Question: Could the National Wages Council recommend a zero wage increase?

Each year, the National Wages Council sits to decide on an annual wage recommendation for Singapore. Yes, in case you’re new to this – we actually have a national organisation that decides on how much wages should increase by each year. This does not exist in any other country and workers are left to bargain on their own, often a fruitless effort.

The neutral organisation, chaired by members of the NTUC (that represents the trade unions, which in turn represents the individual worker), the Government and the employers, sit to have a proper argument over the direction of wages and increases. Decisions are made based on the GDP, the mood of the economy, productivity levels and to compliment government policies.

The last few years had all seen a recommendation of increases. Last year, the minimum recommended monthly wage increment is $50 to $65 for workers earning a basic salary of $1100.

This year however, the economy looks subdued. It hasn’t been growing as it has been in the past and productivity levels have been dismal. It seems businesses have not found ways to make profit without the need of heavy manpower. Our trading partners in other parts of the globe are also growing increasingly protectionist.

The outlooks is uncertain. Does this mean that the NWC might perhaps recommend no wage increases?

I’m not certain if it has happened in the past, but it may happen if situations call for it.

Or perhaps they might recommend a wage increase, but the Government and Employer organisations may not accept it. We don’t know for certain if this could happen and what it would mean constitutionally for the NWC, but this is what having independency means – if it comes to the crunch, the government and employers might say “no”.

One worry for employers is this: that wages have increased ahead of productivity. 

In 2016, the real median wage for Singaporeans rose 7%. This was higher than the 6.5% the previous year. Despite this, productivity has gone the other way around, decreasing by 0.1% – this is not sustainable over the longer term.

In layman’s language: wages have rose, but companies are still making the same amount of money…or less.

There was one year that wages fell behind productivity…and this was back in 2010 when productivity grew 11.6% and median income grew 2.5%. That was a one off event – it was when Singapore rebounded from the global financial crisis.

If the trend persists, we may find our companies struggling to survive and when that happens, they’ll throw in the towel and disappear. Workers will then find themselves struggling even further.

This year’s sitting of the National Wages Council will be interesting…

Share your thoughts!

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