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Inflation expected to eat into likely pay hikes

This story was first published in The Straits Times on Nov 7, 2013

EMPLOYEES in Singapore are likely to get a pay rise of about 4.5 per cent, on average, next year.

But they will probably not get as much bang for their buck given the effects of an expected higher inflation, said human resource consultancy ECA International.

The firm's survey of employers here found that the likely pay rises next year are in line with the past two years' forecasts.

The 4.5 per cent extra cash bound for pay packets here, on average, is lower than the expected global average salary increase of 5.8 per cent.

Factoring in inflation, which is expected to rise next year, real wages here are forecast to rise by 1.8 per cent next year.

That is less than the 2.2 per cent real wage increases that workers here were expected to have received this year.

Still, Singapore employees are better off than most others as the global average of increase in real wages is 1.8 per cent.

But workers here will lag behind their regional counterparts in terms of wage hikes in both real and nominal terms.

Asia as a whole will see the highest real wage rise of 3.2 per cent, while the region is forecast to get a nominal wage rise of 9.7 per cent.

ECA regional director for Asia Lee Quane said at a conference yesterday that Asian nations, such as Bangladesh, Pakistan and Vietnam, will see the highest rates of increase.

That is because their economies are still in the developing stage so there is much room to raise wages from a low base.

"Also, they are locations which historically have high rates of inflation, so in order to ensure that employees' purchasing power keeps pace with inflation, your salary increases have to be quite high as well," he said.

Developed markets such as Singapore, Hong Kong and Japan, meanwhile, typically have lower rates of inflation as well as relatively higher salary levels, so rates of increases are generally lower.

For the 129 companies surveyed here, there was little variation across different sectors, with most industries expecting to raise pay by 4.5 per cent, including the traditionally high-paying banking and finance sector.

"What this may reflect is there may have been a bottoming out in terms of demand and that the banking and finance industry is now potentially a more mature industry in Singapore, so companies feel that they don't need to increase their employees' salaries at above-trend levels," said Mr Quane.

The only exception was in the retail and other professional services sector, which will likely pay their workers 5 per cent more in wages as the sector depends heavily on labour in a tight market.

A separate survey by another HR consultancy, Towers Watson, also forecast that salaries in Singapore will rise by 4.5 per cent next year, lower than the Asia Pacific average of 7 per cent.

It added in a statement that the ongoing tightening of foreign worker policies and the Government's push to increase pay for low-income workers will push overall wages up in the next few years.

The findings were in line with a Singapore National Employers Federation poll of 300 firms that showed that employers expect the basic wage increase this year to hover at around 4 per cent.

feimok@sph.com.sg

This story was first published in The Straits Times on Nov 7, 2013

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