SINGAPORE — Wage growth is expected to moderate for the whole of 2023 due to inflation, uncertain business conditions and the global economic slowdown, with firms likely to take a "cautious approach" in salary increments. 

This is in spite of recent polls from the first quarter of 2023 that found more firms intended to raise their employees' wages, as compared with the previous quarter, the Ministry of Manpower (MOM) said in a press release on Monday (May 29).

In its latest Report on Wage Practices 2022, MOM found that nominal wages went up by 6.5 per cent in 2022, which is the highest year-on-year increase in a decade.

This surpassed the increases in nominal wages for 2020 and 2021, which were 1.2 per cent and 3.9 per cent respectively.

This increase was in tandem with broad-based economic growth and increased profitability, MOM said.

However, it added that after accounting for inflation, real wages rose by only 0.4 per cent year-on-year in 2022, down from 1.6 per cent in 2021.

This is the lowest year-on-year change since 2012, when total wages shrank by 0.4 per cent from the previous year due to the slowing global economy.

“Real wage growth was dampened by inflationary pressures but remained positive (in 2022)," said the ministry.

MOM also noted that inflation is projected to remain at elevated levels this year — the Monetary Authority of Singapore expects core inflation to come in between 3.5 and 4.5 per cent in 2023.

“Against the backdrop of the global economic slowdown and a more uncertain business environment, firms are likely to take a more cautious approach regarding salary increments.

"Hence, wage growth is expected to moderate in 2023,” MOM said.

MORE EMPLOYEES RECEIVED INCREMENTS

MOM's report stated that 81.7 per cent of employees received total wage increases in 2022, up from 69.5 per cent in 2021. 

MOM said the rise in nominal total wages reflects the efforts by firms to restore salaries of some employees who experienced pay cuts during the pandemic, and to retain staff amid competition for workers.

This is also due to the rise in profitable establishments across all industries, which rose to 83.9 per cent last year, an increase from 75.4 per cent in 2021.

WAGES IN ALL INDUSTRIES GREW IN 2022

In line with an increase in the proportion of profitable firms, the proportion of establishments which gave wage increases also rose from 60 per cent in 2021 to 72.2 per cent last year, MOM said. 

Out of all the industries, accommodation and retail trade saw above-average yearly wage increases of 9.7 per cent and 6.7 per cent respectively, as firms in these industries worked to retain workers amid the “strong recovery in Singapore’s tourism and a tight labour market”.

Other sectors which are more outward-oriented, such as financial services, information and communications, and professional services, continued to register “robust wage increases” last year, due to the sustained manpower demand in these industries, the report stated.

On the other hand, pay increases were lower in sectors which were affected by the global supply chain disruptions and weakness in trade-related activities, such as manufacturing and wholesale trade, which saw total annual wages grow by 5.7 per cent and 5.8 per cent respectively. 

MOM added that more firms have expressed intentions to raise the wages of their employees in March this year, compared with December 2022, based on recent polls on salary expectations conducted in the first quarter of this year. 

This is amid the stiff competition among firms to attract and retain talent, the ministry said.