High inflation chips away decade-high salary growth in 2022, with real wages up just 0.4%

NOMINAL wages grew at a decade-high rate in 2022, but high inflation meant the real rise was a marginal 0.4 per cent, a wage report by the Ministry of Manpower (MOM) on Monday (May 29) indicated.

Including employer Central Provident Fund contributions, nominal total wages of full-time resident employees who had been with the same employer for at least a year rose by 6.5 per cent in 2022. This was the highest increase in a decade, and was much higher than 2021 levels at 3.9 per cent.

With headline inflation at 6.1 per cent in 2022, this translates to a real wage growth of just 0.4 per cent, lower than the 1.6 per cent recorded in 2021.

Still, MOM said the nominal wage increase reflected the efforts by firms to restore wages of those whose pay was cut during the pandemic, as well as to give higher increments to other employees to retain them amid competition for workers.

DBS economist Chua Han Teng noted that the tight labour market was a key factor. This can be seen from the low overall unemployment rate and the high job vacancy to unemployed person ratio as at end-2022, he said.

All industries experienced higher wage growth last year, compared to 2021, but the magnitude of increase varied.

BT in your inbox

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign Up

Sign Up

In particular, accommodation and retail trade registered above-average wage increases at 9.7 per cent and 6.7 per cent respectively. This is because businesses in these industries raised wages to attract and retain workers amid the strong recovery in tourism demand, MOM said.

Outward-oriented sectors also continued to register strong wage increases last year. Financial services wages rose 9 per cent, while information and communications, as well as professional services, had increments of close to 8 per cent.

While companies in manufacturing and wholesale trade also raised the salaries of their workers, this increase was moderate – between 5 and 6 per cent – due to global supply chain disruptions and weakness in trade-related activities.

SEE ALSO

Higher EP salaries for renewals mean employers may have to give big raises – or lose workers

South-east Asian tech salaries set to cool in 2023, but specialists still in demand

MOM noted that the proportion of profitable establishments rose for the second consecutive year to 83.9 per cent.

The proportion of organisations that raised their workers’ salaries rose to 72.2 per cent, from 60 per cent in 2021. The pre-pandemic level in 2019 was 69.2 per cent. The magnitude of increase was also larger in 2022 at 7.9 per cent, compared with 6.3 per cent the year before.

The companies that cut wages remained a minority at 5.2 per cent, while 22.6 per cent of the companies left salaries unchanged.

In a LinkedIn post, Patrick Tay, assistant secretary-general of the National Trades Union Congress, said the key highlight is that more businesses are doing better and more are enjoying higher wage increases than past years.

“Although positive, we are faced with the twin challenges of an uneven and uncertain outlook as well as high inflation,” he said. “(We) must not relent in our efforts to better uplift lower-wage workers and also to support the broad middle class, often referred to as the sandwiched class, so that they do not just enjoy gross but real wage increases given the rising cost of living.”

Based on recent polls on wage expectations conducted in the first quarter of 2023, more companies expressed an intention to raise wages of their employees in March, compared to December last year, MOM said.

“However, against the backdrop of the global economic slowdown and a more uncertain business environment, firms are likely to take a cautious approach regarding salary increments,” said the ministry. “In addition, inflation is forecasted to remain elevated. Hence, total nominal and real wage growth are expected to moderate in 2023.”

DBS’ Chua said economic activity in trade-related clusters such as manufacturing and wholesale trade is likely to underperform, compared with the services segment linked to hospitality and tourism, and these trends would be mirrored in wage dynamics.

“Although there will still be competition for talent, the overall labour market is set to soften and be less tight in 2023, with firms likely to be more cautious in salary increments as they attempt to manage costs amid a tougher economic climate,” he said.