Commentary

Why our wage policy must evolve

Why our wage policy must evolve
Published: June 7, 4:02 AM
Updated: June 7, 5:02 AM
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Despite not being mandatory, the National Wages Council’s (NWC) recommendations have never lacked clout when addressing the impact of economic downturns in the past. In contrast, the actual implementation rate of last year’s recommendations has been low.

Judging by its reiteration along the same lines this year, the NWC appears to be keenly aware that dealing with the labour crunch as well as plugging the productivity gap requires a different strategy, one which may require persuasion.

Hence, in addition to again recommending a fixed quantum of increase for low-wage workers, the NWC has made clear its strong support for the NTUC’s progressive wage model which emphasises the link between productivity improvements and wage progression. The key difference between this year’s recommendations and last year’s is the Wage Credit Scheme — it effectively means that companies taking up the NWC’s proposal have to pay only 60 per cent of the rise.

Why is it important to continue focusing on low-wage workers?

LOT NOT LIFTED

In economies undergoing rapid growth, the question of whether there has been a corresponding improvement in the lot of workers is an important and potentially volatile issue. One criterion is a comparison of the growth in real average monthly earnings with the growth in per capita real gross domestic product.

In the three decades beginning 1981, the two measures have kept pace for Singapore, with earnings actually slightly ahead if the all-CPI measure is used as the deflator. While the calculations vary slightly depending on the measure of earnings that is used, the main conclusion about the state of real earnings keeping up remains unchanged across such variations.

Once the span of time is narrowed, however, the picture changes, quite dramatically. In the ’80s and ’90s, real average monthly earnings grew more than 25 per cent faster than real per capita gross domestic product. In the first decade of the 21st century, however, both had slowed significantly, with the former growing less than half as fast as the latter.

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