Tripartism in Singapore

Date October 16, 2013
Speaker LOH Khum Yean(Permanent Secretary, Ministry of Manpower, Government of Singapore)
Panelists for Q&A Discussion CHAM Hui Fong(Assistant Secretary General, National Trades Union Congress (NTUC))ANG Kuan Kuan(Senior Director, Industrial Relations, Singapore National Employers Federation (SNEF))
Moderator NASUNO Futoshi(Consulting Fellow, RIETI / Director for Human Resources Policy, Economic and Industrial Policy Bureau, METI)


LOH Khum Yean's PhotoLOH Khum Yean

Today's presentation will briefly cover the tripartite partnership approach being taken in Singapore. Following this, how cooperation between employers and the government is undertaken will be explained. Finally, the example of enhancing the employability of older workers in Singapore will be used to illustrate how the tripartite approach has helped us to address this challenge.

In Singapore, tripartite cooperation is seen as an effective mechanism to promote industrial harmony. Industrial harmony is a very important national asset because it helps support peace in society, enables progress in the economy, and also aids in bringing about prosperity for the nation. The concept of a tripartite framework in Singapore refers to three parties. The first party is the government, which is represented by the Ministry of Manpower. Next are the employers, represented by the Singapore National Employers Federation (SNEF). Finally, there are trade unions, which are represented by the National Trades Union Congress (NTUC). The three parties work together based on mutual trust and respect toward a common purpose of progress and prosperity for Singapore and its people. This entails determining how the lives of Singaporean citizens can be improved through better jobs and pay. This system is very much based on dialogue and consensus-building, involving the three parties coming together to discuss issues to understand each other's concerns and perspectives, and trying to forge a consensus on the best way forward which meets a common interest and purpose.

The government in Singapore, represented by the Ministry of Manpower, has the mission of developing a productive workforce and progressive workplaces so that Singaporeans can enjoy better jobs and a secure retirement. As far as the government is concerned, tripartism provides a very useful and tested structure to promote industrial harmony and economic progress. Of course, there are times when industrial disputes arise between workers and employers. However, as there is a tripartite framework based on trust and mutual respect in place, talking to both the employers and workers and resolving such industrial disputes in a positive manner become much easier. It is worth emphasizing that this is a relationship conducted based on trust, respect, and common interest, which is very important. Trust and respect cannot be manufactured instantly and must be built up over the years by working together on difficult issues. This is what has been done in Singapore over the 48 years since it became an independent nation. The approach of building a consensus based on fair play, common purpose, and mutual gains along with forming an alliance between the government, unions, and employers is a useful one in building a relationship that is positive and for the common good.

Employers are represented by the SNEF, which is a national trade union of employers representing all sectors of the economy. Its mission is to help employers achieve excellence in employment practices in order to enhance the productivity and competitiveness of companies as well as the quality of life and jobs of their employees. Another part of its mission is to strengthen the role of employers in the tripartite partnership to enhance industrial harmony in Singapore.

From the employer's perspective, industrial relations should also be based on the principles of tripartism. The importance of mutual trust and understanding is stressed again, as well as that formulated policies should address each other's concerns and interests. Furthermore, importance is placed on a consensus being built on a shared purpose and objectives and the resolution of disputes being based on fair play and mutual gain.

Trade unions, represented by the NTUC, have a mission of helping working people earn a better living and live better lives in Singapore. The NTUC perspective on tripartism stresses that tripartite cooperation is a core strength and competitive advantage for Singapore, built on a high level of trust and confidence born out of working for mutual benefit and overcoming crisis. Furthermore, the NTUC holds the view that consultation and communication should be embedded as part of the industrial relations culture through taking a positive perspective when industrial disputes arise and seeking a positive solution which is beneficial for the workers, employers, and society.

The tripartite relationship also faces challenges as there are many issues upon which there is a lack of total agreement. However, it is important to approach each other with mutual respect and trust, share concerns, and search for the consensus which could best deal with the concerns. As the economy changes, technology develops, leaders change, and globalization occurs, it is important that a very deliberate effort is made to ensure that the bonds of this relationship of tripartism remain strong.

In summary, the tripartite approach revolves around the concept of a shared national purpose, in which the unions, the government, and employers support and believe. Those purposes include economic growth, job creation, keeping businesses and the workforce competitive, sharing gains from profits, and in turn improvement in the living standards and the quality of life of workers.

The process of tripartism in Singapore can be broadly represented by a cycle which involves social dialogue, consensus-building, and industrial relations. Social dialogue between the three parties is undertaken in order to share perspectives and learn from other countries to build up mutual trust, respect, and understanding. This in turn helps to build consensus around the shared purpose of creating a favorable investment climate for businesses so that there would be better job opportunities for Singaporean workers and citizens. The result of this collaborative approach leads to the improvement of industrial relations and the strengthening of industrial harmony in Singapore.

