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\r\n \r\n 5\r\n Ms Foo Mee Har\r\n asked\r\nthe Deputy Prime Minister and Minister for Manpower what can be\r\ndone to ensure that workers share in the profits resulting from\r\nproductivity improvements enjoyed by their employers, particularly\r\nin respect of the lifting of income levels of workers earning less\r\nthan $1,500 per month.
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\r\n \r\n 6\r\n Ms Denise Phua Lay Peng\r\n asked\r\nthe Deputy Prime Minister and Minister for Manpower (a) whether\r\nhis Ministry will consider implementing the \"shock therapy\" proposed\r\nby Professor Lim Chong Yah to revamp the wages of low-income Singaporeans;\r\nand (b) if so, what is the impact on the economy, productivity and\r\non businesses especially the SMEs.
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\r\n \r\n 7\r\n Ms Sylvia Lim\r\n asked\r\nthe Deputy Prime Minister and Minister for Manpower (a) whether\r\nthe Government is tailoring specific solutions for wage growth in\r\nindustry sectors where wage increases lag productivity gains and,\r\nif so, how will this be undertaken; and (b) whether the Government\r\nis going to encourage wage growth to a living wage for Singaporeans\r\nin persistently low-wage occupations and, if so, how will this be\r\nachieved.
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\r\n \r\n 8\r\n Mr Yee Jenn Jong\r\n asked\r\nthe Deputy Prime Minister and Minister for Manpower in view of the\r\nrecent inflation figures (a) whether the Government will adjust\r\nits target of a 30% rise in median wages in real terms over the\r\nnext 10 years from 2010; (b) what will be the forecast for inflation\r\nrate over the 10-year period and the resulting target median wage\r\nin nominal terms; and (c) whether the Government will set a target\r\nfor the amount of wage increase in real terms that will be achieved\r\nfor the lowest 20% of income earners over a similar 10-year period.
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\r\n \r\n \r\n The Minister of State for Manpower (BG [NS]\r\nTan Chuan-Jin) \r\n \r\n (for the Deputy Prime Minister\r\nand Minister for Manpower): Mr Speaker, Sir, if I may take the\r\nnext four questions together?
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\r\n \r\n \r\n Mr Speaker\r\n : Yes, please.
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\r\n \r\n \r\n BG [NS] Tan Chuan-Jin\r\n : In\r\nmy constituency, I meet a number of my residents regularly. A number\r\nof them fall under the low-income category. Some have wide-ranging and varied\r\nneeds. Some are clearly struggling to make ends meet. Others manage.\r\nWe step in to help in a wide range of ways. We tap on national schemes\r\nand, more importantly, we also find local solutions.
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\r\n As a Member of Parliament\r\non the ground, I can see the impact, as many of you would, of the\r\nGovernment's effort in trying to uplift our low-wage workers and\r\ntheir families. Being in the Ministry, I am able to also see the\r\nefforts put in behind the scenes, particularly over the last five\r\nyears. The creation of jobs and good jobs is probably the best thing,\r\nand the most important thing that the Government can do for the\r\nlow-income families. It allows everyone to stand on their own two\r\nfeet. They can take pride in providing for themselves and for their\r\nfamilies. In this regard, we have introduced many initiatives to\r\nhelp businesses create better jobs with better wages, to subsidise\r\nworkers' training so that we can upgrade them, provide them with\r\nbetter opportunities, and to supplement their wages with Workfare.\r\nMany of us have seen a number of our residents benefiting from these\r\nschemes and opportunities.
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\r\n However, helping lower income\r\nworkers and their families is not confined to jobs alone. We have\r\nenhanced our housing grants and subsidies to help lower income families\r\nown their own homes and this has enabled many of our residents to\r\neither own their own flats or to be able to rent at below-market\r\nrate rentals.
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\r\n We have also expanded education\r\nsubsidies and programmes to give their children a leg up in education.\r\nWe have improved access to affordable healthcare, including long-term\r\ncare for the aged. In this year's Budget, we further introduced\r\nmany major and significant initiatives to take us forward in building\r\nan inclusive Singapore. On the ground, all of us here can see how\r\nthese various efforts can, in very real ways, impact on the lives\r\nof those who fall under the lower income bracket.
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\r\n As we can see, helping low-wage\r\nworkers to achieve better incomes must be a key part of our strategy,\r\nbut it is not the only way we are helping them and it is important\r\nto make this clear upfront. It is about having a comprehensive and\r\nactive strategy to help low-income families improve their overall\r\nquality of life and share in Singapore's continued progress. It\r\nis about adopting a comprehensive and active strategy and not just\r\nsimply focusing on jobs alone.
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\r\n The focus of many of our\r\nMembers' questions is on raising wages for our low-wage workers.\r\nAs explained, this is only one part of a broader equation. The issue\r\nof wages has been widely discussed over the past few weeks, including\r\nsome very spirited debate on whether Prof Lim Chong Yah's \"shock\r\ntherapy\" proposal is the best way to sustainably raise their incomes.\r\nThis was a very useful trigger to generate thoughts and many have\r\nweighed in, both from within Parliament and from society at large,\r\nwith their views on the matter. It is very heartening to see the\r\nlevel of passion involved. Clearly, many of us feel very deeply\r\nabout this issue.
