Wage increase for workers
1. After a decline in growth from 4.0% in 2002 to 3.1% in 2003, the Singapore economy has had 3 years of good growth, 8.8% in 2004, 6.6% in 2005 and 7.9% in 2006. At the same time employment growth has also been healthy, with 360,000 jobs created over the last three years. As such the resident unemployment rate has shrunk from 5.2 percent in 2003 to 3.6% in 2006. All major sectors of the economy have shown positive growth in GDP and employment terms. The Construction sector had also started to recover by growing 2.7% and adding 20,500 jobs last year. SBF and SNEF therefore support the Recommendation of the NWC that wage increases be awarded to workers for the good performance of the economy and companies.
Sustainable wage increases
(a) Real wage increase lag behind productivity growth
2. Whilst the economy has done well, productivity growth had slowed down from 7.0% in 2004 to 2.1% in 2005 and to 1.2% in 2006. This is mainly due to strong employment growth after declines in 2002 and 2003. However over the same period, real built in wages had increased by 1.0% in 2004 and by 2.6% in 2005 and 2006. As a result, over a longer period, although wage growth has lagged behind productivity growth, the gap is narrowing.
3. To be sustainable in the long run, real wage growth must continue to lag behind productivity growth. We must therefore be watchful over the narrowing wage and productivity gap and ensure that wage growth does not overtake productivity growth over a prolonged period as this would erode our competitiveness.
(b) Wages should have MVCM
4. The Federations strongly support the recommendation that wage increases be used to further build up the MVC beyond 10%. This will make our wage system more flexible to deal with sudden and severe downturns.
5. The Federations note that only 17.4% of employees in non-unionised companies had MVC in their wage structure. Feedback indicates that these companies feel that they have the flexibility to cut wages without MVC. However the Federations encourage non-unionised companies to introduce MVC so that workers are aware of the variable component in their monthly wages and any wage reductions can be seen to be done in a more responsible manner.
(c) Variable Component to reflect company and individual performance
6. Companies are awarding more bonuses to reward workers for better corporate and individual performance. The variable component had increased steadily from the 1.76 months in 2003 to 2.18 months in 2006 in line with the better economic performance. Companies are also encouraged to grant higher variable bonuses to reward workers for their good performance where built in wage increases may not be sustainable.
(d) Max-Min Salary Ratio should be 1.5 or Less
7. The Federations note the good progress made in wage restructuring. In particular the Max-Min salary ratio had narrowed from 1.56 in 2005 to 1.54 in 2006 for rank-and-file workers. However the ratio for junior management had remained higher at 1.72 in 2006.
8. Companies should press ahead to narrow the ratio so that the wages of older workers reflect the value of the job rather than their seniority. This way their wages will be competitive and help enhance their employability. Companies have reported that the salary ratios of junior management had remained high because of broad-banding and longer learning curves.
9. Professionals, Managers, Executives & Technicians (PMETs) are susceptible to retrenchments as well. The number of PMETs as a proportion of the total number of workers retrenched had risen from 23.1% in 1997 to 40.3% in 2006. Therefore, companies should still consider ways to further narrow the salary ratio of junior management staff to ensure that wages are not seniority based and that they are competitive.
Employability of Older Workers
10. In the light of the tight labour market, the Federations also urge companies to recruit, retain and reemploy older workers to fill their job vacancies. Buoyed by a strong economic and employment growth, the employment rate of workers age 55 to 64 had increased by 6.7% point to 53.7% in 2006 or by 40,000 more older workers. As the population ages, employers must establish HR systems to recruit and retain older workers to fuel the growth of their business. This includes restructuring wages, retraining, job redesign as well as introducing re-employment policies for workers reaching the age of 62.
Sustainable Help for Low-Wage and Informal Workers
11. NWC had recommended that companies grant higher wage increases and/or bonuses for the low-wage workers to share the fruits of good economic performance with them. The Federations support the recommendation to grant low-wage and informal workers higher wage increases as one way of building a more cohesive workforce.
12. Nevertheless, companies must enhance the job value of low-wage and informal workers through job redesign and skills upgrading. This would improve the productivity of the companies as well as the earning capacity of such workers over the long term.
Conclusion
13. Singapore's economic and employment growth for the past 3 years was healthy. To maintain our competitiveness, companies need to continue to enhance productivity and tackle labour challenges. The Federations would continue to strengthen our tripartite relations and efforts to help employers and businesses respond to these challenges.
About the Singapore National Employers Federation (www.sgemployers.com)
The Singapore National Employers Federation (SNEF) was established in 1980. With the support of 1,900 member companies, SNEF has become the largest employer body in Singapore today. SNEF is a trade union of employers dedicated to preserving industrial harmony and helping employers achieve excellence in employment practices, thereby enhancing productivity, competitiveness as well as the quality of their employees' work life. SNEF is an active player in facilitating the tripartite industrial relations partnership among the Government, employers and unions.
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