Mixed economic picture may be behind NWC's lowered wage proposals: Experts
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SINGAPORE — Mixed performance across sectors and the fact that wages are a “lagging indicator” could be behind the National Wages Council’s (NWC) lower recommended range of wage increments for low-income earners this year, economists said.
Yesterday, the NWC announced its recommended range of wage increments of S$45 to S$60 for workers earning a monthly basic wage of up to S$1,200, amid uneven business conditions. This is lower than the recommended range of S$50 to S$65 last year, for workers earning up to S$1,100 in basic wages, and comes despite expectations that the economy would outperform last year’s 2-per-cent growth, barring downside risks.
United Overseas Bank economist Francis Tan said that wages are a “lagging indicator”, with the labour market conditions lagging behind economic performance.
Before businesses raise wages on a larger scale, they need to first see “money in the pocket” in the form of growth in revenues or profits.
He said that if the economy turns in a better performance in line with expectations this year, the wage situation may improve next year, and the NWC may bump up its recommended increments.
Noting the “mixed” picture in the economy, CIMB Private Banking economist Song Seng Wun said that headline growth may be better, but this is not “broad-based” and has been pushed up by a “very narrow range of sectors”.
NWC’s lower range of wage increments gives employers facing challenging times the “flexibility”, he noted. Workers’ increments would rise more significantly only when demand for labour in general is “broad-based”, and businesses are willing to fork out more for workers.
Agreeing, Mr Tan said that while some sectors are faring better than others, growth in the services sector — where low-wage workers are concentrated — is still slow.
While the NWC’s wage recommendations were “wise and prudent” to help businesses cope and in giving workers a “benchmark”, Mr Tan acknowledged that “at the end of the day, of course, companies have to pay according to their means”.
At cleaning firm AO ServicePro, only about 20 of its 500 cleaners — 85 per cent of whom are locals — earn less than S$1,200, said its director Vincent Foo. Of these, seven draw below S$1,100, but will have their salaries bumped up to this level before next month, to meet conditions under the Progressive Wage Model (PWM) for the cleaning sector.
But Mr Foo said the firm will not raise wages for those who have already met the PWM’s requirements, citing poorer business. Profits dipped 20 per cent drop last year, compared with 2015. Buyers, he added, are also not raising contract sums, owing to economic difficulties, creating a “ripple effect”.
Ms Ang Hwee Keng, manager of San Ho General Cleaning Service Co, said her firm gave workers a “major” increment of between S$200 and S$300 last year, passing on higher maintenance fees paid out by a contract owner. This means that all but one of its 40 cleaners earn more than S$1,200 now.
Ms Ang said it will increase this cleaner’s wages to S$1,200 this month but does not expect to raise wages for other employees this year, noting the increasing competition in the sector as new firms join the fray. Profit margins have also been “very low” as buyers “just want to have a cheaper rate”.
The firm also “already exceeded” last year’s recommended range of increments, she added.
