Singapore’s economic growth has long been dependent on high inputs of capital and labour. For a global city state with a low fertility rate, labour continues to be the most contentious and challenging to manage. Among other reasons for this complexity, the high cost of living makes self-investment in further training challenging; while the significant influx of low-cost foreign workers, who often compete with local residents for jobs while facing vastly different economic realities, depresses wages in several sectors.

Over the past few decades we have, in our respective corporate roles, worked with companies spanning small local manufacturing firms to large multinationals. In the process, we’ve witnessed how global trends, such as trade liberalisation, the fourth industrial revolution and the advent of AI, have interacted with local ones, such as immigration and wage policies, to affect worker welfare in Singapore. We are all now facing the prospect of a world with higher tariffs and trade barriers, which could further wreak havoc on Singaporean workers.

However well intentioned Singapore’s Progressive Wage Model (PWM) was when the government designed it 12 years ago, it is now outdated, narrow in scope, and exclusionary in nature. “Too little, too late” is how economists Linda Lim and Irene Ng described it. “As a result, while wages of workers in low-wage sectors have risen in the last few years, their absolute and relative wages continue to be significantly lower here than in other rich countries, even those with lower per capita incomes and lower rates of GDP growth.”

All this is why it is high time Singapore implemented a Universal Minimum Wage (UMW) for residents.

While the PWM may have been relevant during its inception, the socio-economic landscape has drastically changed, particularly following the COVID-19 pandemic in 2020. The pandemic not only disrupted traditional industries but also accelerated the adoption of automation and technology. 

Ironically, industries that once relied heavily on low-wage labour, such as cleaners and security guards, are now embracing high-tech solutions, such as (respectively) autonomous cleaning robots and AI-powered surveillance, that offer enhanced efficiency and reduced long-term costs. The PWM does not address the unemployment and wage stagnation generated in these industries through market forces. 

For example, while training requirements under the PWM for the security industry have evolved, such as the introduction of courses for remote surveillance, career laddering has yet to reflect these technological shifts. Job roles and progression pathways have remained largely unchanged. While human intuition is important when it comes to security roles, the use of AI can render certain responsibilities redundant.

Moreover, even though more sectors have been added to the PWM in recent years, it does not cover every category of low-wage worker. Warehouse assistants, for example, are not presently covered. And by design, the PWM does not easily lend itself to uplifting the wages of gig workers, who are not formally employed (there were 88,000 such workers in 2022, making up 3.6 percent of the resident labour force). 

The complexity of the PWM wage laddering and associated eligibility criteria mean that it may not be easily grasped by employees and even some smaller employers. This may lead to under-payment of wages covered by the PWM, against which whistle-blowing may be limited by a lack of understanding. And finally, PWMs take time to be formulated and introduced, due to the consultations and policy work involved.

Meanwhile, the PWM still fails to address the broader social issues facing lower-to-middle-income workers, especially those undergoing mid-career transitions, who find it increasingly difficult to compete in a labour market now driven by local startups and foreign MNCs that seek and are driven by creativity and high-tech skills. 

Anecdotal employer feedback suggests that the wage laddering required by the PWM, which is linked to training options, may not necessarily be commensurate with productivity gains. This leaves workers exposed to their jobs being substituted both by automation and digitalisation. Existing programs have not helped very substantial numbers of workers to transition to a different line of work. For example, WSG’s Career Conversation Program (CCP) reskilled a mere 40,000 workers—out of a total resident labour force of 2.5m—for new jobs between 2016 and 2023.

Singaporeans are repeatedly told that these voucher schemes are designed to support those who fall through the cracks, yet the cracks themselves continue to widen. 

Take the ongoing plight of middle-aged PMETs who, despite their best efforts to upskill and retrain, find themselves unable to secure stable employment amidst technological disruption. A former manufacturing supervisor, for instance, who has spent decades honing his skills, cannot be expected to compete effectively against automated systems and AI-driven solutions. No amount of Skills Future credits will make his or her experience suddenly relevant in a labour market increasingly biased toward high-tech investment and capabilities.

Traditional support will always be needed for the most vulnerable in society, though the best form of social welfare is the creation of good, well-paying jobs, which ensure dignity and economic participation. The UMW can act as a sustainable alternative by incentivising work rather than dependence on ad hoc handouts. These handouts do not foster confidence that our future will be better than the past. We need confident Singaporeans to adopt innovative and entrepreneurial behaviours not just for themselves, but their children too. Let’s examine the numerous advantages of the UMW over the PWM.

Meanwhile, Singapore’s youth unemployment (under-30s) is troubling, having ticked up to 5.6 percent from 5.4 percent in Q4 2024. Many younger Singaporeans struggle to find permanent employment, with a very large share of ITE and Polytechnic graduates taking up gig work. Prolonged absence from the full-time employed workforce could lead to structural unemployment in the future. A UMW could breathe new energy into younger persons’ efforts to look for permanent employment.

