Firms hit by COVID-19 should take other measures before resorting to pay cuts, retrenchments: NWC
Council tells employers retrenchment should be a last resort and those doing it must be fair
By Joanna Seow, Assistant Business Editor, The Straits Times, 31 Mar 2020
Employers affected by the COVID-19 pandemic should first reduce non-wage costs and tap government support before looking to reduce their workers' wages.
Retrenchment should be a last resort, said the National Wages Council (NWC), in releasing its annual guidelines yesterday. And employers doing so should ensure they conduct the exercise fairly and in accordance with the tripartite advisory on managing excess manpower and responsible retrenchment which was updated earlier this month.
The council's guidelines, made ahead of the usual schedule this year, come as unemployment is expected to rise as Singapore's economy heads into what could be its worst annual contraction.
The Monetary Authority of Singapore eased monetary policy yesterday and said that it expects increasing job losses and slower wage growth amid a recession this year.
It has set the Singapore dollar's rate of appreciation at 0 per cent and effectively lowered the mid-point of its currency band to allow for a weaker currency and spur export-driven growth.
The NWC yesterday made recommendations on the key considerations employers should bear in mind if they have to cut pay in order to save jobs. Management should lead by example, and they should try as far as possible to still pay the annual wage supplement, or 13th-month bonus.
Special consideration should be given to low-wage workers earning a basic monthly wage of up to $1,400.
The council also called on employers to support local staff who want to take on a second job to supplement their income if they have been affected by measures such as reduced working hours or temporary layoffs due to the coronavirus outbreak.
The Singapore National Employers Federation (SNEF) said that it supports the recommendation for employers who have been adversely affected by the virus to reduce their wage costs, but urged them to do so in a balanced, measured and graduated approach. "The magnitude of the decline means that cutting non-wage costs alone has not been sufficient for some employers to stay afloat," it said.
The council gave other guidelines on reducing non-wage costs, managing excess manpower, and pressing on with business and workforce transformation.
For example, employers can use the excess time to bring forward planned training for workers, and redesign jobs to improve productivity.
SNEF president Robert Yap, a council member, called on fellow bosses to look for opportunities presented by the crisis.
"We should look at how we can use this opportunity to do a lot of things that we have been trying to do. For example, flexible work, productivity, innovation, how do we cut costs, how do we create that kind of habit that we work actually in a more digital manner," he said.
Fellow council member Mary Liew, who is president of the National Trades Union Congress, said that during the negotiations, NTUC had advocated for special attention to be paid to low-wage workers, including giving an ex-gratia payment to those who stepped up to assist employers during this challenging period, and she was glad that this was part of the recommendations.
The Government has accepted the NWC's recommendations.
Manpower Minister Josephine Teo said in a statement on this year's guidelines that they outline clearly what workers should expect from their employers.
She added that the ability of the council to agree on the guidelines under a compressed timeline - it typically meets in April and May, and releases recommendations at the end of May - shows the strength of tripartism in Singapore.
"In good times, we share the gains. In times of crisis, we share the pain - each making mutual sacrifices to sustain businesses and save jobs," she said.
Council tells employers retrenchment should be a last resort and those doing it must be fair
By Joanna Seow, Assistant Business Editor, The Straits Times, 31 Mar 2020
Retrenchment should be a last resort, said the National Wages Council (NWC), in releasing its annual guidelines yesterday. And employers doing so should ensure they conduct the exercise fairly and in accordance with the tripartite advisory on managing excess manpower and responsible retrenchment which was updated earlier this month.
The council's guidelines, made ahead of the usual schedule this year, come as unemployment is expected to rise as Singapore's economy heads into what could be its worst annual contraction.
The Monetary Authority of Singapore eased monetary policy yesterday and said that it expects increasing job losses and slower wage growth amid a recession this year.
It has set the Singapore dollar's rate of appreciation at 0 per cent and effectively lowered the mid-point of its currency band to allow for a weaker currency and spur export-driven growth.
The NWC yesterday made recommendations on the key considerations employers should bear in mind if they have to cut pay in order to save jobs. Management should lead by example, and they should try as far as possible to still pay the annual wage supplement, or 13th-month bonus.
