Strong wage growth in 2015 not sustainable given low labour productivity: MTI

Office workers in the Central Business District of Singapore.
Office workers in the Central Business District of Singapore.PHOTO: ST FILE

SINGAPORE - The strong wage growth workers here experienced last year might not be sustainable given the lacklustre economic outlook and Singapore's flagging labour productivity.

Mrs Ow Foong Pheng, the Permanent Secretary for the Ministry of Trade and Industry (MTI), told a press briefing on Wednesday that demand for labour may be more subdued this year given the "challenging near-term outlook for the Singapore economy".

This is likely to lead to more moderate wage growth.

Real median income for residents, which count both Singaporeans and Permanent Residents, grew 5.3 per cent last year, significantly faster than the 0.7 per cent growth registered in 2014. Real median wages for Singaporeans rose 7 per cent last year.

This was due to manpower shortages in some industries, as well as increases to employer Central Provident Fund contributions, which went up 1 percentage point for all workers on Jan 1, 2015.

Besides the depressed growth outlook, last year's strong wage increases might not continue also because productivity growth has been poor.

A study released by MTI on Wednesday showed that the real average wage growth of resident workers in Singapore outpaced labour productivity over the past decade, from 2005 to 2015, and also in the 2010 to 2015 period.

From 2005 to 2015 labour productivity grew at an average annual rate of 0.5 per cent, while the real average monthly earnings of resident workers increased by a higher 1 per cent per year over the same period.

If real wage growth to continues to outpace productivity gains, Singapore's competitiveness will be hit, noted Mrs Ow.

"In order for our economy to remain competitive and wage growth to be sustainable, wages should grow in tandem with productivity over the longer term."