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\r\n While there are varying\r\nviews about the solution, all of us agree that more can and should\r\nbe done to raise the wages of low-income Singaporeans. The key question therefore\r\nis how do we then achieve this in a sustainable fashion, so that\r\nour lower income workers keep good jobs and can remain better off\r\nfor the long term.
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\r\n Let me briefly talk about\r\nwhat actually happened to wages at the lower end of the income ladder\r\nin the past few years. We have said this several times now but it\r\nis worth repeating and important to review this again. I have circulated\r\na handout which captures some\r\nof the key data [Please refer to Annex on Pg 227]. Wages\r\npicked up significantly over the past five years for most lower\r\nwage workers. Adjusting for inflation, the real incomes of Singaporean\r\nworkers at the 20th percentile grew by 11.5%, or 2.2% per annum,\r\nfrom 2006 to 2011. This contrasts against the decline of real incomes\r\nin the first half of the last decade, 2001-2006, where we experienced\r\ntwo significant recessions and lower wage workers were hit particularly\r\nhard. In those years, the income levels actually decreased. However,\r\ntaking the decade as a whole, real incomes were roughly flat.
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\r\n Next, let us look at the\r\nincome growth from the household perspective. Here, the picture\r\nis more positive. If we look at Singaporean households at the 20th\r\npercentile, household income per member grew by 13.6% in real terms\r\nin the last five years. Last year, those in the bottom 20%, in fact,\r\nsaw the highest percentage growth in income per member. The average\r\nof the first decile, in other words the average of the bottom 10%, saw\r\nincome growth of 6.8% after adjusting for inflation. And the second\r\ndecile saw real income growth of 5.2%. This is higher than what\r\nhouseholds in the upper deciles experienced.
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\r\n As a result of the stronger\r\ngrowth in the last five years, our low-income households also saw\r\ngrowth in their real incomes over the decade as a whole. At the\r\n20th percentile, incomes per household member grew by 11.7% in real\r\nterms from 2001 to 2011. Let me just repeat, at the 20th percentile,\r\nincomes per household member grew by 11.7% in real terms from 2001\r\nto 2011.
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\r\n This improvement at the\r\nhousehold level reflects not just the rise in individual wages, especially\r\nin the last five years, but it reflects the fact that more members\r\nof the household have found employment in the economy as it has\r\ncreated more jobs with the good economic growth in those years.\r\nIt is also worth recognising that this significant growth in incomes\r\nin the last five years occurred despite the rise in the proportion\r\nof foreign workers in the workforce.
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\r\n I should highlight that\r\nthis is a picture that stands in stark contrast against what we see\r\nin many other countries. In fact, you just have to turn to the papers\r\ntoday to read about the riots and challenges that are facing many\r\ncountries in Europe today. The global financial crisis, coming on\r\ntop of the powerful structural forces of globalisation and technological\r\nchange that we all face, has led to Europe and the US being mired\r\nin high unemployment, low job creation and dismal or negative real\r\nincome growth for both lower income families and especially those\r\nin the middle as well.
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\r\n The reality therefore is\r\nthat we have not done too badly in the last five years. And this is\r\nespecially so when we consider the very significant and comprehensive\r\nsupport that we are providing to lower income families such as through\r\nWorkfare, housing subsidies and better support for children and\r\nthe elderly from low-income households. So, the figures cited do\r\nnot include these transfers and assistance.
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\r\n However, there is another\r\npart of labour market realities that concerns us. While the broad\r\ngroup of lower income workers has seen better real incomes, some\r\nSingaporeans in specific low-wage occupations have not experienced\r\nthis improvement in incomes. For example, office cleaners, who are\r\namongst the lowest paid in the workforce, have seen weak improvement\r\nin nominal wages over the last decade, and therefore we have seen\r\na decline of about 2.7% in their real wages over the last decade.
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\r\n Ms Denise Phua asked whether we would consider\r\nimplementing \"shock therapy\" to revamp wages of low-income Singaporeans.
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\r\n I share Denise's and many\r\nSingaporeans' dismay when we look at the state of some of these\r\nsectors. In October last year, during the Parliamentary debates\r\non the President's Speech, I had said that I was not happy with\r\nthe wages of our cleaners. Let me be quite clear about where we\r\nstand. While the broader group of low-wage workers have seen improvement\r\nin the last five years, the current levels of pay of our cleaners and\r\nsome of our other lowest wage occupations is unsatisfactory. We\r\nhave to find the best ways to improve the incomes of all lower wage\r\nworkers, in particular for those groups which have seen very little\r\nor no improvement.
