Help for Firms to Boost Productivity with Progressive Wage Model's Approach to Wage Increases

5 Mr Yip Hon Weng asked the Minister for Manpower (a) whether the Progressive Wage Model (PWM)'s approach to wage increases is linked to an expectation of increased productivity from businesses, with the aim of reducing costs; and (b) what steps has the Ministry been taking to assist companies that have implemented the PWM and are facing difficulties in boosting productivity.

The Senior Minister of State for Manpower (Mr Zaqy Mohamad) (for the Minister for Manpower): Mr Speaker, the Progressive Wage Model (PWM) is underpinned by the longstanding tripartite principle that wages should grow in tandem with productivity to be sustainable over the long term. To do this, both workers and employers need to play their part, and they can tap on the range of resources and initiatives rolled out by the Government and tripartite partners.

Workers need to improve their skills so that they can be as efficient and as productive as they can be in their jobs, even as wage rises. Through upskilling, workers can also put themselves in a better position to take on larger and more complex job roles. And in particular, workers in PWM job roles are guided by the tripartite-endorsed PWM requirements on how best to upskill. They are also supported by the Workfare Skills Support (WSS) Scheme, which provides training support to lower-wage workers, as well as the broader SkillsFuture movement.

Beyond improving each worker's productivity directly through training, businesses must also take ownership in driving wider business transformations to improve productivity. Our Progressive Wage moves are complemented by the Industry Transformation Maps, or ITMs, which map out growth and transformation plans for 23 sectors across the economy. Businesses can find support for their transformation journeys through various Government schemes, such as the Productivity Solutions Grant. They can also consider working with the National Trades Union Congress (NTUC) to set up Company Training Committees, or CTCs, and tap on the NTUC CTC grant, launched in 2022, to transform business processes, redesign jobs and improve work prospects for the workers.

The Government recognises that the efforts to raise productivity take time and that, in the immediate term, businesses may face cost pressures arising from Progressive Wage moves. As such, the Government has provided schemes to help businesses defray some of these costs in the transition. The Progressive Wage Credit Scheme (PWCS) co-funds the wage increases employers give to their lower-wage workers from 2022 to 2026. And as announced in Budget 2023, the co-funding support for PWCS will be enhanced up to 75% for the qualifying year 2023. Meanwhile, the WSS Scheme provides employers with an absentee payroll of 95% of basic wages when their workers are sent for training.

As we expand PWM to uplift lower-wage workers, we will continue to support businesses to improve their productivity.

Mr Speaker: Mr Yip Hon Weng.

Mr Yip Hon Weng (Yio Chu Kang): I thank the Senior Minister of State for his reply. I wish to ask the Senior Minister of State, which PWM sectors have greatest potential for productivity increase and what is the Ministry doing to improve productivity for these sectors?

Mr Zaqy Mohamad: Mr Speaker, I am actually tempted to say that every sector is a good sector, but I will answer direct.

Thus far, all sectors with PWM have shown potential for improvements in productivity to achieve long-term sustainability, alongside uplifting wages for their lower-wage workers. So, each PWM sector has embarked on their respective transformation journeys and each one is backed by ITMs. Typically, when we look at even the recent ones like food service and retail, we have ITMs to back them up by the industry. And these are also supported by Government and tripartite partners through various schemes.

So, we want to make it a point that it is not just about the workers' productivity alone. Because the workers can get skilled, trained and then, basically, they would be more productive, but they can only do so much if the business does not transform. So, you need the business to also move on the productivity drive because they can redesign jobs, they can put in place automation, sensors and so forth.

We have seen that in security, for example, which have seen very good progress. And with the newer industries or newer PWMs, like retail, for example, we are looking at areas such as putting in the Jobs-Skills Integrator, which I think the Ministry for Trade and Industry (MTI) is trialling. These are ways in which we can potentially improve the productivity levels.

But it is not just on the worker. I would say that it is all three in tandem: the worker, the business, the industry. They would all have to transform at the same time and, therefore, you will see varying degrees of productivity improvements.

Hence, my point was, we do see good progress in terms of productivity. Some of these take more time than others. But there are certainly others that have greater potential. The outcomes vary, depending on how different companies progress and how different sectors progress.

I also want to add on that service buyers and consumers also have a role to play, because I think we have also moved into procuring services based on outcomes, rather than just head counts. And, therefore, this will enable service providers have greater flexibility to transform how they deliver services and bring in innovation. If you are just looking for the lowest cost at the maximum headcount, this is not going to help the industries either to transform. That is why we were moving to outcomes based models. This will help us also help the service providers improve business efficiency and productivity.