Some 77% of 103,000 workers to earn at least S$1,400 with new Local Qualifying Salary rules

ABOUT 77 per cent of workers who earned less than S$1,400 last year will see their wages rise to at least that level by September 2022, when new rules on the Local Qualifying Salary (LQS) kick in, said Senior Minister of State for Manpower Zaqy Mohamad.

That is when firms that hire foreigners will be required to pay all their local employees a LQS of S$1,400. Currently, they only pay some local staff the LQS, depending on how many foreign workers they hire.

In all, there are 103,000 such lower-wage workers, who constitute 5.3 per cent of the full-time employed resident workforce in Singapore, Mr Zaqy said in Parliament.

The remaining 23 per cent of these employees work in businesses that do not hire foreign workers, he said.

The vast majority of these businesses are very small, with fewer than 10 staff, and include small family operations such as hawker stalls and heartland shops.

"We are all familiar with such micro-businesses, familiar faces in our neighbourhoods and typically having family members - spouse, children, relatives helping out," said Mr Zaqy.

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"They don't have the business scale or reach, and we are mindful that sudden wage shifts to these micro-businesses can result in business failure."

Even though the remaining workers are not covered by the LQS requirement, these workers should still see "meaningful increases" in their wages over time due to market forces, he said.

Meanwhile, the ministry has no plans to further increase the LQS for now, given that it will have significant impact on employers, said Mr Zaqy, noting that it has been revised four times in the last five years.

Instead, the Ministry of Manpower (MOM) will focus on the implementation of the new LQS rules as well as sectoral and occupational progressive wages to establish their relevant wage benchmarks, he said.

The sectoral and occupational progressive wages are likely to help raise wages of lower-wage workers beyond the LQS, he added.

Mr Zaqy was fielding a slew of questions from Members of Parliament on MOM's plans to expand the Progressive Wage Model (PWM) and LQS, based on recommendations from a tripartite workgroup, which he also chairs.

The PWM, once described by former Manpower Minister Josephine Teo as "minimum wage plus", is a framework where workers earn more wages as they gain more skills.

Currently covering workers in the cleaning, security, landscape and lift and escalator maintenance sectors, it will be extended to the retail sector as well as in-house workers from September next year.

In response to questions on the sustainability of these wage increases, Mr Zaqy said this will follow the progressive wage approach, where wage increases are secured by tripartite consensus.

"I am confident that through such robust discussions, these established tripartite bodies will arrive at common ground that is sustainable and benefits all stakeholders," he said.

Noting the workgroup's recommendation for these workers' wage growth to outpace productivity growth in the medium term, Mr Zaqy said: "The sustainable response is for businesses to use this period to urgently enhance their firm-level productivity to better support wage increases for workers."

He added that the government will continue to support firms through the Productivity Solutions Grant, as well as more specific efforts enabled by the Industry Transformation Maps.

Asked why the government is lowering the Workfare qualifying age to 30, Mr Zaqy said some workers aged 30 to 34 have continued to remain in the lower-wage range despite upskilling efforts.

"At this age, they are just starting their own families or are looking to buy their first home. We believe that Workfare will help them better cope with their current expenses, and to start saving for retirement," he said.

Below the age of 30 however, most workers would have just started work and are earning starting salaries.

"Most will have greater potential for future income growth. Therefore, it will be too premature to consider them for Workfare," he said.

Instead, these workers would be better supported through training and upskilling efforts, such as SkillsFuture, to help them get better jobs and grow their wages.

The government currently spends S$850 million a year on Workfare, which provides income support for lower-wage workers. This will be increased to S$1.1 billion a year by 2023.

Mr Zaqy urged the House to not look at each measure in isolation but to bear in mind the overall and holistic impact on not just workers, but employers.

Noting that there is likely some degree of cost increase to accommodate higher salaries for lower-wage workers, Mr Zaqy said: "This is where we as consumers have got to do our part in support of our lower-wage workers. I therefore hope that Singaporeans will not accuse firms unfairly of profiteering, but let's also work together to address any unreasonable price increases or practices."

He added this is why the workgroup recommended that the National Wages Council help provide guidance on wage growth. It will enable the tripartite partners to carefully weigh the impact of wage growth, inflation and general economic conditions every year before finalising their guidance.

Mr Zaqy added that the effort to uplift lower-wage workers is a massive undertaking that could span the next decade or more.

This requires support from the whole of society, including workers, consumers, employers, unions, the government and members of the public.

READ MORE:

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• Efforts to uplift 283,000 lower-wage workers on 'accelerated timeline'
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• Transitional support, cost-sharing key to PWM's success
• National Day Rally: Qualifying age for Workfare lowered to 30, from 35