Raising wages to address rising costs not the right solution
By S Ramesh, Channel NewsAsia | Posted: 25 April 2008 2026 hrs

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	Video Raising wages to address rising costs not a right solution

SINGAPORE: Raising wages to address the issue of rising costs may be an enticing option but that is not the right solution, said Acting Manpower Minister Gan Kim Yong.

He said adjusting wages upwards to meet rising prices would only result in a "price-wage spiral" and Singaporeans should look at the bigger picture.

"What is more important is for us to have a realistic expectation of wages that reflect the underlying economic strength of our industries and also of our productivity. That will allow us to ensure that our economy will be able to sustain its growth momentum," said Mr Gan.

Since the last two recessions, tripartite partners – the government, unions and employers – have been working hard to encourage companies to restructure their wage systems to make them more flexible. This would allow companies to respond quickly when there is an economic downturn.

One component that has been built into the wage system is the monthly variable component (MVC). Mr Gan said this has worked well, but more needs to be done.

He said: "It is not an easy instrument to introduce because companies have to put in place certain mechanisms, particularly in the small and medium enterprises. Many of them take the position that in any case, their wages are quite flexible because they are small and nimble, and are able to adjust the wages as they go along.

"We do acknowledge that some of these companies already have a flexible wage system in their own structure... but it is also important for us to look at other flexible components of the wage system, including reducing the ratio between minimum and maximum wages."

A major preoccupation of the Manpower Ministry is to finalise Singapore's reemployment legislation which is expected to come into effect by 2012.

Mr Gan said that it would not be a top-down approach – there will be widespread public consultation with both employers and unions before the final legislation is crafted.

The acting manpower minister also said the feedback received so far has indicated that employers welcome the initiative and see the benefit of employing older workers.

In fact, the employment rate of those aged between 55 and 64 years went up by 3 percentage points from 2006 to reach almost 56 percent last year. The tripartite partners hope to achieve a 65 percent target by 2012.

Mr Gan said: "Employers are ready and willing to give it a try, and we are now helping them to introduce this system even ahead of the introduction of the legislation.

"Drafting the legislation is not so difficult. What is difficult is to decide what are the criteria, terms within the legislation, and this is something we have to work with the industry and unions so that we can arrive at some common understanding how reemployment is to be implemented."

A tripartite work group has also been set up and it will visit companies to enhance the consultation process before the final law is introduced.


- CNA/so