Cautious approach gives firms breathing space

Cautious approach gives firms breathing space

At first glance, the National Wages Council (NWC) wage recommendations announced yesterday were like deja vu.

The guidelines were nearly identical to those that were announced last year - a minimum pay hike of at least $60 for those earning below $1,000 each month; real wage increases should be in line with productivity growth in the long term; and employers should share productivity gains with workers.

As with last year and previous years, the NWC also decided that it should give firms more elbow room to decide for themselves how best to reward their workers.

Just don't let pay hikes outstrip productivity growth, cautioned the council.

But before workers jump at the council for recycling their recommendations this year, it is useful to bear in mind that the cautious approach taken is a necessary one - at least for now.

Firms already face a slew of cost pressures. Forcing them to pay their workers beyond what they can bear will almost send them towards certain death, which means job losses. Everyone suffers.

As Singapore National Employers Federation (SNEF) president Stephen Lee puts it: "From employers' perspective, we are in a rather unusual period. A number of forces are working together and there is pressure to raise wages."

The cost pressures faced by firms come from three fronts.

First, the hike in the Central Provident Fund (CPF) contribution rate next year means larger wage bills for firms.

From next year, firms have to cough up at least 1 percentage point more for their workers' CPF accounts. They will have to pay 2 percentage points more to older workers above 50 to 55.

Indeed, the NWC recognised this when it said yesterday: "Employers should take these into account when considering the quantum of wage increases."

Second, the tight labour market is already causing wages to climb north, even outstripping labour productivity.

Labour productivity fell 1.4 per cent in 2012 and 0.2 per cent last year.

Yet in both years, real total wages - including bonuses and employers' CPF contributions - rose 0.5 per cent and 3.4 per cent respectively.

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