Report on Wage Practices, 2012

1.The tight labour market continued to raise workers’ wages, but the pace of increase has moderated in 2012, amid the weaker economic conditions. A large majority of employees were also under some form of flexible wage system. These are the key findings from the “Report on Wage Practices, 2012” released by the Ministry of Manpower’s Research and Statistics Department.

Main Findings
2. Total wages (including employer CPF contributions) in the private sector rose by 4.2% in 2012. This was lower than the growth of 6.1% in 2011, reflecting the weaker economic conditions in 2012. After adjusting for inflation using the Consumer Price Index (CPI) for all items, real total wages (including employer CPF contributions) declined by 0.4% in 2012, after rising by 0.9% in 2011. When adjusted using CPI less imputed rentals on owner-occupied accommodation (OOA), which relates more directly to the actual cash expenditures of households, real total wages (including employer CPF contributions) rose by 0.5% in 2012, after increasing by 1.9% in 2011.

3. Over the long term, real wage increases have been supported by productivity growth. Labour productivity grew on average by 1.6% per annum, exceeding the growth in real total wages (including employer CPF contributions) of 1.2% per annum over the decade from 2002 to 2012. In the immediate post-SARS years, labour productivity grew strongly on the back of robust GDP growth. However, in the last 5 years, labour productivity in Singapore shrank by 0.4% per annum as economic growth was driven primarily by employment.

4. A large majority of employees in the private sector were under some form of flexible wage system, following a general uptrend in the implementation of flexible wage measures recommended by the tripartite partners representing employers, workers and the government in 2004. In December 2012, 87% of private sector employees were working in establishments which had at least one of the flexible wage components recommended by the tripartite partners. This was comparable to the 86% in December 2011 and notably higher than the 76% in June 2004.

5. Having a narrow maximum-minimum salary ratio was the most common wage recommendation adopted, with nearly two in three (65%) private sector employees working in establishments with this flexible wage component. This was followed by linking variable bonus to Key Performance Indicators (KPI) (49%) and having the Monthly Variable Component (MVC) (34%) in the wage structure.

For More Information
6. The report is available online on the Ministry of Manpower’s website.

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