Special consideration should be given to low-wage workers earning a basic monthly wage of up to $1,400.
The council also called on employers to support local staff who want to take on a second job to supplement their income if they have been affected by measures such as reduced working hours or temporary layoffs due to the coronavirus outbreak.
The Singapore National Employers Federation (SNEF) said that it supports the recommendation for employers who have been adversely affected by the virus to reduce their wage costs, but urged them to do so in a balanced, measured and graduated approach. "The magnitude of the decline means that cutting non-wage costs alone has not been sufficient for some employers to stay afloat," it said.
The council gave other guidelines on reducing non-wage costs, managing excess manpower, and pressing on with business and workforce transformation.
For example, employers can use the excess time to bring forward planned training for workers, and redesign jobs to improve productivity.
SNEF president Robert Yap, a council member, called on fellow bosses to look for opportunities presented by the crisis.
"We should look at how we can use this opportunity to do a lot of things that we have been trying to do. For example, flexible work, productivity, innovation, how do we cut costs, how do we create that kind of habit that we work actually in a more digital manner," he said.
The Government has accepted the NWC's recommendations.
Manpower Minister Josephine Teo said in a statement on this year's guidelines that they outline clearly what workers should expect from their employers.
She added that the ability of the council to agree on the guidelines under a compressed timeline - it typically meets in April and May, and releases recommendations at the end of May - shows the strength of tripartism in Singapore.
"In good times, we share the gains. In times of crisis, we share the pain - each making mutual sacrifices to sustain businesses and save jobs," she said.
Tripartite partnership can help Singapore through crisis due to coronavirus pandemic: Council
By Joanna Seow, Assistant Business Editor, The Straits Times, 31 Mar 2020
Singapore is home to more than 8,000 multinational companies, which may receive directives from their global headquarters regarding retrenchments as the COVID-19 impact becomes more severe.
But Singaporean-German Chamber of Industry and Commerce council member Alexander Melchers said management in Singapore can tell headquarters that it can implement other cost-cutting measures and preserve its workforce in Singapore, thanks to collaboration here between the Government, company and unions.
"It is crucial for the management here to communicate to their headquarters that in Singapore, we take a very different and tripartite approach. In fact, many in Europe and America look to Singapore and even talk about 'Singapore-ising' their approach," he said at a media conference yesterday.
He added: "These circumstances call for employers to act quickly, but in a responsible and humanitarian way to sustain our businesses."
National Wages Council (NWC) chairman Peter Seah, who is DBS and Singapore Airlines chairman, said that the core principle of the tripartite movement is that all parties should always act responsibly.
"So, we certainly would not condone any parties acting irresponsibly and weakening therefore this tripartite partnership and friendship," he said when asked whether some companies might take advantage of the NWC's guidelines to cut costs, even if they are not affected by COVID-19.
National Trades Union Congress president Mary Liew said that workers are discerning and know how well the company is doing.
"I think it is important that during this time, employers step forward and also show their appreciation and work closely together with workers and also reward them fairly and accordingly as well... When the economy turns around, they will need the workers as well to continue on with their journey," she said.
She also called on workers to be adaptable to go for training and accept flexible work schedules or new job roles, and if necessary, accept lower pay if that will help the company retain them.
NWC had considered whether to recommend reducing Central Provident Fund (CPF) contribution rates to cut wage costs, which was done in 2003 amid concerns about Singapore's cost competitiveness.
Permanent Secretary for Manpower Aubeck Kam said that as the 25 per cent wage subsidy in the enhanced Jobs Support Scheme announced last week far exceeds the employer CPF contribution rates of up to 17 per cent, the Government did not feel that a cut to the rate was warranted.
Singapore National Employers Federation president Robert Yap agreed that the supplementary budget "helped to solve many, many issues", while Ms Liew noted that CPF savings help workers pay for their mortgage loans.
By Joanna Seow, Assistant Business Editor, The Straits Times, 31 Mar 2020
Singapore is home to more than 8,000 multinational companies, which may receive directives from their global headquarters regarding retrenchments as the COVID-19 impact becomes more severe.
But Singaporean-German Chamber of Industry and Commerce council member Alexander Melchers said management in Singapore can tell headquarters that it can implement other cost-cutting measures and preserve its workforce in Singapore, thanks to collaboration here between the Government, company and unions.
