Ms He Ting Ru (Sengkang): Mr Chairman, the Progressive Wage Model (PWM) 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 (WCS) was started in 2013 as a temporary three-year measure to support PWM, it has been repeatedly extended and expanded. This has now evolved into 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 plan levels of 30% to 50% to 45% to 75% in 2022 to 2023. In 2024, instead of decreasing to 15% to 30%, it was raised to 30% to 50%. I am concerned about the ongoing extension of what was presented as temporary support.
In its Budget 2025 wish list, 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 PWCS has to also take into consideration the overall structure of economy, projections of where we are headed and contain the right ingredients to allow businesses and our overall fiscal structure to remain sustainable in the long run. This will 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 matrix 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; and three, what is the Government’s transition strategy towards 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 policy. Both workers and businesses deserve a clear roadmap for the future beyond the current repeated ad hoc extensions of the supposedly temporary measures.
Responsible Governance and Incentivising Efficiency
Mr Saktiandi Supaat (Bishan-Toa Payoh): Chairman, our fiscal headroom will get smaller as Government expenditure is projected to increase while our revenues remain uncertain in light of the status of BEPS 2.0 and heightened geopolitical and trade tensions affecting investment returns. We can afford the projected level of spending up to 2030 thanks to sound and timely fiscal measures made. How is MOF enhancing efficiency, fiscal prudence and responsibility in the Budget process?
We are not the only ones feeling this pressure. The United States (US) has created a Department of Government Efficiency headed by Mr Elon Musk to treat government inefficiency. The United Kingdom (UK) Chancellor has announced that the government departments will be asked to identify 5% efficiency savings to crack down on government waste.
To what extent does MOF expect all Ministries and Statutory Boards to improve budget efficiency year-on-year? How can MOF ensure more collaborative initiatives across different Ministries to improve the coordinated delivery of Government services? How often does the MOF undertake resource reviews and transformation on a whole-of-Government basis in order to sustain a healthy fiscal position?
The Second Minister for Finance (Mr Chee Hong Tat): Ms He Ting Ru asked about the Progressive Wage Credit Scheme (PWCS). Sir, this is a scheme that we have put in place. It is currently due to cease in 2026. We will review closer to the date whether to continue or to stop bearing in mind the economic conditions at that time because we are in a more uncertain global environment.
The PWCS is not a broad-based subsidy for all companies. To get PWCS, the employer has to pay their low-wage workers a wage increase. Then, they can qualify to get this co-funding from the Government. So, the purpose is for the Government to co-fund and to share some of the costs of helping our lower-wage workers to earn a higher income. Because we want employers to pay their lower-wage workers a higher salary, we share with the employers part of this cost of paying the lower-wage workers a higher salary. And this is an important part of our social compact, which I think Ms He will agree with. I do not think Ms He is suggesting that we should stop providing support for employers, especially our SMEs. I am quite confident she is not saying that.
If I look at the other schemes that we have in place to improve productivity, which I also agree with Ms He is an important priority.
So, this is not in lieu of those other schemes. In fact, this is something that we put in place specifically to help employers to be able to share some of the costs where they are paying their lower-wage workers a higher salary. But on productivity, we have many other schemes that we will continue to work through our trade associations and chambers, our industry associations with our companies, as well as with our Labour Movement, through the Company Training Committees, to be able to help companies to improve productivity. Because I agree with Ms He that for the wage increases to be sustainable, it must go together with productivity improvements.
I just make an observation here that what Ms He is saying seems to be a little bit different from what Assoc Prof Jamus Lim said during the Budget debate. If I heard him correctly, he suggested that wage increases can happen with or without productivity improvements. But I do agree with Ms He’s point that the two, over time, need to move in tandem. That is more sustainable.
The Chairman: Ms He Ting Ru.
Ms He Ting Ru: Sir, I have two clarifications for Minister Chee. I wish to clarify with the Minister that I did not make a general statement about productivity and wages in my cut. But when I mentioned productivity, that was specific to my seeking clarification from the Minister about whether there has been any analysis done about what effects the programme has had on employers investing in productivity improvements beyond skills upgrading. There was no contradiction with my colleague’s Budget intervention on this, as he said that wages need to catch up with productivity gains that have already occurred. On this point, can the Minister share if this analysis has been done?
My second clarification is a point I also made in my cut. I note the Minister had said that a decision will be made in due course and closer to the time about whether to extend the PWCS beyond 2026.
As mentioned in my cut, can the Minister share with us what are the metrics used to determine whether or not to exit the programme? My concern here is that the uncertainty about whether the scheme will be extended will make businesses currently on the scheme more cautious and less keen to take action to either invest in or increase wages now and will delay any such decisions until they hear the next announcement.
Mr Chee Hong Tat: Mr Chairman, I think the Prime Minister had already explained in his round-up speech about how productivity and wages, over time, do move in tandem. And on that point, the Prime Minister had already explained very thoroughly and I would not repeat.
But I just wanted to go back to my response to Ms He earlier that we do not disagree that we need to look at how to improve productivity of firms. And that is why we do have many schemes in place to help our companies, whether is it SMEs or larger companies, or as Mr Neil Parekh suggested, how do we encourage more SMEs to work closely with the larger companies, whether it is a large local enterprise or a multinational enterprise.
And these are all different ways in which we will continue to work on with our tripartite partners to look at how we can improve productivity.
But specifically, on the PWCS, this is something that is aimed at helping employers when they increase the salaries of their low-wage workers. So, it is not a broad-based subsidy, as I explained earlier. But it is for the Government to co-share some of the cost increases that employers would otherwise have to face when they are trying to help their low-wage workers to earn a higher salary.
I hope this is in line with what Ms He said. I said earlier in my main reply to her that I am sure she is not suggesting that we should not support SMEs. I would like to seek a clarification from Ms He that she will support that objective, that we do want to support our employers, we do want to support our companies, especially our SMEs, when they are trying to do what is good for our low-wage workers to strengthen our social compact.
Mr Chairman, on the decision to extend or not to extend the PWCS, we will make that decision closer to 2026 when this scheme is due to cease. It is difficult to say we will end it if the following boxes are checked because we have to look at the situation at that time. There are a lot of uncertainties in our operating environment globally and the challenges that our companies will face; it is something which we do need to consult with our tripartite partners before making that decision. But I also do not fully agree, Mr Chairman, with Ms He’s framing that just because we are providing this support for our SMEs, to help them to co-fund, not fully fund, but to co-fund some of the cost increases for low-wage workers earning a higher income, that they will then not want to improve productivity. I do not think that is the way the businesses would respond to the various schemes and incentives.
The Chairman: Ms He, you can ask your clarification.
Ms He Ting Ru: Sir, just a quick clarification in response to Minister Chee. It is not to say that I do not support businesses. It is just that the concerns that I raised in my cut were systemic to the long-term effects for what was initially meant to be a temporary scheme.
Mr Chee Hong Tat: Mr Chairman, I thank Ms He for her clarification. I think we are on the same page. The Government also believes that because we are asking businesses to support increasing the wages of their low-wage workers and to hire low-wage workers and increase their pay, and that this is an important part of our social compact, that it is correct for us to co-fund some of the cost increases. The approach that we want to take, whether on this scheme or on many other schemes, is that when we want to do something that will be good for Singapore and Singaporeans, we want to do it together with our stakeholders. And this is also in line, I think, with the spirit of Forward SG.
Ministry of Finance
28 February 2025
https://sprs.parl.gov.sg/search/#/sprs3topic?reportid=budget-2577
Office of the Leader of the Opposition 