The progressive wage model pushed by the labour movement to boost the pay of low-wage workers will be made compulsory in the cleaning and security services sectors later this year.
Deputy Prime Minister Tharman Shanmugaratnam said yesterday that the government will table a bill in Parliament on Jan 20 that requires all cleaning businesses to have a licence to operate - and they must adopt the progressive wage model (PWM) if they want a licence.
The requirement will be extended to security services after the sector has thrashed out the PWM details with the tripartite partners.
Mr Tharman, who was speaking at the Best Sourcing symposium hosted by the labour movement's Employment and Employability Institute (e2i), warned that the government will take non-compliance seriously after the law comes into force in September.
Penalties for companies include a suspension or revocation of their licences for any breach of the PWM requirements. Service buyers procuring from non-licensed cleaning firms will also face punishments.
But Mr Tharman stressed that the move to legislate the PWM was a targeted approach to raise the pay of cleaners and security guards and not a national minimum wage.
The pay will be fixed through tripartite negotiations, with entry-level wages of cleaners likely to be $1,000 or 20 per cent higher than their current basic pay. There are about 55,000 cleaners in the resident workforce earning a median gross wage of around $850 monthly.
"We are not setting wages by political decree," Mr Tharman said. "What legislation will do is ensure that the PWM that the tripartite partners work out is actually implemented in these industries."
He noted that high minimum wages in many European countries "have been accompanied by high unemployment, with the most severe impact falling on people with the lowest skills".
In the United States, a high minimum wage has done little to improve opportunities for the poor, or to reduce social inequalities.
Milton Ng, a director and head of Ramky Cleantech Services, said that legislation of the PWM would force the industry to look for new ways to improve productivity and overcome the shortage of workers. The higher pay that comes with PWM will also draw workers from other industries into cleaning, which is seen as "not sexy".
Alvin Lee, managing director of Reachfield Security, said that legislation will help to encourage training and attract better quality people into the industry. "There will be adjustments from all of us, but in the long term everything will fall in place," he said.
While costs are likely to rise at first, Mr Lee is hopeful that his industry will end up saving money from higher productivity.
Mr Tharman said in his speech that the PWM offers a pathway to higher pay based on experience, skills upgrading, responsibilities and productivity improvements. "This pathway, or 'wage-skill ladder', is a defining feature of the PWM," he said. "To the cleaner, the PWM wage-skill ladder provides assurance of better wages and career progression."
Cleaning companies can also better retain workers and build up a more skilled labour force, according to him. Services buyers and consumers will enjoy better service.
Mr Tharman blamed cheap sourcing for the stagnant pay of cleaners and the "too-low" basic pay of the 70,000 security officers - even though their gross pay has gone up.
Labour movement chief Lim Swee Say, who also spoke at yesterday's symposium, said that "head count" and "fixed price" contracts were also culprits.
In his speech, he said that workers and bosses are not "charging at 100 per cent" to push for higher productivity. Workers wonder if higher productivity will lead to higher wages, and bosses are unsure that higher wages will result in higher productivity. Mr Lim said that adopting the PWM should help to remove these doubts and encourage an all-out push to raise productivity, because wages, skills, productivity and jobs - PWM's four pillars - will then move in tandem.