"It is crucial for the management here to communicate to their headquarters that in Singapore, we take a very different and tripartite approach. In fact, many in Europe and America look to Singapore and even talk about 'Singapore-ising' their approach," he said at a media conference yesterday.
He added: "These circumstances call for employers to act quickly, but in a responsible and humanitarian way to sustain our businesses."
National Wages Council (NWC) chairman Peter Seah, who is DBS and Singapore Airlines chairman, said that the core principle of the tripartite movement is that all parties should always act responsibly.
"So, we certainly would not condone any parties acting irresponsibly and weakening therefore this tripartite partnership and friendship," he said when asked whether some companies might take advantage of the NWC's guidelines to cut costs, even if they are not affected by COVID-19.
National Trades Union Congress president Mary Liew said that workers are discerning and know how well the company is doing.
"I think it is important that during this time, employers step forward and also show their appreciation and work closely together with workers and also reward them fairly and accordingly as well... When the economy turns around, they will need the workers as well to continue on with their journey," she said.
She also called on workers to be adaptable to go for training and accept flexible work schedules or new job roles, and if necessary, accept lower pay if that will help the company retain them.
NWC had considered whether to recommend reducing Central Provident Fund (CPF) contribution rates to cut wage costs, which was done in 2003 amid concerns about Singapore's cost competitiveness.
Permanent Secretary for Manpower Aubeck Kam said that as the 25 per cent wage subsidy in the enhanced Jobs Support Scheme announced last week far exceeds the employer CPF contribution rates of up to 17 per cent, the Government did not feel that a cut to the rate was warranted.
Singapore National Employers Federation president Robert Yap agreed that the supplementary budget "helped to solve many, many issues", while Ms Liew noted that CPF savings help workers pay for their mortgage loans.
Singapore employers urged to support staff who need 2nd job due to COVID-19
NWC: Those cutting salaries should still pay 13th-month bonus, help low-wage workers
By Joanna Seow, Assistant Business Editor, The Straits Times, 31 Mar 2020
Employers should support local staff who want to take on a second job to supplement their incomes if they have been affected by a shorter work week or temporary layoffs due to the COVID-19 pandemic, the National Wages Council (NWC) said yesterday.
Such workers could be looking for part-time or temporary jobs, said the council, which comprises employer, union and government representatives.
The Ministry of Manpower has uploaded a guide on second-job arrangements on its website. It states that workers can take on a second job unless the employment contract prohibits moonlighting or there is a conflict of interest.
In such cases, "employers are encouraged to waive contractual prohibitions against taking on a second job and help employees resolve conflicts of interest where possible, given that they initiated the reduced work hours and reduced salaries to save costs," the guide states.
"Employees should ensure that they are able to take on both jobs without compromising the interests of each employer and be transparent in terms of the requirements of both jobs to their employers," the guide also says.
NWC also recommended that firms focus on training and upskilling workers, and consider "timebanking", which is to reduce weekly working hours without adjusting wages, with the understanding that workers will work extra hours accordingly in the future.
The NWC's guidelines, which cover the period from tomorrow to June 30 next year, were released ahead of its usual schedule this year amid the worsening impact of the coronavirus outbreak on the local and global economies.
NWC said that if firms have to cut pay in order to save jobs, management should lead by example, and they should try as far as possible to still pay the annual wage supplement, or 13th-month bonus.
Special consideration should be given to low-wage workers earning a basic monthly wage of up to $1,400. Their pay should be frozen rather than cut, if there are company-wide wage cuts, NWC said.
If a wage freeze or increase is planned, they should consider giving low-wage workers a built-in wage increase of up to $50.
They should also give low-wage workers who have stepped up to assist the business during this challenging time an ex-gratia payment where possible.
Among other guidelines was that monthly variable components (MVC) of salaries can be adjusted now if the employer cannot wait until the end of the year to adjust annual variable parts of pay.
For the nearly 90 per cent of employers which do not have an MVC system in place, they can consider treating any cut in basic wages of up to 10 per cent - or more, for management - as an MVC cut.
Employers should set clear guidelines on reversing any reductions to MVC or basic salary through future wage increases or adjustments when business recovers.
