THE government is looking to build a stronger wage ladder as the next phase of wage reform that enables meaningful career progression for workers because wage regulation alone will not transform the underlying structure of employment and industries.
It feels that sustainable wage progression requires a broader approach that simultaneously strengthens workers’ opportunities to move up the wage ladder and firms’ capacity to support higher wages through productivity growth and higher-value economic activities.
While the government acknowledges that maintaining an effective national minimum wage is important for protecting workers at the lower end of the labour market, it also believes that sustainable wage progression is important.
This is given the continued concentration of employment in labour-intensive and relatively low-wage industries.
One of its key priorities in pushing for this wage ladder is to accelerate the upgrading of labour-intensive industries, particularly among micro small-medium enterprises (MSMEs).
Policy support is needed to enable MSMEs to adopt technology, improve managerial and organisational capabilities, modernise business processes and strengthen domestic and global market linkages as well as progressively transition into higher-value activities.
Besides moving up the value chain and increasing productivity, such upgrading will strengthen the capacity of industries to support meaningful and sustained wage progression across skill levels. At the same time, workforce development must be more closely aligned with the evolution in demand for skills.
Strengthening education, including technical and vocational education and training, reskilling and upskilling remains essential, but improvements in the supply of talent will generate stronger wage outcomes only when firms create jobs that utilise and reward these capabilities.
For these initiatives to be effective, there needs to be strategic coordination between education and training institutions, and industries to improve job matching.
Existing initiatives such as the progressive wage policy and Academy in Industry provide useful foundations for strengthening this connection.
A more comprehensive and structured wage architecture should accompany stronger business capabilities.
While the national minimum wage should remain the universal wage floor, consideration could be given to sectoral wage floors that better reflect productivity and wage conditions, particularly in persistently low-paid industries, without allowing any sectoral floor to fall below the national minimum.
A structured annual wage progression framework, including collective agreements across industries, could provide workers with clearer pathways for wage advancement, annual increments and career growth based on experience, skills, competency, responsibilities and productivity.
The government sees uplifting wages in labour-intensive MSMEs as a primary focus to generate a broad-based “big-push” impact in rebuilding the wage ladder, enabling more workers to benefit from higher-value activities and meaningful wage progression.
However, it says this will require an integrated framework connecting both sides of the labour market.
The demand-side interventions should support firms through industrial upgrading to create high-value jobs, while supply-side measures should strengthen skills, job matching and career progression.
Productivity must serve as a bridge between the measures by converting stronger business capabilities and a more competent workers into higher output, greater competitiveness and sustainable wage growth.