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\r\n What are the strategies\r\nto increasing and raising wages? Well, to do this sustainably, we\r\nmust continue to do three things right. First, we have seen that\r\nthe incomes of low-wage workers are actually very badly affected\r\nwhen economy falls into recession or when the economy does not do\r\nwell. So, we have to ensure that we recover quickly whenever the\r\neconomy takes a dip and to make sure that we are able to sustain\r\ngood, decent economic growth over time. That is the only way in\r\nthat we can ensure that we can keep unemployment low, keep our labour\r\nmarket tight and therefore create pressures to help grow incomes\r\nand wages.
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\r\n Second, we must invest in\r\nand continuously improve the productivity, innovation and skills\r\nof our companies and workers. Without significant productivity improvements in\r\nthe next decade, we will not be able to improve incomes significantly\r\nand in particularly on a sustained basis, for Singaporeans.
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\r\n And, third, we must pay\r\nattention to ensuring that our lower wage workers, especially in\r\nthose sectors mentioned earlier, benefit from the growth that we\r\nenjoy. And I will talk about this in more detail later. In essence,\r\nall three strategies must go hand-in-hand if we are to succeed in\r\nachieving inclusive growth.
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\r\n Ms Foo Mee Har and others,\r\nincluding union leaders, and many members of the public have asked\r\nif higher productivity will indeed lead to higher wages. This is\r\nan important and valid question.
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\r\n Over the long term, real\r\nwages of our workers have risen broadly in line with productivity\r\nimprovements. Since 2000, our productivity grew at about 1.7% per\r\nannum, while real total wages grew at a comparable rate of about\r\n1.6% per annum. While real wage growth may not match productivity\r\ngrowth in each and every year, the two tend to be consistent over\r\nthe long term.
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\r\n However, our approach is\r\nnot merely to leave things to the market, or to chance. We are dedicating\r\nextra effort and resources to ensure that our lower income groups\r\nbenefit from the economic restructuring and future growth. Indeed,\r\nour lower and middle income Singaporeans must be the main beneficiaries\r\nas we restructure our economy over the next decade.
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\r\n Now, let me go into the\r\nspecific on how our specific strategies can help lower wage workers.\r\nFirst, we are helping lower wage workers to stay in their jobs by\r\nhelping them upgrade their skills, helping employers to pay them\r\nhigher wages. We do this through the Workfare Income Supplement\r\nScheme (WIS), Workfare Training Support (WTS) and the Special Employment\r\nCredit (SEC). In 2011 alone, for example, WTS helped 50,000 lower\r\nwage workers undergo training, and enhance their skills and their\r\nemployability.
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\r\n Importantly, we now provide\r\na Special Employment Credit to employers of older workers. This\r\nis significant as a large proportion of our lower wage workers are\r\nin fact older workers. Since SEC increases along with wages, it\r\nhelps employers raise wages and reward their workers in turn.
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\r\n Our second strategy is focused\r\non specific occupations and industries. A key way to do this is\r\nthrough the Inclusive Growth Programme (IGP) which is led by NTUC.\r\nThis addresses Ms Sylvia Lim's question about whether we have specific\r\nsolutions tailored for industries where wages have lagged. Indeed,\r\nthis is the approach taken. The IGP will be focusing especially\r\non sectors where wages have lagged, such as the cleaning, the F&B\r\nand the retail sectors. In return for the IGP's support, companies\r\nare required to share productivity gains with their lower wage workers.\r\nWe have recently increased Government funding to expand this IGP\r\nprogramme to benefit a total of 100,000 lower wage workers by 2015.
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\r\n A further aspect of our\r\ntargeted approach is to tackle this issue of cheap sourcing. The cleaning\r\nand security sectors are good examples where we face this problem.\r\nWe will be taking steps to support best sourcing for cleaning and\r\nsecurity services, and also to tighten industry regulations and\r\naccreditation frameworks to raise standards and enable workers in\r\nthese sectors to enjoy better employment terms. This will include\r\na requirement for cleaners employed in accredited companies to receive\r\nappropriate wages commensurate with the higher training, standards\r\nand productivity required of accredited companies. The details are\r\nbeing finalised and we will announce this shortly.
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\r\n To summarise, we are addressing\r\nthe problem of low wages through a multi-pronged approach. First,\r\nbroad-based approaches to improve productivity, skills and incomes;\r\nand second, targeted approaches that address issues specific to\r\ncertain sectors. Not just economy-wide incentives, but industry\r\nby industry, company by company, working on a tripartite basis to\r\nput in place very practical and concrete plans to restructure companies'\r\noperations, upgrade jobs and tie in wage gains with productivity\r\nimprovements. Both are intensive efforts, and are already in motion.\r\nThere are practical and sustainable ways in which we can uplift\r\nincomes for low-wage workers.
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\r\n Is the productivity target\r\nof 2%-3% per annum achievable? We have set ourselves a target of\r\nachieving this growth per annum over the decade. If we achieve something nearer\r\nthe upper end of the range, let us say, at about 2.7%, we will be\r\nable to increase productivity by 30% over this decade. That, too,\r\nis how we hope to raise median wages by 30% in real terms over the\r\ndecade.