And companies that did well last year or are still doing well should continue to reward employees with variable payments in line with the company's performance and workers' contributions.
Companies such as Singapore Airlines, Certis, BreadTalk and Singapore Press Holdings have announced pay cuts for senior management in recent weeks. Others have implemented wage freezes.
Deputy Prime Minister Heng Swee Keat also announced in his supplementary budget speech last week that the Prime Minister, Cabinet ministers and other political office-holders, and the President, will take a three-month pay cut.
Permanent Secretary for Manpower Aubeck Kam, an NWC member, said yesterday that discussions on pay are ongoing between the Public Service Division and public sector unions, and they are working towards the regular timeline of announcing the decisions and mid-year annual variable component in June.
NWC chairman Peter Seah said the council intends to meet again later this year to address other more permanent issues that it usually works on.
DPM Heng Swee Keat lauds aviation workers for resilience and upgrading efforts amid coronavirus outbreak
He hopes staff will be retained as much as possible, noting many have been redeployed
By Toh Ting Wei, The Straits Times, 31 Mar 2020
Two months ago, a typical weekday evening would see throngs of travellers in the bustling departure hall of Changi Airport Terminal 3.
But yesterday, at 4pm, a near-empty place greeted Deputy Prime Minister Heng Swee Keat when he arrived. There were relatively few airport staff.
However, Mr Heng, who is also Finance Minister, said he was glad to hear from employers that the Jobs Support Scheme has helped them retain staff and look into restructuring their operations to be more efficient and cater to more customers when the economy recovers.
He was speaking to reporters after a two-hour visit to see how businesses and workers were coping as the COVID-19 pandemic brings activity in the aviation sector to a halt.
He noted that many staff have been redeployed to other roles in the sector, with some doing voluntary work like being ambassadors for the SG Clean programme, and praised them for their resilience.
"I am glad to see that the morale of the staff remains high. They are taking this challenge in their stride and thinking about how they can make the best use of this downtime, to learn new skills to upgrade themselves to support others," he said.
"I hope that when the recovery takes place, when we are able to fly again, that our staff will be even better than before."
Mr Heng's visit comes days after he announced the $48.4 billion supplementary budget, dubbed the Resilience Budget, to address the economic fallout from the coronavirus pandemic, which has hit the aviation and tourism sectors hard.
For aviation, more than $400 million has been set aside for an enhanced Jobs Support Scheme to offset 75 per cent of the first $4,600 of wages for local workers, and $350 million will go to various rebates and reliefs to help reduce business costs.
Mr Heng said both workers and employers suggested various ideas to help improve the situation on the visit, and the Government will look into them.
Asked whether Singapore Airlines - which has cut 96 per cent of its scheduled capacity up till the end of next month - could see retrenchments, like during the severe acute respiratory syndrome (Sars) outbreak in 2003, Mr Heng said: "At the moment, the various industries, and certainly the aviation industry, are seeking to retain their workers as much as possible, and indeed, that is the Government's hope as well.
"I am confident that Singapore Airlines is continuing to look into this very carefully and that they will take very careful decisions on this."
He also warned that the COVID-19 pandemic is expected to continue for some time. He said it will likely take a few months before the world gets a clearer picture of how the outbreak would develop in the long term, which would in turn let Singapore decide on how to better address the issue going forward.
Mr Heng outlined three possible scenarios.
One, a quick recovery, which experts think is unlikely.
Two, where the situation is contained in parts of the world, and some activities can continue.
Three, a much broader pandemic that overwhelms healthcare systems, and global recovery becomes very difficult.
Mr Heng said: "We will hope for the best, but we need to prepare for the worst."
Mr Heng, who was managing director of the Monetary Authority of Singapore (MAS) from 2005 to 2011, was also asked about the MAS move yesterday to ease its policy stance. It set the Singapore dollar's rate of appreciation at zero per cent at the prevailing lower level of its exchange rate policy band.
He described it as the right approach at this time.
"Our exchange rate must be centred at a level that supports economic activity, and at the same time keeps our inflation low," he said.
"At this point, MAS estimates our core inflation will be low, and that we can afford to keep the exchange rate at zero appreciation with no change to the width of the band."
