has been around since 2006, "is dependent on the goodwill of the service buyers and cannot be expected to have universal or widespread adoption", Prof Hui notes.
Indeed, owners of cleaning and security companies have long argued that cost-competitiveness is key as jobs often go to the firms that submit the lowest bids in tender exercises.
Mr Woon Chiap Chan, country managing director of ISS Facility Services, says he is willing to raise the pay of the 6,000 cleaners in his company. "But the question is whether buyers are also willing to pay more, or go back to picking the cheapest bidder."
This year's NWC guidelines are another means of persuasion. For the first time in some three decades, the council specified a sum by which wages at the bottom should go up. It suggested a wage increase of at least $50 a month for workers earning less than $1,000.
NUS economist Shandre Thangavelu sees this as a step in the right direction, as the workers who benefit have weak bargaining power and low skills. The NWC thus plays a very important role to "provide more bargaining strength" for them, he says.
Yet these guidelines, though often followed in practice, are also strictly voluntary.
Profits and productivity
TO INCENTIVISE companies to do the right thing, the Government is pouring millions into the Inclusive Growth Programme (IGP).
The labour movement plans to tie IGP funds to its progressive wage plan. This will involve subsidising employers' operating costs on machinery and other purchases that raise productivity.
Linked to this is a plan to systematically upgrade the skills of cleaners and others on low wages, so their pay can be scaled up. The ideal outcome is that firms reap savings when they spend to raise productivity, and this sweetens the bitter pill of higher wage costs.
Labour chief Lim Swee Say tells Insight he believes that the Best Sourcing Initiative and IGP will eventually make an impact.
He says: "With a tight labour market, cleaners can become more mobile too as we spread the progressive wage model. As time goes by, contractors who do not upgrade the skills, wages and working conditions of their cleaners will risk losing them to those who do.
"Hence, our aim is to make progressive wage a new mindset for the tripartite partners and, most importantly, the service buyers so that there are incentives for those who embrace the progressive wage model and also disincentives for those who do not."
But views are mixed on how far productivity can rise. While Professor Kapur sees "significant scope" for raising productivity through better equipment in cleaning and improved skills for security guards, Dr Chor has reservations.
"There are aspects of the cleaning job that will inevitably remain labour- and time-intensive," he says. "Technology is not quite at the point yet where a machine can consistently do a better job than a human being in mopping a floor or wiping a window."
To such doubts, NTUC's Mr Lim says: "The bottleneck today is not that the cleaning job has run out of room for further improvements but rather, there is a big lag in the way our cleaning sector makes use of the technology and innovation available out there in the world."
Still, if higher wages are not compensated for by higher productivity, firms could do two things. One is to swallow the costs.
In Parliament in March, Senior Parliamentary Secretary for Education and Manpower Hawazi Daipi noted that security and cleaning make up less than 7 per cent of the operating costs of offices and shopping malls.
"We must be prepared to take some cost increase in our stride, if we want to help our low-wage workers earn more," he said.
The other is to pass them on. Singaporeans should be prepared to pay more for the services of workers such as cleaners, plumbers, just like in other developed countries, says Prof Kapur.
The alternative, he says, is for the Government to top up wages instead. It already does so via the Workfare Income Supplement, which tops up the wages of low-wage Singaporeans aged 35 and above.
But Prof Kapur feels that the payout - a maximum of $2,800 a year - could be higher.
Sooner or later, the Government will have to spend money on this group anyway, says Dr Chor.
"Ultimately, the economic burden will fall back on the Government if we have a sizeable portion of our population that isn't able to accumulate sufficient savings to see them through their retirement years."
And how will the Government fund support for these aged poor?
One route, notes Dr Chor, is higher taxes - which may fall on the private sector. If companies do not pay now, they may well have to do so later.
That those at the receiving end of these low wages lack bargaining power is no reason to tarry in setting things right.
On the contrary, that is all the more reason for a society that prides itself on being inclusive to make fair, living wages for them a priority.
Part D,Insight, The Straits Times, Saturday June 30 2012, Pg D2