This tripartite approach manifests itself in various forms of activity that are undertaken together. At the heart of this is the formulation of employment and wage-related policies, such as legislation, advisories, guidelines, and codes of practice. This is conducted through a process of collaboration and consultation. As an example, we are currently reviewing the Employment Act. This process is being carried out through consulting partners in unions, as well as employers, in order to build a consensus on changes which both businesses and unions can support.

Social and informal activities such as golf and bowling are also conducted in order to promote understanding and build a rapport between union leaders, employers, and the government. Developing personal relationships allows for more confidence in solving issues in harmony.

Japan and Singapore are both facing issues in relation to an aging workforce. About eight years ago, Singapore conducted studies on the Japanese re-employment system and, in fact, recently enacted its own re-employment legislation in 2012. However, this process was not simply conducted by the government alone. The goal in Singapore was to ensure that all workers are able to work for a longer period and stay economically active, through a balanced and flexible approach so that employers are also able to support this objective. In 2005, Singapore set up the Tripartite Committee on Employability of Older Workers, comprising of leaders from the government, unions, and employers to study this issue. The original 1993 Retirement Age Act introduced a statutory minimum retirement age of 60, which was amended and raised to 62 in 1999. The re-employment concept in Singapore was actually adopted from Japan, where, in 2008, practical guidelines were issued in order to help the employment of older workers. Those guidelines were expanded in 2011, and finally, in 2012, the Retirement and Re-employment Act (RRA) was introduced. The RRA requires employers to offer re-employment to employees, from the ages of 62 to 65, with satisfactory performance and who are medically fit.

The process leading to the RRA legislation has actually been fairly long, but its benefit was that when the RRA came into effect, employers and employees were ready to adapt to this change. As a result of all of these efforts, the employment rate of older residents in Singapore between the ages of 55 and 64 has been gradually improving since 2002. This positive, upward trend has come about as a result of using a tripartite approach.

Tripartite cooperation has led to the development of a significant list of committees on employment issues, such as the Tripartite Panel on Retrenched Workers, the Tripartite Committee on Portable Medical Benefits, the Tripartite Taskforce on Wage Restructuring, and the Tripartite Committee on Flexible Work Schedules. Several tripartite guidelines and advisories on employment have also been issued. This reflects the fact that many issues are talked through, consensus is achieved, and tripartite guidelines are issued for workers and employers. One example of tripartite guidelines which was released is the National Wages Council Guidelines, introduced in 1972. This is an annual exercise where representatives from the government, unions, and employers come together to look at the economic and global situation in order to release guidelines for wage adjustments for the year. Another example of tripartite cooperation at work was when tripartite partners came together to discuss how to save jobs during the global financial crisis of 2008. Guidelines were released, which resulted in improvement in the conditions for both workers and businesses. Again, this highlights that tripartite cooperation is utilized for many issues in Singapore.

In conclusion, tripartism has benefited Singapore in three major areas. It has helped Singapore achieve a desirable economic transformation and has met our social objectives. It has helped improve shared business gains between businesses and workers during times of prosperity, as well as burdens during more difficult economic conditions to help regain cost competitiveness. Finally, tripartism has helped achieve industrial harmony in order to have a productive workplace environment and an investment climate conducive for rapid economic growth and job creation. Tripartism creates a virtuous cycle in Singapore. Industrial harmony supports high productivity and a favorable investment climate. This in turn creates good economic growth and jobs, as well as a higher standard of living and quality of life, which leads to social and political stability.

Questions and Answers

Q1: In Japan, there are problems facing non-union workers. The number of workers who are not in unions is increasing, and their wages are low. People in this situation have no way to receive support, even from the government. How is this issue being dealt with in Singapore?

CHAM Hui Fong
In Singapore, about 23%-25% of workers are union members. It is hoped that this can be raised to about one-third within the next five years through the support of the government and employers. Wage increases in unionized sectors tend to be higher than the non-unionized ones. The current approach is the improvement of mutual support between workers and employers. We adopt a consultative approach where we encourage workers to be pro-business and emphasize that employers should in turn practice gain sharing. In the case of Singapore where the labor market is tight, non-unionized companies will lose their workers if they do not pay them reasonably well.

ANG Kuan Kuan
In the SNEF, 70% of member companies are not unionized. A set of National Wages Council guidelines is released every year to help provide direction for wage increases. The SNEF holds various briefing and dialogue sessions on wage issues with employers annually, which more than 50% of member companies attend. The SNEF also has a research institute which releases a publication on salaries in different industries and jobs. Given Singapore's tight labor market, companies need to look at wage-related issues, and work out competitive salary structures. Non-unionized companies are also aware of the importance to be competitive, and hence try to pay well to compete for quality labor.

