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NWC guidelines rightly focus on productivity over wage increase: SNEF

The Singapore National Employers Federation (SNEF) "strongly endorses" the new guidelines, and cautions against unsustainable pay raises that erodes businesses' competitiveness.  

SINGAPORE: The focus on raising productivity in a tight labour market seen in the National Wages Council's wage guidelines released on Friday (May 30) was "strongly endorsed" by the Singapore National Employers Federation (SNEF).

The SNEF said in a statement issued on the same day that unsustainable wages increases will erode the competitiveness of businesses and workers' real wage increases. This is why it supports the principle that wage increases must lag productivity increases over the long term, it added. 

Below is the full statement issued:

The Singapore National Employers Federation (SNEF) strongly endorses the National Wages Council (NWC) Guidelines for 2014/2015. A combination of factors - the low unemployment rate, the tightening of foreign manpower policies, the limited pool of skilled manpower- are exerting upward pressure on wages.

As such, the Federation welcomes the call by NWC for employers to focus on raising productivity in a tight labour market to reinforce the principle that wage increases must lag productivity increases over the long term.

Raise Productivity to Support Real Wage Increases
Due to sustained employment growth, a record 79% of the resident workforce aged 25 to 64 was in employment as at June 2013. The labour market remains tight with 144 job vacancies for every 100 job seekers as at December 2013, higher than the 105 job vacancies a year earlier.

The tightening of the foreign manpower polices has also nudged wages upward, especially for those employers which employ work permit holders and ‘S’ pass holders. This has caused some ripple effect on wage increases in such companies, thus further driving up wage costs.

Furthermore, productivity growth had lagged real wage growth since 2010. Productivity grew 0.2 per cent per annum but real basic wage grew by 0.6 per cent per annum over the last three years. Along with other labour cost increases, the real unit labour cost of our economy had increased by 2.8 per cent per annum during the same period.

SNEF cautions against unsustainable wage increases which will erode the competitiveness of businesses and the real wage increases of workers as businesses pass on the higher labour cost to consumers. The Ministry of Trade and Industry and Monetary Authority of Singapore expect the tight labour market to be the main source of inflation of 1.5-2.5 per cent this year.

Given this scenario, employers have a compelling reason to take immediate measures to raise productivity to support real wage increases. Otherwise, if their wage cost increases continue to outstrip productivity growth, they may lose their competitiveness and their workers may also be affected.

Continued Help for Low Wage Workers

The Federation is pleased that 57 per cent of the companies with workers earning monthly basic salary of up to $1000 granted at least $60 wage increase to their workers, double the 28 per cent of such companies which implemented the “at least $50 recommendation”.

Said Mr Stephen Lee, President, SNEF: “After an encouraging start in 2012, employers have responded positively to the quantitative guidelines last year. Hence, we supported the continuation of the recommendation for another year to give low wage workers another boost.”

Added Mr Lee: “We believe that a number of factors contributed to the higher implementation, for example, the Wage Credit Scheme, the tightening foreign manpower policies and the Progressive Wage Model. Among these the most sustainable way to raise wages is through the Progressive Wage Model. Hence, I strongly encourage companies to work with the Government, unions and SNEF to look at how the Progressive Wage Model can be applied to them.”

The economy is in the midst of a restructuring phase and is focusing on quality growth. Companies will need to better manage their wage costs during this period in order to go through this tunnel of transition and transformation. If properly implemented by employers and their unions, the NWC recommendations would make the journey smoother for companies and workers.

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