Mr Heng added: "At this stage, monetary policy by itself cannot reflate the economy. Our aim is not to improve our growth at this point, our aim... is very focused on limiting the damage to the economy and, in particular, not affecting our long-term capability."
This includes keeping workers in jobs and retraining them, as well as restructuring business operations.
Mr Heng also said that the major work and heavy lifting have to be done by fiscal policy. This was why he was glad that Singapore had accumulated enough past reserves to deal with a situation like today's - the supplementary budget is expected to tap $17 billion from past reserves, the bulk of which will fund the enhanced Jobs Support Scheme across the economy.
In an interview with CNBC in the morning, Mr Heng said the post-COVID-19 world will be a "very different" one, and hence it is important to put in place structural policies and look towards the future. He said sectors like pharmaceuticals, artificial intelligence and information and communications technology will become more important, and the Future Economy Council, which he chairs, is tapping government and industry leaders on how the country can emerge stronger.
Asked at Changi whether the Government will tap the reserves for a further package, Mr Heng said it would do so if the situation continues to deteriorate.
"I would like to assure Singaporeans that we have the resources to do that, if we need to," he said.
"For now, let's concentrate on making the best use of what we already have in the Resilience Package. It is a very substantial package."
Additional reporting by Grace Ho
NWC: Those cutting salaries should still pay 13th-month bonus, help low-wage workers
By Joanna Seow, Assistant Business Editor, The Straits Times, 31 Mar 2020
Employers should support local staff who want to take on a second job to supplement their incomes if they have been affected by a shorter work week or temporary layoffs due to the COVID-19 pandemic, the National Wages Council (NWC) said yesterday.
Such workers could be looking for part-time or temporary jobs, said the council, which comprises employer, union and government representatives.
The Ministry of Manpower has uploaded a guide on second-job arrangements on its website. It states that workers can take on a second job unless the employment contract prohibits moonlighting or there is a conflict of interest.
In such cases, "employers are encouraged to waive contractual prohibitions against taking on a second job and help employees resolve conflicts of interest where possible, given that they initiated the reduced work hours and reduced salaries to save costs," the guide states.
"Employees should ensure that they are able to take on both jobs without compromising the interests of each employer and be transparent in terms of the requirements of both jobs to their employers," the guide also says.
NWC also recommended that firms focus on training and upskilling workers, and consider "timebanking", which is to reduce weekly working hours without adjusting wages, with the understanding that workers will work extra hours accordingly in the future.
The NWC's guidelines, which cover the period from tomorrow to June 30 next year, were released ahead of its usual schedule this year amid the worsening impact of the coronavirus outbreak on the local and global economies.
NWC said that if firms have to cut pay in order to save jobs, management should lead by example, and they should try as far as possible to still pay the annual wage supplement, or 13th-month bonus.
Special consideration should be given to low-wage workers earning a basic monthly wage of up to $1,400. Their pay should be frozen rather than cut, if there are company-wide wage cuts, NWC said.
If a wage freeze or increase is planned, they should consider giving low-wage workers a built-in wage increase of up to $50.
They should also give low-wage workers who have stepped up to assist the business during this challenging time an ex-gratia payment where possible.
Among other guidelines was that monthly variable components (MVC) of salaries can be adjusted now if the employer cannot wait until the end of the year to adjust annual variable parts of pay.
For the nearly 90 per cent of employers which do not have an MVC system in place, they can consider treating any cut in basic wages of up to 10 per cent - or more, for management - as an MVC cut.
Employers should set clear guidelines on reversing any reductions to MVC or basic salary through future wage increases or adjustments when business recovers.
And companies that did well last year or are still doing well should continue to reward employees with variable payments in line with the company's performance and workers' contributions.
Companies such as Singapore Airlines, Certis, BreadTalk and Singapore Press Holdings have announced pay cuts for senior management in recent weeks. Others have implemented wage freezes.
Deputy Prime Minister Heng Swee Keat also announced in his supplementary budget speech last week that the Prime Minister, Cabinet ministers and other political office-holders, and the President, will take a three-month pay cut.