LOH Khum Yean
From the perspective of the government, it is very important through a combination of economic policy as well as tripartism and good labor policy to keep Singapore as an attractive place of business and investment and, through that, create good jobs in order to keep the labor market tight. Fortunately, this has been accomplished, and it keeps an upward pressure on wages for both unionized and non-unionized workers. Second, skills training and upgrading is important for workers in Singapore. A national system has been put in place to provide courses at subsidized rates so that Singaporean workers are able to upgrade their skills and move on to better jobs. Third, specialized learning courses for low wage workers are also provided to encourage them to go for training, along with a wage supplement.

Q2: Can you elaborate about the tripartite approach to deal with crisis situations (e.g., economic downturn)?

LOH Khum Yean
Over the last 30 years, Singapore has gone through a few economic crises. Although they were challenging times, they were also seen as opportunities for tripartite partners to come together. In the global financial crisis of 2008, tripartite guidelines for cutting costs to save jobs were promoted, as opposed to cutting jobs to save costs. This was implemented through the Tripartite Guidelines on Managing Excess Manpower during the economic crisis. Suggestions included shortening employees' working hours or offering a short period of unpaid leave. The government itself came up with a fiscal package to extend assistance to companies to help with manpower costs. Fortunately, the crisis did not last for long in Singapore, and companies were grateful to have workers available when economic conditions recovered. This tripartite approach of mutual cooperation resulted in a positive outcome.

CHAM Hui Fong
Many tripartite committees have been formed. Managing excess manpower is one of the tougher tripartite issues, and relies on trust and relationships built up over the years. It is a challenge for the three parties to come together during times when jobs may be lost, thus tripartism can come under stress. Singapore has had good experience with such situations in the past, and is able to respond relatively quickly through a tripartite approach. This is due to the mutual trust and respect built up over the years.

ANG Kuan Kuan
In addition to what has been discussed, it is also worth mentioning that Singapore has a flexible wage system—70% of wages are fixed and 30% are variable. The variable component allowed for an element of response or adjustment in times of crisis. During the financial crisis in 2008, tripartite discussions concluded that even cutting wages would not help to solve the problem. This led to the introduction of measures for a shorter work week. A flexible wage system also means that if a company is making a good profit, it can offer bonuses.

Q3: What are the challenges in Singapore in terms of foreign workers from a tripartite perspective?

ANG Kuan Kuan
There is a very tight labor situation in Singapore. As the employment rate is high, foreign workers are needed to contribute to the growth of the economy. Guidelines in relation to wage recommendations by the National Wages Council usually take into account all employees, regardless of whether they are local or foreign workers. However, when it comes to the actual implementation, some companies may make certain adjustments such as establishing a performance-based pay system. Companies would not be able to maintain a peaceful environment if they do not treat foreign workers fairly.

CHAM Hui Fong
There are three challenges facing unions in Singapore. The first is the tension between high and low income workers. The gap in wages between lower and higher income groups continues to be wide and is not showing signs of change. The second issue involves harmonization of both younger and older workers in terms of their expectations. The third challenge revolves around the issue of nationality. Foreign workers make up about one-third of the workforce in Singapore. One concern is that if companies remain too dependent on foreign workers due to the lower expenses in employing them, this actually minimizes the need to invest in productivity. This will result in a negative outcome for Singaporean workers over a longer period of time. The tripartite approach to this situation is to send the right message and urge companies to give Singaporean workers fair opportunities at the same time as continuing to make good investments and fairly distributing returns to all.

LOH Khum Yean
It is important to remain open and welcoming. Singapore has a small population of about three million. To continue to grow and thrive as a global city, Singapore needs to complement and supplement its workforce with foreign talent. However, as a small island, Singapore also has physical limits in terms of the population it can support. This is why there is now a great emphasis on productivity-driven growth as opposed to labor-driven growth so that the number of foreign workers does not grow too fast. This is the national challenge for this decade, which is being approached through raising the skillsets of workers as well as changing business models and increasing innovation. It is important to maintain a balance of both remaining open and welcoming, along with raising the quality of workers.

Q4: What is the policy in relation to home workers in Singapore?

LOH Khum Yean
Home workers are considered as workers as well. In Singapore, there is no national minimum wage. Wages are determined by the forces of supply and demand. In this respect, the system is different than that of many other economies. However, home workers enjoy similar protection under Singaporean laws.

Q5: What is the policy regarding educational support for home workers in Singapore?

LOH Khum Yean
Training courses provided in Singapore are available to everyone. However, subsidies for training fees are only given to Singaporeans. Company sponsorship of training for foreign workers also exists, although the full rate must still be paid. If a company sponsors a Singaporean worker, it can receive a subsidy.

*This summary was compiled by RIETI Editorial staff.