What is all this talk about Progressive Wage Model?

Recently, Nicole has been harping on the fact that Mcdonald’s is 24 Hours! She keeps on telling me, “Daddy, it means that we can go there anytime! For Breakfast, Lunch or Dinner!”

Needless to say, I did not share the same excitement. A fast food diet isn’t one of the most healthy diets around. As she was harping on this 24 hour service, she began to ask me…

“Daddy, does it mean that the Auntie at Mcdonald’s does not go home?”
This was when the discussion shifted to shift work, and I explained to her the shifts that the workers needed to work. Nicole then innocently exclaimed, “So, she earns a lot of money?”

“Er…Not really…” I replied, “They don’t get paid a lot!”

It is definitely intriguing to realise that even though the cost of living in Singapore has gone up, wages in certain industries have not risen by much. I remember I used to ask my friends why they were working at Mcdonald’s or any other fast food restaurant. The pay was a miserly $3.30 an hour, and the shifts were just so LONG! Through the years, the hourly wage for this low paying job has increased only by a few dollars and at a slower rate than higher paying jobs. As presently, wages are still under $6 an hour for the fast food industry!

That’s why many people are calling for minimum wage to help our lower income citizens. Unfortunately, minimum wage may not lead to progressively higher pay as the years go by! To put it simply, is there a justification for companies to adjust the pay a cleaner or security guard more than the minimum wage of $800 (assuming there is one) if they are still doing the same duties and having the same job scope? That’s why in many countries that have minimum wage schemes, the difficulty is in raising the minimum wage level year after year.

Hence we simply need a proper wage system to help our lower income citizens. I have been watching the news lately, and I have been intrigued by the Progressive Wage Model advocated by NTUC. It’s like a minimum wage but with an upsize package!

This means that instead of just setting a minimum wage, the Progressive Wage Model aims to help workers like cleaners and security guards upgrade themselves and make their jobs more productive too. Besides their original duties of cleaning or security control, companies will develop career paths to enlarge their job scope, upgrade their skills, productivity and career experience, and increase their pay accordingly!

With better wages and better promotion prospects, workers will tend to stay on longer with their bosses, and the shortage of workers in places such as the cleaning, F&B and hospitality industry will be addressed. Companies become more competitive with a pool of experienced labour.

As Ordinary Citizens, many of us would like to help our lower income compatriots. However, simply supporting the easiest way to raise wages (by calling only for minimum wage) without thinking about the long term effects will not help the lower income earners to earn more in the long run.

With progressive wage, profit margins for businesses can improve sustainably with new processes and automation. Because workers can now do more with the same number of work hours, the company can afford to pay them more too. The best thing is this arrangement is not contingent on subsidies, grants or artificial wage controls, but based on profit and productivity growth.

The progressive wage model definitely sounds like a good package. When workers are encouraged to upgrade, they will be more valuable to the company and the company gains a strategic asset too. Not only will the well being of lower income workers be looked after, but these companies will be more competitive as well!

This article was written in collaboration with NTUC