Permanent Secretary for Manpower Aubeck Kam, an NWC member, said yesterday that discussions on pay are ongoing between the Public Service Division and public sector unions, and they are working towards the regular timeline of announcing the decisions and mid-year annual variable component in June.
NWC chairman Peter Seah said the council intends to meet again later this year to address other more permanent issues that it usually works on.
DPM Heng Swee Keat lauds aviation workers for resilience and upgrading efforts amid coronavirus outbreak
He hopes staff will be retained as much as possible, noting many have been redeployed
By Toh Ting Wei, The Straits Times, 31 Mar 2020
Two months ago, a typical weekday evening would see throngs of travellers in the bustling departure hall of Changi Airport Terminal 3.
But yesterday, at 4pm, a near-empty place greeted Deputy Prime Minister Heng Swee Keat when he arrived. There were relatively few airport staff.
However, Mr Heng, who is also Finance Minister, said he was glad to hear from employers that the Jobs Support Scheme has helped them retain staff and look into restructuring their operations to be more efficient and cater to more customers when the economy recovers.
He was speaking to reporters after a two-hour visit to see how businesses and workers were coping as the COVID-19 pandemic brings activity in the aviation sector to a halt.
He noted that many staff have been redeployed to other roles in the sector, with some doing voluntary work like being ambassadors for the SG Clean programme, and praised them for their resilience.
"I am glad to see that the morale of the staff remains high. They are taking this challenge in their stride and thinking about how they can make the best use of this downtime, to learn new skills to upgrade themselves to support others," he said.
"I hope that when the recovery takes place, when we are able to fly again, that our staff will be even better than before."
Mr Heng's visit comes days after he announced the $48.4 billion supplementary budget, dubbed the Resilience Budget, to address the economic fallout from the coronavirus pandemic, which has hit the aviation and tourism sectors hard.
For aviation, more than $400 million has been set aside for an enhanced Jobs Support Scheme to offset 75 per cent of the first $4,600 of wages for local workers, and $350 million will go to various rebates and reliefs to help reduce business costs.
Mr Heng said both workers and employers suggested various ideas to help improve the situation on the visit, and the Government will look into them.
Asked whether Singapore Airlines - which has cut 96 per cent of its scheduled capacity up till the end of next month - could see retrenchments, like during the severe acute respiratory syndrome (Sars) outbreak in 2003, Mr Heng said: "At the moment, the various industries, and certainly the aviation industry, are seeking to retain their workers as much as possible, and indeed, that is the Government's hope as well.
"I am confident that Singapore Airlines is continuing to look into this very carefully and that they will take very careful decisions on this."
He also warned that the COVID-19 pandemic is expected to continue for some time. He said it will likely take a few months before the world gets a clearer picture of how the outbreak would develop in the long term, which would in turn let Singapore decide on how to better address the issue going forward.
Mr Heng outlined three possible scenarios.
One, a quick recovery, which experts think is unlikely.
Two, where the situation is contained in parts of the world, and some activities can continue.
Three, a much broader pandemic that overwhelms healthcare systems, and global recovery becomes very difficult.
Mr Heng said: "We will hope for the best, but we need to prepare for the worst."
Mr Heng, who was managing director of the Monetary Authority of Singapore (MAS) from 2005 to 2011, was also asked about the MAS move yesterday to ease its policy stance. It set the Singapore dollar's rate of appreciation at zero per cent at the prevailing lower level of its exchange rate policy band.
He described it as the right approach at this time.
"Our exchange rate must be centred at a level that supports economic activity, and at the same time keeps our inflation low," he said.
"At this point, MAS estimates our core inflation will be low, and that we can afford to keep the exchange rate at zero appreciation with no change to the width of the band."
Mr Heng added: "At this stage, monetary policy by itself cannot reflate the economy. Our aim is not to improve our growth at this point, our aim... is very focused on limiting the damage to the economy and, in particular, not affecting our long-term capability."
This includes keeping workers in jobs and retraining them, as well as restructuring business operations.
Mr Heng also said that the major work and heavy lifting have to be done by fiscal policy. This was why he was glad that Singapore had accumulated enough past reserves to deal with a situation like today's - the supplementary budget is expected to tap $17 billion from past reserves, the bulk of which will fund the enhanced Jobs Support Scheme across the economy.