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\r\n It is a stretch target.\r\nMost developed countries enjoy productivity growth of about 1%-2%.\r\nBut these are matured economies, and at the steady state, they enjoy\r\n1%-2% of productivity growth a year. However, the good news is,\r\nin a sense, most of our industries are operating well below the\r\nlevels of productivity seen in many of these developed countries.\r\nOur productivity growth was also relatively slow in the last decade. So,\r\nunlike a matured economy, we have the space to move up. This is\r\nsomething that we must and we should do.
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\r\n Mr Yee Jenn Jong asked about the inflation\r\nforecast for the next 10 years, and whether it means that the 30%\r\nrise in real median wages will not be achievable. The Monetary Authority\r\nof Singapore, like other central banks, does not have a 10-year inflation\r\nforecast as over a long period, the combined impact of structural\r\nand cyclical changes in economy on inflation is very uncertain.\r\nGlobal price trends are also very difficult to predict far in advance.\r\nNevertheless, we do not expect our current high levels of inflation\r\nto persist in the years to come. As the Minister for Trade and Industry\r\njust mentioned, the Government will also be doing what it can to\r\nmanage and to bring inflation down.
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\r\n Ms Denise Phua asked about\r\nthe impact of a \"shock therapy\" on productivity and our businesses,\r\nespecially the SMEs. Let me share what we learnt from our last experience of\r\nsudden and large increases in wages in the 1980s. The NWC's wage\r\ncorrection policy from 1979-1981 came after a period when wages\r\nhad in fact been held down. However, wages ended up rising much\r\nfaster than productivity, and hence Singapore's unit labour cost\r\n(ULC) rose by almost 40% from 1980-1985. This was a sharp increase\r\ncompared to that of our competitors during the same period, which\r\nwere mainly the other Asian NIEs. Not all of this was due to the\r\ninitial three-year wage restructuring, as wages continued to rise\r\nquickly after 1981. However, when wages are pushed up artificially\r\nand pushed up much faster than productivity is able to improve,\r\nthere is a continuing dynamic of wages and prices feeding into each\r\nother, together with expectations and demands. And it forces wages\r\nto continue to go up and moving up, and this moving up of wages\r\nis difficult to avoid – and that was what essentially happened.
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\r\n In the first half of the\r\n1980s, the loss of competitiveness because of this increase in wages\r\ndid not have a significant impact on our exports because external\r\ndemand was booming. But the moment external demand began to decline\r\nand the demand eased, the effects of a loss of competitiveness was\r\nvery severe. Tens of thousands of local jobs were lost. And it is\r\nnot just tens of thousands of local jobs, tens of thousands of workers, but\r\ntens of thousands of families were affected as well. The impact\r\nis not trivial.
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\r\n To regain competitiveness\r\nand to create jobs as a response to the situation in 1985, in 1986\r\nthe NWC recommended a wage standstill for three years. We also had\r\nto cut employer's CPF contribution rates very sharply from 25% to\r\n10%.
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\r\n Equally important was the\r\nNWC's emphasis on the need to focus on productivity improvements\r\nas the basis for sustainable wage increases. Over the last two-and-a-half decades,\r\nthis focus has served us well. Wages overall have increased and\r\ngrown substantially, along with productivity.
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\r\n What it comes down to essentially\r\nis this: we have to avoid extremes of one form or another. One end\r\nof the spectrum of policy options is to mandate large rises in wages and\r\nhope that productivity gains will follow. In fact, this would be\r\nseemingly the easy option. At the other end, we could take a completely\r\nmarket approach, we could simply wait for market forces do the work\r\nof raising wages in a tight labour market with minimal Government\r\nintervention or tripartite efforts.
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\r\n The approach we are taking\r\nis essentially a balanced one which involves deliberate intervention\r\nto support restructuring, to raise skills and to ensure that our\r\nlower wage workers get a fair share of productivity gains. It is\r\nan active strategy and we are not leaving things to the market –\r\nbut neither should we engage, we feel, in experiments which would\r\nput our workers and businesses at risk.
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\r\n In particular, we have to bear in mind\r\nthat our SMEs are the major employers of our low-wage workers, and\r\nwill be at real risk if we force their wages up suddenly. Many of them\r\nhave indeed expressed their grave concerns over such a move. This\r\nis also why we have been increasing our foreign worker levies gradually,\r\nin small steps each year, so that the companies, the businesses,\r\nthe SMEs, are able to manage and adjust. We are also actively supporting\r\nour SMEs to restructure and improve productivity and, in turn, this\r\nwould have an impact on the workers themselves.
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\r\n To conclude, let me return\r\nto where we started – which is about our people. We have provided\r\nreasonably well for the majority of Singaporeans and have avoided\r\nthe situations that plague many other developed countries today.\r\nBut we know that there are certain segments of our low-wage Singaporeans\r\nthat have not enjoyed that same improvement. We are addressing this\r\nresolutely and will leave no stone unturned to help them move up\r\nthe income ladder. We are also taking a holistic approach that goes beyond\r\nthe labour market. We help them own their own homes by providing\r\nheavy subsidies. We have taken various measures to improve their\r\nretirement adequacy, through WIS payouts and CPF top-ups. We are\r\ndoing more for their children and providing more medical and long-term\r\ncare subsidies to lower income families to ensure that they will\r\nalways have access to good healthcare. Many of these have been taken\r\nfurther in the recent Budgets.
