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Fastest growing economy? What about jobs and wages?

Leong Sze Hian

After adjusting for historical inflation of about two per cent, the annual real wage increase may only be about 0.6 per cent.

I refer to the articles “Economy set to grow 13% - 15%” and “100,000 foreign workers needed: PM” (ST, Jul 15)On 15 July, Prime Minister Lee Hsien Loong said,“If we don't allow the foreign workers in, you are going to have overheating (in the economy)”.

I am somewhat confused by this. Wouldn't allowing such a large influx of cheap foreign labour contribute to overheating the economy even more?

With all the good news about a booming economy and job market, the fact remains that for the last nine years, from 2001 to 2009, real wages increased by only 1.4 per cent per year.

In a Straits Times report on the same day, NTUC Deputy Secretary-General Halimah Yacob said “wage increases of between 3 and 4 per cent are being anticipated”. (“Higher growth but not higher wages yet”, ST, Jul 15).   .

With inflation running at a 14 month high now at 3.2 per cent in May, we could end up with a third consecutive year of decline in real wages, As I understand it, wages do not include the employer's CPF contribution. The employer’s CPF contribution rate was decreased from 16 per cent to 13 per cent in October 2003, which was partially restored to 14.5 per cent in July 2007.

After factoring this in, does it mean that in effect, the increase in real wages may even be less than the 1.4 per cent per annum, from 2001 to 2009?

According to the Ministry of Manpower’s Singapore Yearbook of Manpower Statistics 2010 – Active CPF Members By Monthly Wage Level, there were, in 2009:

-       65,141 people earnings less than $400

-       146,080 earning less than $800

-        74,568 less than $1,000

-       128,611 less than $1,500.

Taken together, this means that there were a total of 464,400 or almost 30 per cent of all active CPF members, earning less than $1,500.

As the data excludes self-employed persons and inactive CPF members (those who did not have at least one employment CPF contribution paid for him for the current or any of the preceding 3 months), if we include these excluded persons, how many in total earn less than $1,500 in Singapore?

One of the targets of the Economic Strategies Committee (ESC) is to raise the wages of the average Singapore worker by one-third in the next decade, from a median wage of $2,400 today to about $3,100 in 10 years.

The Finance Minister said that to achieve this, Singapore must have workers with top quality skills and make the island one of the top liveable cities in the world. He also said Singapore has never had it as good as now, and for the next five to ten years.

Even if workers heed Mr Tharman’s call to “raise our game”, the targeted reward of a median wage of $3,100 in 10 years time only works out to an annual increase of 2.6 per cent.

After adjusting for historical inflation of about two per cent, the annual real wage increase may only be about 0.6 per cent.

This is even lower than the 1.4 per cent per annum real wage increase from 2001 to 2009, according to the Ministry of Manpower's Labour Market Q1 2010 report.

Speaking at the same dialogue session with the Finance Minister, the Manpower Minister said "productivity is also a partnership. It's not just about a company making efforts, it also involves the workers, so workers must take responsibility for their own skills upgrading".

I would like to suggest that the ESC sets it sight higher for wage increase. Otherwise, why would workers want to upgrade their skills, be more productive, aspire to higher standards, and make Singapore one of the top liveable cities in the world, when the reward at the end of the day, is just a 0.6 per cent increase in real wages?

In light of the last two years of negative real wage growth and current inflation running at a 14-month high of 3.2 per cent in May, workers may direly need a moral boost in the form of higher expected wage increases in the future.
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Pictures from Singapore Mind.

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Cartoon by Joshua Chiang.