Budget 2022: New scheme to co-fund wage increases for low-wage workers

THE government will co-fund wage increases for local lower-wage workers over the next 5 years, to help employers adjust as the Progressive Wage Model (PWM) gets expanded to cover more workers.

In his Budget speech on Friday (Feb 18), Finance Minister Lawrence Wong also announced enhancements to the Workfare Income Supplement to give lower-wage workers a further boost.

Observers saw these as a commitment to uplift the most vulnerable in society, but some pointed out that their adequacy depends on the wage levels set for each sector and occupation.

Under the new Progressive Wage Credit Scheme (PWCS), wages for workers earning up to S$2,500 will be co-funded 50 per cent this year and next year, 30 per cent in 2024 and 2025, before tapering to 15 per cent in 2026.

For workers earning between S$2,500 and S$3,000, the co-funding rate will be 30 per cent in the first 2 years and 15 per cent in 2024.

The scheme will start with a S$2 billion injection this year, a sum that will "provide certainty" of funding for wage increases over the next 5 years, Wong said.

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Over the next 2 years, the PWM will be extended to the retail, food services, and waste management sectors, as well as to in-house cleaners, security officers, landscape workers, administrators, and drivers across all sectors.

The model sets out minimum pay and training requirements for workers at different skill levels. It currently covers Singapore citizens and permanent residents in the cleaning and security sectors, and landscaping companies.

From September this year, companies employing foreign workers are also to pay all their local employees at least the local qualifying salary, which is currently set at S$1,400 per month.

From March 2023, firms will also have to be accredited with the new Progressive Wage Mark to secure government contracts.

Wong also announced that the qualifying monthly income cap for the Workfare Income Supplement will be raised to S$2,500, from S$2,300, from Jan 1 next year.

Payouts will be raised across the board for eligible employees.

Those aged 35 to 44 will receive a maximum of S$3,000; those aged 45 to 59 will receive up to S$3,600; while those aged 60 and older can get up to S$4,200.

Persons with disabilities will receive a maximum annual payout of S$4,200 regardless of age.

The supplement will be extended to younger workers aged 30 to 34, as announced at the National Day Rally last year. This group will receive a maximum annual payout of S$2,100.

A new minimum income criterion of S$500 per month will be put in place to encourage part-timers and casual workers to take up regular, full-time work.

Wong said the Workfare enhancements are expected to benefit more than 500,000 workers.

"Through the combination of progressive wage schemes and Workfare, we expect the incomes of lower-wage workers to grow faster than the median wage growth over the coming decade," he said.

The government expects to spend S$9 billion over the next 5 years for PWCS and the enhanced Workfare.

Lee Kuan Yew School of Public Policy associate professor in practice Terence Ho said taken together with tax changes announced at Budget 2022, these wage enhancements represent "a clear commitment towards a more inclusive society".

"Firms will need to make timely adjustments in managing their contracts and cost structure. As many have pointed out, society as a whole will have to bear the higher cost of the collective aspiration for a more inclusive society," he said.

Ng Kok Hoe, a senior research fellow, also at LKYSPP, said the expansion of the PWM is "much welcome and long overdue".

Still, he cautions: "As the PWM is not universal, one of the drawbacks is that the minimum wage levels may be sufficient in some cases but fall short for others."

Ng also feels the new minimum income criterion to qualify for Workfare may deny some of the lowest-paid workers the support they need. "Low-wage work in Singapore is often also insecure work, which does not offer guaranteed or fixed hours. This is a labour market problem, not an issue of individual motivation," he said.

Singapore Business Federation’s chief executive Lam Yi Young said the federation welcomes PWCS and the Progressive Wage Mark that recognises responsible companies. “This allows lower wage workers to enjoy a pay increase and a reasonable living wage without causing too big a burden on companies in the near term,” Lam said.