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\r\n We will continue to work\r\nwith our tripartite partners and press on with our efforts to improve\r\nproductivity and restructure our economy. While the Government will\r\ndo its part, we will also work with business-owners, and unions\r\nand workers to ensure that we make real progress, so that all Singaporeans,\r\nespecially our lower wage workers, can look forward to better jobs\r\nand higher incomes.
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\r\n \r\n \r\n Ms Denise Phua Lay Peng (Moulmein-Kallang)\r\n :\r\nSir, I want to thank the Minister of State for the good response.\r\nI, too, do not agree with Professor Lim Chong Yah's idea of the\r\n\"shock therapy\", without concern whatsoever of the cost impact on\r\nespecially the smaller enterprises. I also believe that the Workfare\r\nthat the Minister of State has spoken about is superior to Minimum\r\nWage. The cost of Workfare is borne by the Government with the intent\r\nof sharing the fruits of economy. But I do believe that every worker\r\nshould be paid a fair day's wage. I still meet cleaners €”
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\r\n \r\n \r\n Mr Speaker\r\n : Ms Phua, can\r\nyou ask the question, please?
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\r\n \r\n \r\n Ms Denise Phua Lay Peng\r\n :\r\nI still meet cleaners who are being paid an amount of $700 a month\r\nfor a full day's physically demanding work. And I think that needs\r\nto be corrected. So, I would like to ask the Minister of State if\r\nthe Ministry would consider adopting the corporate practice of job\r\nevaluation to study the nature, the profile and the size of jobs\r\nlike cleaners' jobs, so that a right pay level can be determined.\r\nThat benchmark can then be woven into the Workfare formula and into\r\nthe industry's pay practices. That is my first question. My second\r\nquestion is: I am very heartened to also note that BCA has taken\r\nspecific measures to help construction firms, the smaller ones, to\r\nincrease their productivity. I would like to ask the Minister of\r\nState if the same is being done, specifically for other industries,\r\nlike the F&B and the cleaning industries, especially for the\r\nsmaller players.
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\r\n \r\n \r\n BG\r\n[NS] Tan Chuan-Jin\r\n : I would like to thank Ms Denise\r\nPhua for her statement and her questions. I would completely agree\r\nwith her that the wage level at which some of our lower wage workers\r\nare operating at is quite unacceptable. I meet them myself, a number\r\nof my residents who are cleaners, some in other sectors as well.\r\nI agree that every individual worker should be paid a fair day's\r\nwage. So, this is precisely why for sectors especially cleaning,\r\na sector in which many of our low-wage and older workers are found\r\nbecause of their skill levels, educational levels, and so on.
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\r\n We are taking a very specific\r\napproach to improve their conditions. So, as highlighted in my speech\r\nearlier, we are working on the schemes to make sure that the accreditation takes\r\nplace and this will be tied to the wage levels at which they are\r\npaid. This is something that we intend to do and we also intend\r\nto build on it, in terms of not just cheap sourcing, but best sourcing,\r\nhow different companies are able to do that. The Government will\r\ntake a lead in that as well.
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\r\n In terms of Workfare, it\r\nis something that we will review in detail next year. We believe\r\nthat Workfare remains an effective way to incentivise work but at\r\nthe same time look after our low-wage workers by supplementing their\r\nlevel of income. We have received much feedback over time. Some\r\nof the suggestions like those that Ms Denise Phua had raised are\r\nthings that we can take on board, but we will carry out a comprehensive\r\nreview of Workfare next year.
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\r\n With regard to the incentives\r\nprovided, for example as announced by BCA, we are constantly working\r\nwith various industries to see how to help them. There is a wide range\r\nof funds available to help companies restructure to improve the\r\nproductivity. The IGP, as I have highlighted earlier, is one specific\r\nprogramme where we work with specific sectors and with companies\r\nto improve the situation. We have seen the impact of that, not only\r\nin terms of how they have changed the way they do business, but\r\nhow that has flowed down to improving the wages of their workers\r\nas well. So, that is something that we will continue to do.
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\r\n \r\n \r\n Ms Sylvia Lim (Aljunied)\r\n :\r\nSir, three supplementary questions for the Minister of State. First,\r\nthe Minister of State mentioned in his answer that in general, at\r\na macro level, we see productivity gains, sort of roughly moving\r\nin line with wage increases. Does he accept – which I seem to gather\r\nfrom his speech – that at the sectoral level, actually, the links\r\nare weaker in that sense. And in particular, there was a report\r\nput out by MTI in 2011, a feature article which mentioned certain\r\nsectors where there had been productivity gains, for example in\r\nelectronics, but the wage gains were not apparently moving in tandem.\r\nSo, does he accept that actually at the sectoral level, we do have some\r\nissues there, where productivity gains have not brought back wage\r\nimprovements for the people in the sectors?