Second, a UMW could nudge companies to invest more in measures that promise labour productivity uplift, so as to make those higher wages compatible with profits. 

The availability of low-cost manpower can act as a brake against employers investing in upskilling workers and investing in labour productivity-enhancing technology, choosing instead to exploit lowly paid workers. (Leon once saw a worker in an emerging economy trimming the grass on a lawn using a pair of scissors.) 

A 2013 paper from economists at the Ministry of Trade and Industry argued that, “low-skilled foreign workers (FWs) were used as substitutes for machinery in the manufacturing sector during the recent period of FW policy liberalisation from 2003 to 2008. Over this period, the increase in employment of low-skilled FWs had caused manufacturing firms to reduce their machinery intensity. This would in turn have likely dampened the firms’ productivity growth.”

We want employers to invest in more productive local workers and pay them more. But which comes first? The PMW model suggests a narrow, prescriptive model in which reskilling leads to higher pay. The UMW, by contrast, is broad based, and puts the worker first, nudging firms to invest in them. With better productivity, Singapore’s dependence on foreign manpower will fall, lessening the burden on public resources like housing stock. 

Third, a UMW can help shift individuals from a survivalist/scarcity mindset to an ambitious, skills-enhancing one. It’ll incentivise workers to spend time and effort developing their own human capital so they can secure a better job—whereas lower wages may lead to a pre-occupation with simply keeping one’s head above water. 

In a recent study, the NGO AWWA used randomised controlled trials to understand the effect of unconditional cash transfers on low-income families’ ability to break out of the poverty cycle. The research showed that such unconditional cash transfers had a significant and measurable impact on the ability of these very low-income families to address the “cognitive bandwidth tax” imposed by poverty (the impact of anxiety and resource poverty on the quality of decision-making) and to obtain better employment outcomes (as they could afford to “hold out” for a more suitable job).

Fourth, a UMW could serve as a powerful instrument for combating income inequality and addressing underemployment. Singapore’s heavy reliance on cheap foreign labour has contributed to wage suppression for lower and middle-income workers, resulting in a polarised society where the rich continue to accumulate wealth while the working class struggles to stay afloat. The UMW would help bridge this gap, acknowledging the true value of labour in a high-cost society. 

This is especially clear when discussing under-employment, a measure which “looks at how well the labour force is being used in terms of skills, experience, and availability to work.” It refers to a situation in which individuals are forced to work in lower-paying or lower-skilled jobs than would normally be associated with their qualifications. A clear, holistic measure of under-employment in Singapore is still lacking, in spite of the issue having been repeatedly raised by the opposition in Parliament. (The Ministry of Manpower currently measures time-related underemployment, but not skills-related under-employment, the more pertinent one for this discussion—say, a skilled worker forced by circumstance into a ridesharing job.) 

Raising wages at the lower and middle levels, in addressing income inequality, also offers the prospect of another benefit: preventing a lurch towards anti-system politics among workers who have given up on mainstream politics due to stagnating or worsening real wages—as seen in the US and Europe. In Singapore’s case, the danger is that such anti-systemic politics, spurred by depressed wages at the lower end, could take on ugly racial and religious overtones.

Fifth, a UMW may boost revenues for heartland enterprises. It stands to reason that when you raise the incomes of the lowest paid, they will spend more on necessities such as cooked food and basic clothing items. This would provide a boost to micro and small enterprises that lend colour to our neighbourhoods, generate employment, and preserve elements of our heritage and history.

While the evidence is by no means settled and hinges crucially on whether the UMW is set too high, an Economic Policy Institute study found that between 1981 and 2000, US states with higher minimum wages saw small businesses grow twice as fast. In contrast, if we raise the net incomes of the rich, it is likely that a larger part of those income hikes will go to holidays abroad and the purchase of luxury goods which are mostly manufactured abroad.

Sixth, a UMW is more transparent, less confusing and hence easier to enforce than the PWM. Among other things, it is easier to enforce because it facilitates whistle-blowing in cases of non-compliance. 

Is this really the case?

One simple counter-argument arises immediately – if this is so, would it not also be an argument against the PWM and the Local Qualifying Salary (LQS)? Would these not also destroy jobs? The job destruction argument would, in any case, also apply to wage growth that arises through market forces in a tight labour market, or via other regulatory tools, such as tweaking foreign worker quotas. Yet oddly we only hear such arguments being used against a blanket minimum wage.

Leon’s written Parliamentary exchange with Josephine Teo, then manpower minister, in 2019 did not elicit any evidence that the PWM had led to job destruction in the cleaning, security, and landscape sectors where it had, by then, been implemented.

While the academic evidence is mixed and the issue is complex, the bulk of it seems consistent with a view that minimum wages do not destroy jobs unless set at too high a level, which happened in South Korea in the late 2010s, or introduced at a time of recession. 

