Economy is down, but why did wages rise?

Progressive Wage Model


Last week we heard that Singapore’s GDP had contracted.

This week we heard that incomes rose strongly in Singapore.

Some of this could be attributed to labour tightening measures and the Progressive Wage Model that had been introduced over the past few years.

Whilst wages had risen in the short term, it remains to be seen if this would continue. Especially if productivity fails to increase.

“Wage growth has outpaced to some extent GDP growth and productivity growth in the last couple of years,” said Dr Walter Edgar Theseira, a senior lecturer at SIM University. “I think going forward, especially since most predictions are that GDP growth will be quite muted in the next decade, we may have to adjust to a period of perhaps more modest wage growth going forward.”

increasing low wages no longer a choice

Perhaps attributed directly to the Progressive Wage Model (which requires a minimum base salary and an increment plan over time), low-waged workers see a sustained increase of salary. After inflation, real income growth was at 3.1 percent a year at the median and 2.1 percent at the 20th percentile.

The tighter market also forced employers to hire more women and elderly into the workforce.

Labour participation rate rose for the fourth consecutive year, increasing from 67 percent to 68.3% in June this year.

“We’re starting to see more females entering the workforce, which is a positive sign. One of the reasons for this is that talent continues to be very short in some areas and the smart companies are realising that they’ve got to forget about gender, forget about age and just recruit or hire the best talent.” said Mr Ian Grundy, head of marketing and communications for Asia Pacific at Adecco Group.

For the rest of the decade however, the MOM says that employment will grow at a slower place as compared to the last five years. This is owed to the rise in resident labour force and continued restructuring of the economy.



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