Entry-level pay stagnating because of inflation: Experts

Entry-level pay stagnating because of inflation: Experts

SINGAPORE - Rising prices, more so than competition from foreigners, are to blame for starting salaries flatlining in recent years, said economists and human resource experts.

They note that while numbers on payslips have been rising, pay has not kept up with the high inflation in recent years.

Discussion over salaries for those entering the workforce heated up this week after Acting Manpower Minister Tan Chuan-Jin said that entry-level salaries had been stagnant for five years.

From dollar figures alone, the problem is not immediately obvious. In 2007, the median monthly gross starting pay for a local university graduate was $2,750, meaning that half of them earned at least that. Last year, it was $3,050, up almost 11 per cent.

Yet cumulative inflation over the same period was 21 per cent - meaning that in real terms, starting pay actually fell 10 per cent.

Mr Tan had said he hoped to combat the starting-pay trend by tightening the criteria for Employment Pass (EP) holders, skilled foreigners who might compete with local graduates.

Raising the minimum salary for EP holders, especially the lowest Q1 tier, is on the cards. The Q1 qualifying pay is now $3,000, on a par with last year's $3,050 median starting pay for graduates.

But experts interviewed said that competition from foreigners is far from the only reason for stagnating starting pay. Slow real wage growth is an issue not just for graduate pay, but across the economy, said Barclays economist Joey Chew.

The problem was not that nominal pay - pay in dollar figures - was failing to rise, but that inflation was too high, she added.

The last five years also saw a global economic crisis. "2007 was really the pre-crisis peak and... things are clearly not back to that heyday," said OCBC economist Selena Ling.

Inflation aside, HR experts point to the increasing supply of graduates as another factor. "Now that they are in greater supply than before, graduates have less power to negotiate salaries," said eFinancialCareers managing director for Asia-Pacific George McFerran.

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