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\r\n Earlier, he mentioned that\r\nthe Government was looking at some mechanism by which employers\r\nwho enjoy productivity gains will be forced to share the gains with\r\nthe workers. So, I wonder if he could elaborate on what kind of\r\nformula or mechanism the Government is looking at to ensure that\r\nthis is done, and done in a fair manner with the workers.
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\r\n Secondly, the Minister of\r\nState did not touch on the part of my question on living wage. I\r\nwould like to ask the Minister of State whether the Government has\r\nthis concept of living wage in its calculations and this links to\r\nWIS, for example. And thirdly, the Minister of State mentioned the\r\nsecurity industry, and I note that in the May Day speech by the Deputy Prime\r\nMinister and Minister for Manpower, he did mention that the Government\r\nwill take a lead in the way it appoints security companies, for\r\nexample, by appointing only well-graded security companies. From\r\nwhat I know from the grading system in place under the MOM criteria,\r\nannual wage increments, for example, are only an optional submission\r\nitem in the grading. So, I would like to ask whether the Government\r\nis actually going to review that.
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\r\n \r\n \r\n BG [NS] Tan Chuan-Jin\r\n : I\r\nwould like to thank Ms Sylvia Lim for her questions. Firstly, the\r\nquestion of productivity moving in sync with wages. At the macro\r\nlevel, indeed, we have found that the level of productivity increases\r\nover the last decade has moved roughly in sync with wages. But Ms\r\nSylvia Lim is also correct to say that there are variations within\r\nsectors, and this is something that we need to look out for. There will\r\nbe certain sectors where productivity has increased, and perhaps\r\nwages have not moved directly at the same rate. This is something\r\nthat companies have to factor in. By and large, we find that when\r\ncompanies do well, and productivity increases, they are able to\r\nincrease their wages and then to transfer them to their employees.\r\nThat, as a broad rule, is what happened. But whether it is able\r\nto move exactly at the same time rate or not, a lot depends on the\r\nspecific circumstances of those companies. So, this is something\r\nthat we encourage.
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\r\n We work closely, on a tripartite\r\nbasis, with businesses, workers and the unions. For example, in\r\nthe NWC recommendations, we take a look and we suggest a broad range at\r\nwhich wages should move. Companies would take reference from that,\r\ngiven their specific circumstances. This is something that we work\r\nclosely with the industries on, and we work with employers. Not\r\nevery wage level will move directly in sync but, by and large, there\r\nis a correlation with that. And I think it is difficult to expect\r\nevery single company to move exactly the same because conditions\r\nvary. But, by and large, we find that most companies when their\r\nproductivity increases, would see some of this transfer of productivity\r\ngains in the wages. This is something that we will constantly encourage companies\r\nto do so and, of course, the unions will also do the same by pressuring\r\nthe employers to do the same.
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\r\n Secondly, on the question\r\nof living wage. By living wage, we are really referring to how much\r\na Singaporean needs to earn in order for him and his family to subsist\r\nor to meet their basic needs. But this is not a very straightforward\r\nconcept and it is quite complex, because one figure alone does not\r\ncapture every single family or every individual worker. Depending\r\non the individual circumstances, he and his family could have very\r\ndifferent needs, and we meet many of these low-income families in\r\nour constituencies today. But a lot of their conditions and circumstances\r\nvary. Large families would generally have greater needs than smaller\r\nfamilies. The number of employed persons in the household also matters.\r\nSo, someone earning, say, $1,500 or $2,000, and supporting five\r\nmembers of the family as opposed to two members would have very different\r\nchallenges, because the expenses can be shared out if more people\r\nwork.
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\r\n A lot also depends on the\r\nhousehold, that is, how many people are working. For this reason,\r\nwe believe it is more meaningful to consider household incomes rather\r\nthan an individual's income when considering if they have enough\r\nto meet their basic needs. And what is considered the basic lifestyle\r\nis also very subjective, with different people having different\r\nstandards and expectations. Many Singaporeans would use their own yardstick\r\nto measure at which how someone earning $1,000 or $1,200 ought to\r\nlive their life,\r\nand they feel that that amount of money may not be sufficient. But\r\nthat is because sometimes we use our own yardsticks to measure what\r\nwe think ought to be minimum. But it varies, and we have also met\r\nmany of our residents who may be earning low income for their families\r\nbut it is not easy; it is challenging, but they manage, and there is\r\na lot of pride that they take as well in being able to provide for\r\ntheir own families.
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\r\n So, a simple thing, like\r\nwhether air-conditioning is essential in a house or not, has a lot\r\nof impact in terms of not just installing the air-conditioner but\r\nalso electricity bills, and so on. All these things vary. Given\r\nthe different considerations, it is actually very difficult to pinpoint\r\nexactly what that so-called living wage ought to be.
