SINGAPORE: Labour chief Lim Swee Say said that the next three years is an important transition time for companies as they embark on the painful process of restructuring.
Move too slowly, he said, and Singapore will lose its competitiveness, with higher unemployment and wage stagnation.
Mr Lim, who's also Minister in the Prime Minister's Office, added that companies which are able to upgrade their operations during this period, will be able to make full use of the Wage Credit Scheme.
The scheme, announced during the Budget Statement in Parliament on Monday, is aimed at helping companies offset costs, as they restructure.
The message from the labour chief was clear - companies need to keep pace with changes or risk being eliminated. And it's a fine balance that needs to be struck.
Mr Lim: "If this transition we progress too slowly, we could actually end up losing our competitiveness. And not only the economy growth will slow down, job growth will slow down as well. So therefore if we get it wrong, it could end up with higher unemployment. We could end up with wage stagnation. That's what we are worried about.
"If we try to move too fast, faster than what the businesses can cope with, we are going to see many businesses closing down, relocating and as a result, workers who are released, if they are released in big numbers, we may not be able to retrain them, upscale them, and match them to new jobs fast enough, then we could end up with structural unemployment."
He said, how successful Singapore is in managing this transition will depend on several factors - whether the country can sustain full employment; if wages go up and the income gap narrowed; and if the Singaporean core is strengthened in every sector of the economy.
"We hope that we continue to see full employment, we hope wages can continue to go up, and at the same time, we hope that the Singaporean core can be strengthened in every sector of the economy, and at the same time the income gap can be narrowed, and at the same time, pay special attention to the lower wage workers to make sure their wage gain, their productivity gain is faster than the rest of the economy," said Mr Lim.
Addressing concerns over the sustainability of the Wage Credit Scheme, Mr Lim stressed that any pay increase needs to be supported by productivity gain.
Under the scheme, the government will fund 40 per cent of the pay increase given to Singaporean employees, up to a cap of S$4,000 a month.
But the subsidy is good for only three years.
Mr Lim said: "Really it's not about whether after three years, will the Wage Credit Scheme continue. The right question that businesses should be asking now is how can they make best use of the Wage Credit Scheme over the next three years to upgrade operations, to upgrade productivity, to upgrade the wages of the workers and do so in such a way that beyond this Wage Credit Scheme, it would still be sustainable.
"Companies that are able to make full use of the next three years, to upgrade their operations, enhance their productivity, to speed up innovation, these are the companies that will be able to make full use of this Wage Credit Scheme because they will be able to reward the workers better with the support of the scheme, but more importantly, the wage increase will be sustainable, he explained.
Mr Lim cautioned that companies who do not upgrade accordingly or keep up with the pace of change may be eliminated by the market.
He said: "Businesses that are going to continue life as per normal, so in another words, the next three years, do nothing to change their ways to operate, they will no choice but to up their wages.
"Because in a tight labour market, if they want to attract workers, they want to retain workers, they have no choice. But the question is how long can they sustain?
"Because if you are forced by the market to enhance the wages, yes the next three years maybe you can still survive with the Wage Credit Scheme - 40 per cent sharing by the government. But beyond that, how are you going to continue to sustain that kind of wage increases?"
Mr Lim added it also important to pay attention to less attractive jobs that Singaporeans shun.
And not just through raising wages, but also job redesign.
"The not so good jobs, if we continue to adopt the mindset that since they are not good enough to attract Singaporeans, therefore continuing to depend on foreign workers or cheap foreign labour, then we will never be able to transform the economy in a holistic manner."
"Sectors where the jobs are not so good, pay not so good, we should re-develop them. So if you adopt this development of the new growth sectors, and at the same time the re-development of the less attractive sectors, then hopefully when we go through this transition, Singapore indeed will be a better Singapore for all Singaporeans," said Mr Lim.
He said that he was "excited" about some of the new initiatives announced by Finance Minister Tharman Shanmugaratnam, in his Budget Statement.
This includes the new Productivity and Innovation Credit bonus scheme as it will give small and medium enterprises greater support.
Mr Lim added that the Inclusive Growth Programme, led by the National Trades Union Congress, will also be sped up.