Real wages last year grew at slowest pace since 2013

Salaries expected to continue to rise in 2018 but at a similar or slower pace: Economists

Real wages last year grew at the slowest pace in five years since 2013, going up by 3.2 per cent compared with 3.6 per cent in 2016.

But before inflation, nominal wages jumped by 3.8 per cent last year, compared with 3.1 per cent in 2016.

The reversal was due to a rise in inflation - going from minus 0.5 per cent in 2016 to 0.6 per cent last year, according to a Manpower Ministry report on wage practices released yesterday.

Economists told The Straits Times that while nominal wages will continue to rise this year, they expect the increase to be at a similar or slower pace.

Meanwhile, real wages will grow only if labour productivity growth strengthens, notes Maybank Kim Eng economist Chua Hak Bin.

"There are concerns that real wage growth has been driven more by tighter manpower regulations and higher qualifying salaries for foreign workers, rather than real laboUr productivity gains. This is not sustainable longer-term." 

CIMB Private Banking economist Song Seng Wun said that the average inflation of just 0.2 per cent in the first four months of this year is set to rise.

The ministry's report also shows that 65 per cent of private-sector establishments raised the nominal wages of workers last year, up from 58 per cent in 2016.

In turn, companies that cut wages fell, from 17 per cent in 2016 to 12 per cent last year.

This resulted in a higher proportion of local employees getting a pay rise last year - 78 per cent against 75 per cent in 2016.

In all, the report covers 4,900 private-sector establishments with at least 10 workers.

It involves more than 1.2 million workers. Of these, about 600,000 are local full-time employees and 440,000 are foreigners.

The rest are local full-time employees of less than one year of service or part-time workers.

Among the establishments that hire low-wage workers, 62 per cent gave them a bigger pay packet last year, up from 40 per cent in 2016.

These workers earn a monthly basic wage of up to $1,200.

Another finding was that the nominal total wage growth of nine out of 12 sectors last year was the same or higher than in the previous year.

The three sectors in which wage growth slowed were: transport and storage, administrative and support, and real estate services.

The biggest nominal pay rise last year was given by manufacturers.

Mr Song expects the pay rise in real estate services to be better this year, while that in transport and storage could get worse.

Industries such as infocomm and wholesale and retail trade saw a rise in the proportion of profitable businesses, while that in the construction industry as well as community, social and personal services declined.

The report found a dip in profitable establishments last year. It slipped one point to 75 per cent. But the proportion of workers in such companies went up.


Correction note: An earlier version of this story misquoted Maybank Kim Eng economist Chua Hak Bin. We are sorry for the error. 

A version of this article appeared in the print edition of The Straits Times on May 31, 2018, with the headline 'Real wages last year grew at slowest pace since 2013'. Print Edition | Subscribe