Top Print Edition Stories
Published June 4, 2009
Productivity falls, outlook stays sombre
Bottom not reached and no upturn in sight, says NWC, asking companies to cut costs
By LEE U-WEN AND TEH SHI NING
Print article
(SINGAPORE) Productivity in Singapore fell more sharply than real basic wages last year, evoking concern from the National Wages Council (NWC), which has warned of a prolonged recession.
Prof Lim: Advised job seekers to ‘adjust your expectations and make career switches, if necessary’
The council, issuing its newest wage guidelines for the year beginning July 1, also cautioned the public not to get carried away by the recent stockmarket rebound, as corporate performance has yet to recover.
NWC chairman Lim Pin also contradicted suggestions that the Singapore economy had bottomed out, telling a news conference yesterday that this has not happened yet, and that the country was ‘nowhere near an upturn’.
‘We have not hit a plateau yet,’ said Professor Lim. ‘While the rate of decline has slowed since January, this is based on concrete data and information, not on the stock market’s performance.’
Taking into account the deep global recession, an uncertain economic outlook and a possible H1N1 flu pandemic, the council warned that Singaporeans should brace themselves for ‘the eventuality of a prolonged downturn’.
In its wage guidelines, the NWC urged employers, unions and the government to ‘press on’ with the actions it recommended in January this year to cut costs, save jobs and enhance competitiveness.
Management should take the lead in accepting wage freezes or cuts, implementing other cost-cutting measures such as shorter workweeks and temporary layoffs, and improving productivity, said the council.
Productivity, meanwhile, was a key concern across the various groups represented in the 35-member council. In 2008, labour productivity declined sharply to minus 7.8 per cent, from minus 0.8 per cent in 2007, ‘due to slower GDP growth and strong employment gains in the first half of 2008′.
This meant that productivity fell more than real basic wages, which fell 2.1 per cent after adjusting for last year’s high inflation. ‘To be sustainable and to maintain cost competitiveness, wage increases – especially built-in wage increases – should lag productivity growth,’ the NWC said.
Largely reflecting the productivity decline in 2008, overall unit labour cost rose for a fourth straight year, by 9.6 per cent, compared to the 5.2 per cent increase in 2007. Singapore’s labour productivity growth has diminished for four years, and labour productivity has contracted in the last two years.
Economist Manu Bhaskaran, CEO of Centennial Asia Advisors, said that wages and productivity must be looked at over the cycle. Some degree of ‘labour hoarding’ despite falls in demand is to be expected, he said, as companies know that it is not easy to recruit and retrain workers in a hurry when demand recovers.
The key issue is ‘whether there is a long-term trend here of wages rising faster than productivity’, and here he remains doubtful. ‘The profit/GDP ratio in Singapore is very high compared to countries with similar per capita incomes. That does not suggest that labour is overpriced here.’
Singapore National Employers Federation (SNEF) president Stephen Lee also said that the fall in labour productivity last year seems to have been more a function of a drop in demand, rather than due to cost competitiveness issues.
The NWC wage recommendations come amid Singapore’s worst recession since Independence, resulting in a sharp rise in unemployment and economic growth hitting just 1.1 per cent in 2008 – much lower than the 7.8 per cent growth in 2007.
Total employment growth of 221,600 last year was lower than the 234,900 jobs in 2007, as the seasonally adjusted overall jobless rate rose to 2.5 per cent in December 2008. Redundancies hit a high of 9,410 in Q42008, making up more than half of the 16,880 in the whole of 2008.
Even as it dished out advice to companies hit by the downturn, the council said that firms that have performed well should continue to reward their staff with ‘moderate wage increases’ – preferably in the form of a variable payment, so that their long-term cost competitiveness would not be affected.
Ever since the government introduced the $20.5 billion Resilience Package in January, which included schemes such as Jobs Credit and a special Workfare payment, the council said these measures have been well received by the tripartite partners and have helped in managing costs and minimising job losses.
Prof Lim had a word of advice for job seekers: ‘Adjust your expectations and make career switches, if necessary, to take up available jobs. Employers, too, should be open to taking in workers with little or no relevant experience, and set up appropriate employment terms reflecting the market realities of their sectors.’
In a statement, the government said that it has accepted the council’s recommendations, and supported the call for companies to focus on cutting costs in order to save jobs. Unions and industry associations also voiced support for the wage guidelines.
Related posts:
