Productivity must rise in line with higher wages: NTUC

Singapore

THE tight labour market will put pressure on companies this year to pay higher wages to retain and attract talent, but productivity must improve in tandem to ensure wage increases are sustainable for the long term, said the National Trades Union Congress (NTUC).

In its 2015 outlook for the unionised sector, the Labour Movement stressed that it will continue to push for broad-based real wage increases by advocating greater adoption of the progressive wage model, emphasising productivity improvements in particular.

NTUC also flagged its concerns relating to negative productivity growth experienced in recent quarters, noting that this could lead to wage stagnation. For the first three-quarters of 2014, Singapore's productivity growth shrank 0.5 per cent - far from the two to three per cent annual target.

"What we need is to see action taking place," said Cham Hui Fong, NTUC's assistant secretary-general. "If companies (are) not more forthcoming to identify gaps, redesign work, review work processes, then we are not very hopeful that we can have any quantum leap improvement in productivity. For 2015, this is certainly one of the areas we want to pay a lot of attention to. We are fully mindful that wages are linked to productivity."

According to preliminary estimates from NTUC, workers in unionised companies saw healthy basic wage increases of about 4.1 per cent in 2014, down slightly from 4.63 per cent in 2013, while bonus payments worked out to three months last year, versus 3.16 months in the previous year. In particular, the hotels and hospitality, construction and chemical sectors paid out lower bonuses.

Ms Cham added there must be more sharing of best practices among firms within the same industry so that companies learn from one another. This requires a mind-set change as companies largely prefer to safeguard any competitive advantages.

CIMB Research regional economist Song Seng Wun said that it will likely continue to be a bumpy ride this year where productivity growth is concerned, which could mean increased retrenchment on the cards.

Productivity growth is also being affected by uneven global demand and external risks, he pointed out. "It will take some time before a clearer picture (emerges)," he said, adding that both Singapore's growth and the global economy will need to return to greater stability.

Meanwhile, Mizuho Bank senior economist Vishnu Varathan suggested that the drag on profits from negative productivity could be offset by other factors such as oil prices or rentals.

"2015 may continue to be a challenging year for businesses given the many moving parts involved - both on the domestic and external front," he said. "But short-term productivity shifts are unlikely to be the death knell for labour markets. Quite rightly, the focus should be on improving processes and pursuing innovation in the medium-term; then the productivity report card will take care of itself."

NTUC's figures show that 2,212 unionised workers were retrenched last year, down 27 per cent from 2013, with two out of three of the retrenched coming from the manufacturing sector. Reasons cited for lay-offs include high costs, weak business and the ongoing restructuring, which prompted eight companies to move operations out of Singapore to countries such as Thailand, Malaysia and China.

In the services sector, the number of workers retrenched doubled to 722 in 2014, with workers from the commerce industry laid off due to loss of business here.

In the first quarter of 2015, unionised companies may see retrenchment affecting about 300 workers from the chemical and electronic sectors, NTUC said.

At the national level, 7,710 workers were retrenched in the first three quarters of 2014, based on figures from the Ministry of Manpower. This is higher than the 7,220 laid off in the corresponding period a year before, as more workers were retrenched in the services sector last year.

For 2014 as a whole, the number of workers put on shorter work weeks fell substantially from 5,793 in 2013 to 1,323 as five companies were hit by a dearth of orders and slowing business, down from 10 firms in 2013. These five companies largely produce semiconductor and electronics products and components.

NTUC also said that it will widen its scope to cover more professionals, managers and executives (PMEs), in line with changes made to labour laws and the Industrial Relations Act. Amendments to the IR Act will allow the Labour Movement to potentially reach out to another 100,000 PMEs within unionised companies and over 600,000 existing PMEs in the workforce.