Workers in Singapore may have received a more generous pay increase last year, but many of them did not feel much richer for it. -- ST PHOTO: JOYCE FANG
WORKERS in Singapore may have received a more generous pay increase last year, but many of them did not feel much richer for it.
That's because high inflation eroded most of the wage bump, according to the Manpower Ministry's (MOM) latest annual report on wages.
So while a tight labour market helped to raise salaries by 6.1 per cent in terms of dollars and cents, real wage growth last year was just 0.9 per cent.
This was much lower than the real wage growth of 2.9 per cent workers enjoyed in 2010.
Last year's number, however, improved to 1.9 per cent after excluding the imputed rental value of workers' homes. Most workers here own their homes and don't pay rent.
Released yearly, MOM's report examines wages of full-time Singaporean and permanent resident workers who receive Central Provident Fund (CPF) contributions.
The twin spectre of high wages and high inflation could be indicative of a wage-price spiral, but economists interviewed yesterday were divided on whether this was happening in Singapore.
A wage-price spiral is where workers demand higher pay to make up for inflation. Higher wage costs then cause companies to raise prices, which in turn stokes inflation even more.
UOB Group economist Chow Penn Nee felt such a phenomenon was already taking place, but conceded that inflation was not the only factor pushing pay up.
Higher wages also reflect last year's tight labour market, when restrictions on foreign labour pushed wages up for locals, she added.
DBS economist Irvin Seah noted that the uncertain global economic environment will cool consumer demand and eventually put less pressure on wages to rise.
The labour market has already started to soften in the first quarter of this year, with fewer vacancies and slightly higher unemployment of 2.1 per cent.
Given that the economy has slowed but inflation remains high, real wages could stagnate or even fall slightly this year, warned Ms Selena Ling, head of treasury research and strategy at OCBC Bank. This means that workers could end up feeling poorer despite increments received in 2012.
To mitigate this, Mr Zainudin Nordin, chairman of the Government Parliamentary Committee for Manpower, set out two policy options.
The first is to 'lift absolute incomes', but he acknowledged that this could raise costs for businesses and other employers.
The other is to find ways to lower inflation.
Mr Zainudin said that the way ahead will probably be some combination of the strategies: lower inflation, but also use targeted measures to boost the pay of low income earners.
Unionist Nasordin Mohamad Hashim noted that the ministry's 2011 report does not yet reflect recent government moves to do precisely that.
The president of the 30,000- member Building Construction and Timber Industries Employees' Union said he is 'optimistic' that workers will be helped this year by measures such as the National Wages Council's recommended pay hike of $50 for workers earning less than $1,000.
But workers do not have to be low-income to feel inflation's sting. Safety manager Kelvin Tan, 46, received 'a usual' pay increment last year, but feels that prices are 'definitely rising'.
'A lot of my friends and colleagues have also complained that things are getting a bit too expensive: food, daily necessities, even hospitalisation fees.'