Mr Chairman,
The Progressive Wage Model has benefited many lower-wage Singaporean workers. We support this, as workers deserve to be paid living wages.
However, I have some questions today about the long-term sustainability of the Progressive Wage Credit Scheme (PWCS) in the context of our overall economy, and what MOF’s view is, given the Ministry’s role in managing Singapore’s fiscal policies prudently.
Since the Wage Credit Scheme was started in 2013 as a temporary 3-year measure to support the Progressive Wage Model, it has been repeatedly extended and expanded. This has now evolved into the PWCS, with an allocation of $9 billion from 2022 to 2026 to this “temporary measure” first introduced 12 years ago. The original WCS co-funding of 40% was supposed to end by 2017, but was instead extended multiple times. Similarly, PWCS co-funding increased from planned levels of 30-50% to 45-75% in 2022-2023. In 2024, instead of decreasing to 15-30%, it was raised to 30-50%.
I’m concerned about the ongoing extension of what was presented as temporary support. In its Budget 2025 wishlist, the Singapore National Employers Federation asked that the co-funding of wage increases continue beyond 2026, suggesting a growing dependency on these subsidies.
How did our economy get to the point where our businesses rely so on such wage support? This goes beyond labour policy, and I hope for more clarity on how MOF intends to structure an exit plan with firm targets that takes into account a whole-of-economy approach. A clear exit plan from the PWCS has to also take into consideration the overall structure of our economy, projections of where we are headed, and contains the right ingredients to allow businesses and our overall fiscal structure to remain sustainable in the long run. This would include having a hard look at our overall cost structure beyond labour, including our land policies.
With economic disruptions becoming more frequent, will we keep returning to wage subsidies whenever sectors face challenges? What signals does this send to businesses about long-term planning and productivity investments?
I would like to ask:
One, what metrics will determine when these temporary wage subsidies will be phased out?
Two, has MOF analysed how these subsidies might affect employers’ incentives to invest in productivity improvements? And not just in the sense of skills upgrading, but also in capital goods investment.
Three, what is the Government’s transition strategy toward sustainable wages that align with our broader economic objectives?
While we support wage improvements for workers, we need greater certainty about how these temporary measures fit into Singapore’s long-term fiscal and economic strategy. Both workers and businesses deserve a clear roadmap for the future beyond the current repeated ad-hoc extensions of supposedly temporary measures.
Thank you.