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\r\n Some commentators have also\r\nrecently been using the figure of $1,700 as the amount a household\r\nneeds to meet basic subsistence needs. This figure has been referred\r\nto a few times in the last year. But we have taken a look at it\r\nand to find out where this $1,700 came from. Essentially, the figure\r\nwas derived by taking the average expenditure of the bottom 20%\r\nof resident households, as published by the Department of Statistics\r\n(DOS). For a sense of the expenditure required to provide for basic\r\nneeds, let us consider the amounts that are provided under the Public\r\nAssistance (PA) Scheme to recipients who are unable to work. MCYS\r\nmakes a detailed assessment of how much Public Assistance recipients\r\nneed in cash to help with basic living expenses. Based on that assessment,\r\nthe PA Scheme provides a household with four adults, with a cash allowance\r\nof about $1,050, and a household with two adults and two children\r\nwith $1,350. In addition to the cash allowance, Public Assistance\r\nrecipients receive free medical care as well as free education for\r\ntheir children.
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\r\n Similarly, many households\r\nat the bottom 20% also receive assistance from the Government, for\r\nexample, Medisave top-ups, MOH's Community Health Assist Scheme, MOE's\r\nFinancial Assistance Schemes, Kindergarten Fee Assistance Scheme,\r\nCentre-based Fee Assistance for Childcare, Student Care Fee Assistance\r\nScheme, GST Vouchers which was just introduced, and so on. These\r\nschemes all help to pay for healthcare and education and go to reduce\r\nthe cost of living in general.
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\r\n Let us take a look at how\r\nearnings compare. In 2011, the average monthly income of resident\r\nemployed households in the bottom 20% was $2,358, including CPF contributions.\r\nAfter deducting CPF contributions, the take-home pay would generally\r\nbe sufficient to meet the basic expenditure levels I just described.\r\nBut what is clear is this: we recognise that finances are tight\r\nfor households in the bottom 20%, and we know that because we meet\r\nsome of the residents at the constituency, and we understand the challenges\r\nthat they face. But we should not also equate living on tight budget\r\nwith being unable to earn enough to subsist. Many low-income families\r\nare proud that they are able to provide for their families. We should\r\nnot demean their effort and achievement by suggesting that what\r\nthey are providing is not enough.
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\r\n So, our focus in Government\r\nreally is to help the breadwinners of these families translate their\r\nhard work into high incomes, so that they can enjoy higher standards\r\nof living. On what the Government is doing to bring this about,\r\nI have elaborated earlier. In essence, the approach that we take\r\nis to go for a more targeted approach, look at the circumstances\r\nof every individual person, and particularly his family, and then\r\nto tailor a range of solution sets upon which he can draw on.
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\r\n With regard to the Member's\r\nthird question – could she remind me what was the third question\r\nagain?
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\r\n \r\n \r\n Ms\r\nSylvia Lim\r\n : Grading of security companies and the\r\nfact that under the grading system, currently as I know it, it is\r\noptional for employers to indicate whether there is any annual wage\r\nincrement in their employment terms.
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\r\n \r\n \r\n BG [NS] Tan Chuan-Jin\r\n : Indeed,\r\nI think for the security sector, and for the cleaning sector in\r\nparticular, these are two sectors that we are in the process of\r\nscrutinising and looking at the schemes, particularly the accreditation\r\nscheme. So what the accreditation scheme will do is to take into\r\naccount all the different factors – as pointed out by Ms Denise\r\nPhua earlier, and the concern that Ms Lim has for some of the members\r\nin this sector – and to make sure that wage increases will be fair,\r\nwage levels will be fair, and wage increases will be fair.
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\r\n The details are being worked\r\nout, and this is something that we will be announcing shortly. But\r\nthe intent is to take an active role in intervening in these sectors,\r\nto make sure that they are accredited, there is upskilling, and\r\nto make sure that their wages will be commensurate for their effort\r\nput in. So, as far as these two sectors are concerned, we are quite\r\ndetermined to make sure that the wages increase and to make sure\r\nthat the wages are not just increased on a one-off basis but on\r\na sustainable basis.
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\r\n With regard specifically\r\nto the point that Ms Sylvia Lim has pointed out, that is something\r\nthat we will take into consideration amongst the various ideas that\r\nwe put forward by the industry and the public, and this is something\r\nthat we will announce in detail in subsequent months.
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\r\n \r\n \r\n Mr Speaker\r\n : Ms Foo Mee Har,\r\nlast question.
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\r\n \r\n \r\n Ms Foo Mee Har (West Coast)\r\n :\r\nMr Speaker, Sir, I thank the Minister of State for his comprehensive\r\nanswers. I have two supplementary questions. First, much has been\r\nsaid about the need to improve the wages of low-income workers through\r\nproductivity initiatives. However, initiatives to improve productivity\r\nare typically driven by company management, and therefore dependent\r\non the will of the management to make meaningful changes. To provide\r\nthe needed impetus to drive productivity growth as well as to ensure\r\ncompany financial gains from productivity are transferred to workers, I\r\nwould like to ask the Minister of State if he would consider obliging\r\ncompanies to set aside a certain percentage of their profits towards\r\nbuilding up a productivity improvement fund to be used by company\r\nmanagement solely for training, skills upgrading or performance\r\nincentives, especially for the lower-income employees.
