Workers cheer NWC recommendations?

I refer to the report “Workers, HR experts expect wage increases of 3-5%” (Channel NewsAsia, May 25). It states that “After weathering one of the worst global recessions, workers have cheered the National Wages Council‘s (NWC) latest recommendations”.

While the council did not spell out a quantum, workers and HR experts are predicting a salary hike of anything from 3-5 percent. For many workers, it has been more than a year of wage cuts, wage freezes, and for some, even lay-offs. So the latest report from the NWC came as welcome relief.

One unionist will even be pushing for a merit bonus for deserving employees. “We have not had our increment since 2008… so this time around we are looking at our annual increment. At what percentage, I think we will take into account the increase in CPF and look at our productivity level,” said Ameer Hamzah, general secretary of Singapore Port Workers Union.

A survey of nearly 157 multi-national corporations across wide-ranging sectors like chemical, pharmaceuticals, banking and property showed employers willing to give increases averaging 3.5 per cent this year. That’s on top of the CPF restoration rate”.

I understand that historically, multi-national corporations may tend to give higher wage increases, relative to SMEs. So, if we survey SMEs, would the wage increases average less than 3.5 per cent? In this connection, as to “workers and HR experts are predicting a salary hike of anything from 3-5 percent”, how was this conclusion derived?

How many and who were the workers asked who gave this prediction, and who are the HR experts who also gave this prediction? Does it mean and workers and HR experts predict 3-5 per cent, but the MNCs surveyed say just 3.5 per cent?

It is interesting to note that the report then went on to say that “The job scene also looks positive. Six in 10 said they intend to hire over the next 12 months, compared to just two in 10, over the same period last year.

“This does not mean everyone gets a 3.5% increase. What it simply means is that employers are looking at an increase in their payroll cost by 3.5 per cent and there could be varying degrees of increases depending on performance of an individual,” said Puneet Swani, Market Business Leader (ASEAN), Mercer. So, does this mean that overall payroll cost are expected to go up by 3.5 per cent, but more workers may be hired, such that the possible net effect may be a smaller than 3.5 per cent increase in per workers’ wages?

With regards to “employers should also consider giving low wage workers a one-off payment to help defray the higher cost of living”, last year’s NWC also made this recommendation, but most employers did not give the one-off payment. So, if it did not work the last time, how likely is it that most employers will heed the call this year?

A day before, the report “CPI rises 3.2% on-year in April” (Channel NewsAsia, May 24) said that “Singapore’s consumer price index (CPI) rose 3.2 per cent in April compared to a year ago, due to higher costs of transport, housing and food. The Department of Statistics said the CPI was also 0.9 per cent higher compared to March. In the first four months of this year, the consumer price index increased by 1.5 per cent”.

At this pace of increase, inflation for the whole year may be around 3.2 (current April year-on-year) to 4.5 percent (first 4 months CPI of 1.5% increase times 3). So, if this is indeed the case for the year, then it may translate to yet another year of almost zero real increase in wages. In this connection, according to the MOM’s Labour Market report 2009, real earnings fell by 3.2 and 1.2 per cent, in 2009 and 2008, respectively.

On the same day, there was also another report “S’pore ranked 17th most expensive retail location globally” (Channel NewsAsia, May 25), which said “Singapore has moved up one spot to become the 17th most expensive retail location in the world”. So, rising retail costs may also translate into higher prices of goods and services.

Also on the same day, there was another report “National Wages Council calls for sustainable wage increases” (Channel NewsAsia, May 25), which said “the tripartite council noted that companies have rolled back their wage restraint measures in varying degrees”. In this regard, is it possible to cite the statistics to support this conclusion?

As to “The council said companies should take this into account as well as such (increase in CPF) contributions are part of the overall wage package”, employers are in essence being advised to take the 1 per cent increase in CPF contribution into account, which effectively may mean a 1 percent lower wage increase. And since the CPF increase will go to the Medisave and Special accounts, it cannot be used for housing or education, and therefore is not really a wage increase that can be utilised by workers.

In summary, the NWC is encouraging employers to

“grant sustainable wage increases to their employees, taking into account the firm’s performance and prospects”
“to take the guidelines into account when deciding on wage increases”
“in situations where companies still face cost pressures, have yet to fully recover from the downturn, and where a built-in wage increase is not sustainable, the council recommends that they instead grant variable payments”
“to recognise that not all industries and enterprises would perform the same level. The quantum of wage increases, in terms of total wage increase, would depend on individual companies”
“pay wages based on the performance – most enterprises would give a fair share of gains, at the same time keep the wage increase flexible. This means not all must be in the built-in wage increase, some can be on year-end bonuses”
“for low-wage workers, companies could also include a dollar quantum for their built-in wage increase”
“share productivity gains with their employees in the form of productivity incentives and bonuses”
“drive productivity measures and reduce reliance on low-skilled foreign manpower”

But how many employers will heed the above, and to what extent?

Perhaps one indication of the outcome of the NWC’s recommendations over the years on workers’ wages, is that from 2001 to 2008, real total wage growth was only 1.7 per cent per annum (Source: MOM Report on Wages in Singapore 2008, note: real earnings fell by 3.2% in 2009).

As to “The government is working closely with the tripartite partners on various initiatives including implementing re-employment for older workers”, since the Retirement Age Act says that a pay cut should be based on reasonable factors, and age is not one such factor, there may still be too much room for employers to terminate or reduce workers’s wages even before they reach age 60 or 62, citing other non-age reasons like performance.