In an interview with CNBC in the morning, Mr Heng said the post-COVID-19 world will be a "very different" one, and hence it is important to put in place structural policies and look towards the future. He said sectors like pharmaceuticals, artificial intelligence and information and communications technology will become more important, and the Future Economy Council, which he chairs, is tapping government and industry leaders on how the country can emerge stronger.
Asked at Changi whether the Government will tap the reserves for a further package, Mr Heng said it would do so if the situation continues to deteriorate.
"I would like to assure Singaporeans that we have the resources to do that, if we need to," he said.
"For now, let's concentrate on making the best use of what we already have in the Resilience Package. It is a very substantial package."
Additional reporting by Grace Ho
MAS expects more job losses and fewer pay rises as recession looms
By Ovais Subhani, The Straits Times, 31 Mar 2020
The Monetary Authority of Singapore (MAS) expects increasing job losses and fewer pay rises this year as the economy heads into its worst recession on record.
The central bank said the job market will worsen amid a sharp drop in both economic activity and demand for goods and services at home and abroad.
"The resident unemployment rate is expected to rise and wage growth ease," MAS said in its monetary policy statement yesterday.
"A degree of labour market slack could emerge as firms pull back on their hiring plans, even as the scale of retrenchments is mitigated by the Jobs Support Scheme," it said.
MAS noted the "economy will enter a recession", and will shrink by 1 per cent to 4 per cent this year.
In the fourth quarter of last year, the seasonally adjusted unemployment rate had risen to 2.3 per cent, up from 2.1 per cent in the last three months of 2018.
Unemployment among Singaporean citizens was even higher at 3.3 per cent, up from 3 per cent in the same quarter of 2018.
Retrenchments had also crept up in the fourth quarter of last year to 2,700 persons, compared with 2,470 in the third quarter of 2019.
Even more troubling is the fact that the job vacancy to unemployment ratio has stayed below 1.0 since the second quarter of last year - suggesting there were more unemployed persons than vacancies available.
United Overseas Bank economist Barnabas Gan, in a research note yesterday, compared the current labour market trends to previous periods of crisis, and noted that unemployment rates had risen then despite government intervention.
Singapore's unemployment rate increased to 4.8 per cent in the third quarter of 2003 during the severe acute respiratory syndrome (Sars) outbreak, up from 3.6 per cent the previous year.
Similarly, during the global financial crisis (GFC), the unemployment rate rose to 3.3 per cent in the third quarter of 2009, up from 2.3 per cent in the second quarter, despite the introduction of the $20.5 billion Resilience Package then.
"Coupled with the initial stress seen in Singapore's labour market prior to the COVID-19 outbreak, the pandemic will likely further weaken Singapore's labour market in 2020," Mr Gan said.
"As such, we pencil Singapore's unemployment rate to rise to 3.5 per cent in 2020, similar to the impact seen during Sars and GFC."
However, Mr Gan pointed out, the level of government support announced this time around - a total of $55 billion - is more than twice the level of support given during the global financial crisis and should help mitigate some of the negative impact of the crisis.
Weak labour market conditions and consumer sentiment, however, may lower inflation, capping costs for businesses and prices for consumer goods.
MAS lowered its 2020 forecast range for both core inflation, which excludes the costs of accommodation and private road transport, and overall consumer price inflation to minus 1 per cent to 0 per cent.
Core inflation fell last month into negative territory for the first time in a decade as the pandemic's damage to demand outweighed price pressures from supply disruptions.
MAS expects external sources of inflation to weaken in the near term amid the global downturn and, in particular, due to the sharp slide in oil prices, which are expected to stay low for an extended period.
"However, supply chain disruptions arising from worldwide measures to contain COVID-19 could put some temporary upward pressure on imported food prices," it said.
Maybank economist Chua Hak Bin, in an e-mail reply to questions yesterday, said imported inflation can also rise due to hoarding of staples by some of the leading food exporters.
Vietnam, for example, halted overseas shipments of the commodity from Tuesday to Saturday last week to ensure its own food security.
"Food prices may see a temporary increase in March and April due to the supply chain disruptions, but will not offset the broad-based decline," Dr Chua said.
