Jun 06, 2013

    Wage rise slows but respite likely

    WAGES in the private sector continued to grow last year, but the gains were undercut by inflation.

    However, employees may expect some reprieve this year, as economists predict that inflation will ease.

    Based on the Ministry of Manpower's Report on Wage Practices 2012 released yesterday, private-sector wages grew by 4.2 per cent, a slower pace than 2011's 6.1 per cent.

    The report said that a "tight labour market continued to raise workers' wages", but the pace was more moderate "amid...weaker economic conditions".

    However, after adjusting for inflation, real wages saw a drop of 0.4 per cent last year, compared to an increase of 0.9 per cent in 2011.

    After adjusting for inflation but factoring out imputed rentals on owner-occupied homes, real wages grew by 0.5 per cent last year, and by 1.9 per cent the previous year.

    Still, there are bright spots. CIMB economist Song Seng Wun said: "The good news is that inflation this year is likely to be lower than in the previous two years, thanks to government measures on housing and more (so) on cars."

    Mr Song expects nominal wages to grow at a similar pace this year, but overall inflation to dip to around 2 per cent.

    In April, inflation plunged to a three-year low of 1.5 per cent, reportedly on the back of the cooling of car and home prices.

    OCBC economist Selena Ling said workers can still expect wage increases this year, as the labour market will remain tight, due to curbs on foreign manpower growth.

    Ms Ling also pointed to the Wage Credit Scheme announced during this year's Budget - in which the Government co-funds 40 per cent of a worker's wage increases - that will help companies to raise salaries for Singaporean employees.

    However, wages may not rise as much as in previous years, as the global economy is still recovering and Singapore is affected by external factors.

    "Our economy is dependent...on trade...not only with the G-7 economies, but also on intra-regional trade, which is being led by China," she explained.

    On inflation, she said that while April's data is encouraging, it remains to be seen if inflation will stay low. "It really depends on how Certificate of Entitlement (COE) premiums will trade from here... Are car buyers going to come back into the market?" she said.

    At the end of this month's first COE bidding exercise yesterday, COE prices rose across all categories, with premiums for big cars jumping 11 per cent to $75,000.