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SINGAPORE: With Singapore’s economic numbers looking good in many areas, there wasn’t much of a surprise in the National Wages Council’s (NWC) key recommendation this year: That employers should give their staff a pay hike.
But the NWC’s wage guidelines for 2007/2008, released yesterday, were also notable for another set of findings: Productivity growth headed south last year — the second year in a row it has fallen. “We should try and arrest this trend,” said Professor Lim Pin, who chairs the tripartite council.
Companies should dish out wage increments that can be sustained in the long run, which depends on productivity gains exceeding wage growth, he added.
Real total wages, which factor in inflation, grew by 3.5 per cent last year, lower than 2005’s 3.8 per cent. Labour productivity rose by 1.2 per cent last year. In 2005, it was higher at 2.1 per cent.
But this decline in growth is no cause for alarm just yet, some NWC members pointed out. For one, cumulatively since 1997, productivity growth still outpaced the increase in real basic and total wages — even though the gap has narrowed.
One reason for this drop in productivity growth, the Manpower Ministry’s Permanent Secretary Leo Yip suggested, is the record 17,600 number of jobs added to the economy last year. Then, there are employers who “don’t let (staff) go” even as they hire more because of the current bullish sentiments, said Mr Stephen Lee, head of the employers and business federations.
Professor Chew Soon Beng of the Nanyang Technological University’s Economics division told TODAY that improving productivity is “always important”. Unless firms are on a flexible wage system, he said, it will be “bad for the economy” when wage growth exceeds that of productivity. This is because in times of downturn, Central Provident Fund (CPF) cuts or retrenchments are often seen as the way out for employers who are not on such a flexible system, which includes the Monthly Variable Component (MVC).
With the current economic climate, the NWC has recommended that firms pay their staff more for “their contributions to good corporate and economic performance”. This can be done via a built-in wage increment or higher variable bonuses, if the employer cannot pay out built-in increments in the long run.
The take-up for the MVC has left much to be desired over the past year. Last December, just 37.2 per cent of employees were in firms that implemented the MVC in their wage structure, up from 36 per cent in December 2005.
Said Mr Lee: “From the employers’point of view, the key message will be to make sure the built-in wage increase ... is sustainable in the long run. To address the current tight market situation, they could shift towards the use of a variable component because we are a very small, open economy.”
The NWC also wants employers to do more for low-wage earners, such as grant higher wage increments, even though the Government has introduced the Workfare Income Supplement (WIS) scheme.
The WIS is meant to boost the takehome pay and CPF savings of low-wage earners. A tripartite committee chaired by Mr Gan Kim Yong, the Manpower and Education Minister of State, will be set up to encourage low-wage earners to contribute to their CPF so as to benefit from the WIS scheme.
The Government has accepted the NWC’s recommendations for the year ahead, including the call for companies to narrow the maximum-minimum salary ratio to 1.5 or below — it is currently at 1.54 — and to keep older workers in the labour force.
Mr Alexander Melchers, vice-president of the 420-member Singapore-German Chamber, felt the NWC guidelines were “well-measured and wellbalanced”.
He believes the guidelines “very clearly tell us the direction that Singapore is heading, and that is, while we continue to give due reward for the company’s achievements, we must remain nimble and flexible”. - TODAY/fa
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