Salary hikes stall as firms see their earnings sputter

Office workers crossing a road in the Central Business District.
Office workers crossing a road in the Central Business District.ST PHOTO: JAMIE KOH

Wage growth slowed last year, more workers had pay cuts and more firms suffered losses

Fewer workers received salary hikes last year and more took a pay cut as slowing economic growth hit companies.

Real total wages also grew at a slower rate, rising 3.6 per cent last year compared with 5.4 per cent in 2015, after accounting for negative inflation of 0.5 per cent. As they struggled to turn a profit, companies scaled back payouts made to their workers.

This year, economists expect another hard slog with uneven performance and wage growth across different sectors.

A Ministry of Manpower survey showed that with nine in 10 firms putting some form of a flexible wage system in place, the earnings of workers in Singapore have moved more closely in tandem with the fortunes of their employers.

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Last year was a choppy one for businesses, with the share of loss-making companies creeping up for a third year in a row. Almost a quarter - 24.3 per cent - racked up losses, compared with 21.5 per cent in 2015.

This was the highest proportion of companies in the red in the past 10 years - and it hit workers directly in the pocket.

 

A bigger proportion of companies cut workers' pay last year: Around 17 per cent compared with 11 per cent in 2015. The cuts were also steeper: 5 per cent in 2016 compared with 4.7 per cent the previous year.

Of 1,232,800 workers across 4,800 companies surveyed, 13.1 per cent took a pay cut, compared with 11.1 per cent in 2015.

While the flexible wage system docks a worker's pay when times are tough, it also serves to protect jobs and keep firms competitive as they can cut costs without trimming headcount. Since 2004, the proportion of firms with a flexible wage system has never been higher, and they typically adjust wages when they are not doing so well.

Despite this buffer, some 19,170 workers were made redundant in 2016, compared with 15,580 the previous year.

Meanwhile, the proportion of profitable firms dropped from 78.5 per cent in 2015 to 75.7 per cent last year. For workers, this meant that 75 per cent of them got a pay raise in 2016, down from 77 per cent the previous year.

The survey findings, given in the annual Report on Wage Practices released yesterday, also show that the pay rise workers received was not as good as in 2015.

Last year's nominal pay increase was 4.9 per cent, a decline from 5.6 per cent the previous year.

Bonuses stayed about the same at 2.16 months of basic wage last year. But a bigger proportion of companies said they tied bonuses to market conditions and their own performance, compared with an employee's performance.

The economy grew by a sluggish 2 per cent last year, but is expected to do slightly better this year.

DBS senior economist Irvin Seah said that this should improve wages in externally-oriented sectors like financial services, which are buoyed by stronger global demand.

But other sectors like domestic services will still struggle as they face structural challenges.

"Some clusters are disrupted by new technology and will continue to find it tough going forward," Mr Seah said, citing the retail sector competing with e-commerce.

"Any improvement in wages will be uneven," he added.

Singapore University of Social Sciences labour economist Randolph Tan also noted that unemployment may worsen as Singapore grapples with a mismatch between jobs created and skills that workers have.

"It will not make much sense to expect significant wage growth until the situation has stabilised a bit more," he said.

A version of this article appeared in the print edition of The Straits Times on May 31, 2017, with the headline 'Salary hikes stall as firms see their earnings sputter'. Print Edition | Subscribe