Shocked, by the Progressive or the Minimum Wage

Professor Lim Chong Yah has repeated his call for the “wage shock” therapy.  This coming on the back of the announcement of the Progressive Wage Model for cleaning sector by the NTUC, which pegs wages of cleaners to skills, work conditions, and “productivity”.

Prof Lim said

minimum wage

should be a last resort.  I don’t think in his mind, he thinks that is the best option for Singapore.  Even under his wage shock proposal, he said the implementation of such a proposal have to be carefully managed so that Singapore’s economy continues to thrive.

While NTUC’s labour MPs have made comments seemingly in disagreement with Prof Lim, I thought that NTUC’s Progressive Wage Model is, on its own, a mini-wage-shock-mechanism by itself, albeit confined only to one sector of the economy.

In mid-Sep, I wrote about the relationship between wage and the relative bargaining positions between employer and employee in my blog piece, “More Productive = More Wage. Really?”  I would say that cleaners’ wages have remained low for quite a simple reason – cleaners are at the bottom of the food-chain when it comes to bargaining.

Buyers of cleaning services focus their annual budgets on core business, and outsource non-core operations, to keep operating costs lean.  Cleaning contractors with low barriers to entry to the market, compete with many players ,often with low prices, to secure revenue streams. Due to easy access to labour supply, contractors can easily get workers who are willing and able to do cleaning jobs.  Cleaners’ wages are thus stuck at low rates because they have no bargaining chip to ask for more.

The situation today has turned.  With tightening manpower, cleaners are becoming precious assets.  Even the buyers of services are starting to feel the impact of unproductive cleaners on their “core-business” operations.  Smelly toilets are hard to miss.  And contractors are now awakening to the pain of not having dedicated staff, because of the liquidated damages they now potentially face, if they cannot deliver the cleaners.

I think that wages of cleaners will rise just by demand-supply forces.  Just as demand and supply has worked against cleaners in the past, now let’s have demand supply work for cleaners.  By putting up a Progressive Wage Model, NTUC is setting a realistic benchmark at a starting value of $1,000, rather than have companies shoot blindly in the dark to establish a new norm (Sakae comes to mind again).

Enlightened buyers and contractors will welcome this. Backed by Government’s adoption of the wage model into accreditation scheme for cleaning companies, and committing to procure only from accredited companies, one segment of the market would be anchoring the pace of wage increase based on this model.  This would set a wage pattern for the market.

At the same time, NTUC has quite cleverly raised the bargaining hand of the cleaner, by pegging higher value to better skill-sets that a cleaner has.  That is to say, the ability to demand for a higher pay is now placed in the hands of the cleaner.  By upgrading himself, or agreeing to take on higher value work, he can now command a higher starting salary.

In addition, by basing the pay rise on skills and productivity, the cleaner keeps himself competitive so that he can be employable even if market conditions change.  This is again backed by Government’s regulatory and procurement levers, further strengthening the relationship between pay and skills.

I’ve said in my earlier blog piece that  a good wage system depends on various factors, and tripartite cooperation is one.  The efforts by NTUC and the Government, with the support of the private sector in the case of the cleaners’ wage, is a good example of how we can ride out the “wage-shocks” and help workers sustain their pay increase in the longer run.

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yana

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2 Comments

  • Hi Yanna,

    Thanks for the update.

    I am delighted and heartened to know that there are measurements and training put in place for cleaners in Singapore that allow them to further develop their skill sets and eventually, salary within the cleaning industry.

    Well done NTUC!

  • Whatever therapy there is, boils down to raising wages artificially to match standard of living. If inflation can’t be tamed, wages gotta grow.

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