Friday 7 June 2013

Slower rise in 2012 private-sector pay

Real wages dipped because of high inflation; this year likely to be better
By Janice Heng, The Straits Times, 6 Jun 2013

PAY in the private sector went up more slowly last year and coupled with high inflation, workers were worse off than in 2011.

But with inflation likely to come down this year, analysts such as OCBC economist Selena Ling foresee real wages rising and workers being better off.

Ms Ling expects nominal wages to grow by around 4 per cent to 5 per cent this year and inflation to ease below last year's 4.6 per cent.

"With lower inflation, there's likely to be positive real wage growth this year," she told The Straits Times, adding that last year's decline in real wages did not surprise her as the economy's real growth was just 1.3 per cent.

She was commenting on the latest pay figures released yesterday by the Ministry of Manpower in its Report on Wage Practices, which replaces the annual Report on Wages.

The new report is based on a survey of about 4,700 private- sector companies and looks at the wages of full-time citizens as well as permanent resident workers.

The ministry attributes the slower pace of increase in private-sector pay to weaker economic conditions.

Workers' pay rose by 4.2 per cent compared with 6.1 per cent in the previous year. With inflation at a high 4.6 per cent, real wages dipped by 0.4 per cent.

But if imputed rent is excluded from inflation, real wages actually rose - by 0.5 per cent. Imputed rent refers to what home owners would have paid if they were tenants instead.

The 4.2 per cent rise in total wages includes basic pay, bonuses and employer Central Provident Fund (CPF) contributions.

When employer CPF contributions are excluded, total wages rose 3.8 per cent last year. The bulk of the increase was fuelled by a 4.5 per cent rise in basic pay, and not bonuses as these had actually shrunk.

Basic pay rose the most for those in financial and insurance services. But when it came to total pay, excluding employer CPF contributions, workers in information and communications had the biggest pay rise.

The only other industry where total wages also rose more than in 2011 was administrative and support services, which tied for the biggest pay rise. Total wages for such workers rose 4.7 per cent, up from a 3.7 per cent rise in 2011.

The report also shows that almost three in 10 companies gave low-wage workers the pay rise recommended by the National Wages Council (NWC) last year. The NWC called on companies to give a built-in wage increase of at least $50 for workers earning a basic monthly salary of up to $1,000.

The most common reason given by companies that did not heed the call was that they were already paying the market rate.

Among other reasons they gave was that their business was not doing well and the recommended pay rise would have raised costs.

Looking ahead, Credit Suisse economist Michael Wan expects stronger wage growth this year, as the economy picks up and the tight labour market persists.

"Structurally, the labour market is still very tight, and I do not see it easing as more restrictions on foreign labour are coming in July," he said.

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