For example, a 2017 study by Jessey Rothstein and Michael Reich at UC Berkeley found that moderate minimum wage increases had only a small impact on employment, either negative or positive, depending on the circumstances. A 2024 Economic Policy Institute meta-study of other studies found little or no dis-employment effects from minimum wage laws.

Furthermore, the job destruction argument is limited by the non-tradeability of many jobs—meaning they must be done on-site, a firm can’t shift it overseas—in the domestic services sector, which is the main area where wages are low. This is complemented by the “non-automatibility” of many jobs involving physical work in these sectors, e.g. beautician, hawker assistant. The nature of such jobs limits the scope for job destruction and a UMW scheme would reward employers who are best at raising productivity in a high wage environment. 

One explanation of the PAP government’s unease at the idea of a UMW could be a “hangover” from their second industrial revolution in the late 1970s-early 1980s, when the government tried to ramp up wages substantially and in a short time, which eroded competitiveness and, by some accounts, contributed to the 1985 recession.

A related discussion concerns sectors with a high percentage of low-cost migrant labour. The construction and logistics sectors—together contributing over 10 percent of Singapore’s GDP (3.8 percent from construction and 9.1 percent from transportation & storage), have long depended on low-cost foreign labour to remain cost-competitive. 

However, this model is increasingly unsustainable, especially in light of evolving national priorities around workforce resilience, wage growth, and local talent retention. Organisations such as the Singapore Contractors Association Limited (SCAL) and Singapore Logistics Association (SLA) have acknowledged the structural challenges facing their industries, including an ageing workforce and a lack of Singaporeans in mid-skill and supervisory roles. 

A UMW, if applied exclusively to local workers, could help reverse this trend by incentivising Singaporeans to re-enter or remain in these critical sectors. Rather than placing blanket cost burdens on employers, such a calibrated policy would spur investments in automation and digitalisation, safety, and productivity, while enhancing job attractiveness for locals in roles such as operations planning, quality assurance, logistics coordination, and site supervision. 

Another objection to UMW is that it leads to elevated levels of inflation. Yet again, the academic results are mixed and tend to suggest effects that are weak and non-lasting. Many studies find that employers are able to absorb some of the effect of a minimum wage through internal adjustments and high productivity, rather than mechanically passing on the whole effect of the minimum wage to the consumer.

Again, the exception would be if the UMW were set at too high a level, too suddenly, in a time of elevated inflation and/or was inflation-indexed, which may tend to fuel inflationary expectations and, hence, real inflation.

It also could be argued that the government’s current policy of a LQS already acts as a de facto minimum wage. However, the LQS applies only to companies who hire foreign work pass or S Pass holders. It would not apply to companies whose workforce is entirely Singaporean.

Moreover, the LQS is not widely known and grasped by stake-holders, making enforcement more difficult, whereas a minimum wage with its headline number and attendant publicity could become well understood by employees, who could then whistleblow in cases of non-compliance.

Lastly, it is not at all clear if the LQS (or indeed another government metric, the Average Household Expenditure on Basic Necessities) is formulated using the latest and best social science research, by independent Singapore academics, on minimum income standards for well-being and thriving.

It would uplift the lowest paid, plugging the gaps and shortcomings of the PWM. It would enable the worst paid and most vulnerable workers to focus better on longer-term career planning, reducing the centrifugal force of social inequality in our society and reducing the need for ad hoc handouts at the taxpayer’s expense, hand-outs which could be prone to political abuse. A UMW would be simple to administer and easy for all stake-holders to grasp, making enforcement much more effective.

This streamlining of wage policies would align with the call of Prime Minister Lawrence Wong, in his speech a day before he was sworn in, to “re-look at all assumptions and slay sacred cows”, to ensure social policies are responsive to the evolving economic landscape.

Lawrence Pek served as the past secretary-general of the Singapore Manufacturing Federation, where he led efforts to advance innovation, upskilling, and competitiveness across Singapore’s industrial sectors. As a factory owner in Shenzhen, China, manufacturing high end surveillance cameras, he witnessed firsthand the difficulties faced by local workers in adapting to rapid technological changes and the influx of foreign talent. A strong advocate for sustainable labour policies, Lawrence brings a pragmatic perspective to workforce transformation and economic resilience.

Leon Perera began his career in the Singapore Economic Development Board. He served as an Opposition member of Parliament between 2016 and 2023. Prior to that, he volunteered for many years in the charity and civil society sectors. He is currently the executive director at a publicly-listed international consulting and financial advisory company, while also serving as a board member of a Singapore charity with IPC status. Leon has extensive experience in the domains of business strategy and public policy. He has consistently championed the causes of equitable growth, social inclusivity, and the need for robust, future-ready economic policies. 

Lawrence is a member of the Progress Singapore Party (PSP) and Leon volunteers with the PSP but this essay is written in their personal capacities. 

Thanks to Yeoh Lam Keong for reading.

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