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\r\n My second supplementary\r\nquestion. Employees are in the best place to uncover opportunities\r\nfor process and system improvements. I would like to ask the Minister\r\nof State how his Ministry sets about encouraging companies to involve\r\nthe employees in productivity drives and if this would involve financial\r\nincentives for employees' suggestions, leading to profitable improvements\r\nin productivity. How can workers feel invested in surfacing and\r\nrealising opportunities for productivity improvements for their employers?
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\r\n \r\n \r\n BG [NS] Tan Chuan-Jin\r\n : I\r\nwould like to thank Ms Foo Mee Har for her questions. The issue\r\nof productivity, as highlighted earlier in response to Ms Sylvia\r\nLim's questions, is that productivity largely forms the basis for\r\nsustainable wage increases. When companies make profits by being\r\nmore productive, it can afford to share the gains and reward its\r\nworkers with higher wages in return for their higher productivity.\r\nBecause without higher\r\nproductivity and higher earnings, companies are not able to share\r\nthose gains, and whatever little gains they have, with the workers.
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\r\n It is difficult to implement\r\nand derive a measure of productivity for every single worker. Many\r\ncompanies which are doing well already do provide higher pay for\r\ntheir productive workers, simply because in order to retain and\r\nto reward workers, which is why as I highlighted earlier, when the\r\neconomy does well, we are able to keep unemployment low and the\r\nlabour market tight, and there is competition and high demand for\r\nworkers, this actually creates a pressure for companies to make\r\nsure that they remunerate their workers fairly and competitively.\r\nThat will also allow wages to move up in time as well.
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\r\n Ultimately, employers do\r\nhave to pay fair wages to workers that are commensurate with their\r\ncontributions if they want to retain and attract workers in a tight\r\nlabour market. For sectors in which the translation of productivity\r\ngains through wage increases while market forces are not strong,\r\nfor example, in those sectors we mentioned earlier, in the cleaning\r\nsector and the security sector, that is where Government intervention\r\nwill kick in, and this is something from a sector-specific perspective\r\nwe will play an increasing role. The IGP is another example where\r\nwe will step in to work with specific companies to also improve\r\nthe way they do business so that as their businesses do well, this\r\nwill invariably also be tied to the way wages move up for the workers\r\nin those companies as well.
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\r\n So, the long and short of\r\nit is we do need to keep our labour market tight, to provide companies\r\nwith an impetus to improve labour productivity, to ensure that relationship between\r\nproductivity and wages is maintained. Workers do need to play an\r\nimportant part in the overall productivity drive. Whether companies\r\nshould set aside funds to do that or not is something that individual\r\ncompanies have to decide. But what we are doing at the national\r\nlevel is to set aside a very substantial amount of money, in terms of\r\nfunds, to help and incentivise companies to undertake these productivity\r\ngains, both in terms of restructuring, changing the way they do\r\nbusiness or just to bring IT into the way they operate in order\r\nto improve productivity. So, that is how the Government intends\r\nto step in through a whole range of measures, to make it as user-friendly\r\nas possible.
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\r\n We are very open to feedback\r\nfrom the sectors to improve some of these measures, to make it more\r\nuser-friendly and more targeted. The main idea is to help companies improve\r\ntheir productivity. The companies, in turn, when they see the benefit\r\n– and many companies do that as well, whether in terms of setting\r\naside a fund specifically for the workers or not – do undertake\r\ntheir own productivity moves. IGP, for example, is one programme\r\nwhere we work intimately with companies, and we see many of these companies\r\nrespond by involving workers to improve the work processes, thereby improving\r\nproductivity and not only improving the bottom line for the companies\r\nbut, in turn, seeing the knock-on effect on wages.
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\r\n Whether workers are being\r\ninvolved, like I said earlier, this is something that we do encourage\r\ncompanies to do. Right now, the main focus on productivity is in\r\nlarge part with the companies. The major shift in doing business\r\nneeds to come at the company level, particularly as we restructure\r\nthe economy in the next decade. Essentially, what it means is that\r\nwe need to move up the productivity chain. We are tightening in\r\nterms of foreign labour, particularly companies need to re-adjust\r\nthe way they do business and focus more on productivity growth.\r\nSo, for a lot of productivity efforts, the major shifts will be done at the\r\ncompany level but this does not preclude workers playing an active role\r\nin that. And that is something that we encourage both through the\r\nIGP or other schemes. But this is something we do hope companies\r\nwill embrace, and we will work constantly with the companies to\r\nmake sure that productivity is a big part of most companies so that\r\nthey can adjust to a tight labour market and to put them on a better footing\r\nso that as the economy grows and transforms, our companies will\r\nbe in a very good shape and good position to compete on the global\r\nmarket. And when they do well, in turn, the knock-on effect on our\r\nworkers will be there, and we hope to also see the knock-on effect\r\nat the lower end of the workforce as well.
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