Has Singapore Raised the Wage Bar? Impact Evaluation of the Progressive Wage Model.

Abstract

Conventional theory suggests that minimum wage reduces employment, but there is little consensus in empirical studies. This thesis investigates the impact of the Progressive Wage Model (PWM) - a sector-specific minimum wage - on wage and employment outcomes for cleaners and security guards in Singapore. Specifically, I adopt a fixed effects differencein- differences model to identify the causal impact of PWM, using data from the Occupational Wage Survey 2008-2016 and the Comprehensive Labour Force Survey 2011-2016. As causal inference hinges on an appropriate counterfactual, I also adopt matching and synthetic control methods to ensure balance of treatment and common pre-trends. Results indicate that for both sectors, basic wages rose but gross wages increased belatedly. Employment share has also increased, suggesting that firms ride on the PWM to hire and retain more productive workers, while engaging in some form of compensation in the short run to cope with higher costs.