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Real wage growth in 2021 dampened by higher inflation despite total salary growth rebounding

Real wage growth in 2021 dampened by higher inflation despite total salary growth rebounding

Office workers cross a road in the financial district of Raffles Place on Sep 6, 2021. (Photo: CNA/Gaya Chandramohan)

SINGAPORE: Total wage growth rebounded to 3.9 per cent in 2021, comparable to before the COVID-19 pandemic in 2019, but real wage growth was dampened by higher inflation last year, the Manpower Ministry (MOM) said on Monday (May 30).

Real wage growth came in at 1.6 per cent in 2021, only slightly above the 1.4 per cent registered in 2020, and less than half of the 3.3 per cent in 2019. Wage growth last year continued to exceed inflation, the ministry added.

Singapore’s core inflation for the whole of 2021 came in at 0.9 per cent, with overall inflation rising to 2.3 per cent.

"The strong recovery of Singapore’s economy and a tight labour market prompted more employers to raise their employees’ wages in 2021, following a period of wage moderation in 2020," said MOM.

"As a result, more employees received wage increases last year, and wages also grew at a faster pace than in 2020."

Total wage growth, including employer Central Provident Fund contributions, among resident employees who have been with the same employer for at least one year was 3.9 per cent in 2021 - the same as 2019. This is up from the 1.2 per cent recorded in 2020.

"The rebound in total wage growth in 2021 reflects the broad-based economic recovery across industries, and a tight labour market due to border restrictions slowing down the inflow of non-resident labour," the ministry said.

After the global financial crisis, total wage growth rebounded the following year in 2010 to 5.7 per cent in the period of recovery.

While 2021's total wage growth also rebounded, it was lower than 2010, suggesting that employers may have been "more cautious given the longer tail" of the COVID-19 pandemic, said MOM. 

"As COVID-19 had a less severe impact on wages compared to the global financial crisis, wage growth also had less ground to recover in 2021 compared to 2010," added the ministry.

In 2021, Singapore reported a surge in COVID-19 cases and related deaths due to the Delta variant. This was then followed by another spike in cases when the Omicron variant hit earlier this year. 

DOWNSIDES TO GLOBAL ECONOMY REMAIN IN 2022

"In 2022, we expect the tight labour market to support continued nominal wage growth, although the significant relaxation of border restrictions will allow the non-resident workforce numbers to recover and ease some of the tightness."

Downside risks to the global economy remain, such as the ongoing Russia-Ukraine conflict and protracted global supply disruptions. MOM said this could moderate demand and nominal wage growth.

With recent shocks to the global supply chains, inflation is projected to stay elevated and dampen real wage growth this year, the ministry added.

Singapore’s core inflation for April this year rose to 3.3 per cent, the highest since January 2012. The increase was driven by higher energy and food costs. 

THREE IN FOUR EMPLOYERS PROFITABLE IN 2021

With Singapore's economy expanding by 7.6 per cent in 2021, the proportion of profitable employers increased from 63 per cent in 2020 to 75 per cent last year, enabling some employers to restore wage cuts made in 2020. 

About 70 per cent of employees had wage increases in 2021, compared to 59 per cent in 2020, said MOM. 

The extent of their wage increases was also higher in 2021 (6.3 per cent) than in 2020 (4.5 per cent). The proportion of employees that saw wage cuts in 2021 (10 per cent) was about half of 2020 (23 per cent).

Among employees who saw wage cuts in 2021, the wage cuts were less steep than in 2020. 

SECTORS REGISTERED HIGHER TOTAL WAGE GROWTH

All sectors experienced higher total wage growth in 2021 compared to 2020, said MOM. 

Outward-oriented sectors, in particular information and communications, financial and insurance services and manufacturing, registered healthy expansion even in the midst of the COVID-19 pandemic and continue to see "strong wage growth" in 2021, said MOM. 

The information and communications sector saw total wage growth of 5.1 per cent, followed by the financial and insurance services at 4.1 per cent and manufacturing at 4 per cent. 

Among domestic-oriented sectors, retail trade registered the highest wage increase at 5.5 per cent. 

Sectors that were more affected by the pandemic also registered wage increases as demand for manpower rose in tandem with the reopening of borders, said MOM.

  2020 2021
Accommodation -5.3% 1.7%
Transportation & Storage -3% 2.8%
Food & Beverages Services 1.5% 2.6%
 

"2021 saw a rebound in total wage growth, in tandem with the broad-based economic recovery," said MOM.

"Real wage growth was dampened by rising inflation but remained positive and grew slightly faster compared to 2020."

Source: CNA/lk(mi)

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