SNEF calls for focus on productivity to sustain wage hikes

There is a need for Singapore to focus on productivity to sustain wage increases as employment growth slows in the coming years, the Singapore National Employers Federation (SNEF) said on Friday.

Robert Yap, SNEF's president, said this is because Singapore's economy is expected to grow by 2-4 per cent per year over the next five years and employment growth would slow from 66,000 per year to 20,000 per year by 2020.

"At the same time, as jobs are being transformed, we need to upgrade and reskill workers to take on these new jobs, thereby raising the productivity. This virtuous cycle of higher skills, productivity and wages will benefit all companies and their workers," Mr Yap said.

The SNEF noted that productivity growth had been sluggish over the last four years averaging 0.3 per cent per annum between 2011 and 2014. However, over the same period, real basic wage increased by 1.4 per cent per annum.

"This has widened the gap between productivity and wage growth and will erode our cost competitiveness if not arrested," it said.

Therefore, the federation strongly endorsed the National Wages Council (NWC) Guidelines for 2015/2016 unveiled on Friday to focus on raising productivity so that real wage growth would be in line with productivity growth over the long term.

"This will not only enhance our competitiveness but also ensure that real wage increases are sustainable," it said.

With the sluggish productivity growth, low inflation and the recent softening of the labour market, wage hikes are expected to moderate. SNEF believes companies should therefore make greater use of the variable component to reward workers so as to ensure that the built-in wage increases are sustainable in the long term.

SNEF said it was pleased that the NWC would review the continued need for quantitative guidelines for low wage workers, taking into consideration factors such as Singapore's economic competitiveness, productivity performance, labour market conditions and inflation.

"This is important so as to keep wage and labour market flexible to support economic and job growth," it said.

SNEF also called on employers and unions to restructure the medical benefits to ride on MediShield Life so as to optimise the medical expenditure of employers and at the same time help employees to save for their future medical needs.

It also encourages companies that are doing well to recognise the contributions of their employees in their own ways on Singapore's 50th anniversary.