MAS expects rentals to be broadly flat as demand for accommodation eases in line with the reduced inflow of foreign workers.
Dr Chua said businesses are focused on survival and staying afloat, as revenue topline is collapsing and margins are coming under pressure.
On the other hand, consumers stuck at home will cut back on discretionary spending and holidays.
"Severe job losses in the coming months could see consumers delaying big-ticket items, including cars and housing," he said.
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By Ovais Subhani, The Straits Times, 31 Mar 2020
The Monetary Authority of Singapore (MAS) expects increasing job losses and fewer pay rises this year as the economy heads into its worst recession on record.
The central bank said the job market will worsen amid a sharp drop in both economic activity and demand for goods and services at home and abroad.
"The resident unemployment rate is expected to rise and wage growth ease," MAS said in its monetary policy statement yesterday.
"A degree of labour market slack could emerge as firms pull back on their hiring plans, even as the scale of retrenchments is mitigated by the Jobs Support Scheme," it said.
MAS noted the "economy will enter a recession", and will shrink by 1 per cent to 4 per cent this year.
In the fourth quarter of last year, the seasonally adjusted unemployment rate had risen to 2.3 per cent, up from 2.1 per cent in the last three months of 2018.
Unemployment among Singaporean citizens was even higher at 3.3 per cent, up from 3 per cent in the same quarter of 2018.
Retrenchments had also crept up in the fourth quarter of last year to 2,700 persons, compared with 2,470 in the third quarter of 2019.
Even more troubling is the fact that the job vacancy to unemployment ratio has stayed below 1.0 since the second quarter of last year - suggesting there were more unemployed persons than vacancies available.
United Overseas Bank economist Barnabas Gan, in a research note yesterday, compared the current labour market trends to previous periods of crisis, and noted that unemployment rates had risen then despite government intervention.
Singapore's unemployment rate increased to 4.8 per cent in the third quarter of 2003 during the severe acute respiratory syndrome (Sars) outbreak, up from 3.6 per cent the previous year.
Similarly, during the global financial crisis (GFC), the unemployment rate rose to 3.3 per cent in the third quarter of 2009, up from 2.3 per cent in the second quarter, despite the introduction of the $20.5 billion Resilience Package then.
"Coupled with the initial stress seen in Singapore's labour market prior to the COVID-19 outbreak, the pandemic will likely further weaken Singapore's labour market in 2020," Mr Gan said.
"As such, we pencil Singapore's unemployment rate to rise to 3.5 per cent in 2020, similar to the impact seen during Sars and GFC."
However, Mr Gan pointed out, the level of government support announced this time around - a total of $55 billion - is more than twice the level of support given during the global financial crisis and should help mitigate some of the negative impact of the crisis.
Weak labour market conditions and consumer sentiment, however, may lower inflation, capping costs for businesses and prices for consumer goods.
MAS lowered its 2020 forecast range for both core inflation, which excludes the costs of accommodation and private road transport, and overall consumer price inflation to minus 1 per cent to 0 per cent.
Core inflation fell last month into negative territory for the first time in a decade as the pandemic's damage to demand outweighed price pressures from supply disruptions.
MAS expects external sources of inflation to weaken in the near term amid the global downturn and, in particular, due to the sharp slide in oil prices, which are expected to stay low for an extended period.
"However, supply chain disruptions arising from worldwide measures to contain COVID-19 could put some temporary upward pressure on imported food prices," it said.
Maybank economist Chua Hak Bin, in an e-mail reply to questions yesterday, said imported inflation can also rise due to hoarding of staples by some of the leading food exporters.
Vietnam, for example, halted overseas shipments of the commodity from Tuesday to Saturday last week to ensure its own food security.
"Food prices may see a temporary increase in March and April due to the supply chain disruptions, but will not offset the broad-based decline," Dr Chua said.
MAS expects rentals to be broadly flat as demand for accommodation eases in line with the reduced inflow of foreign workers.
Dr Chua said businesses are focused on survival and staying afloat, as revenue topline is collapsing and margins are coming under pressure.
On the other hand, consumers stuck at home will cut back on discretionary spending and holidays.
"Severe job losses in the coming months could see consumers delaying big-ticket items, including cars and housing," he said.
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