Bigger jumps in wages seen next year: MAS
WAGES could rise more rapidly next year, especially if economic conditions improve, the Monetary Authority of Singapore (MAS) said yesterday.
Labour demand will be supported by healthy hiring in service sectors such as education, health and other social services. Firms in the financial and insurance services industry are also expected to expand headcount, the central bank said.
However, wage increases will be uneven across sectors and generally stronger in the non-tradable sectors such as accommodation and food services, retail trade, and administrative and support services, where vacancy rates have been comparatively high.
This comes after salaries increased at a slower pace in the second half of last year despite the tight labour market.
Salaries rose just 1.6 per cent, considerably lower than the 3 per cent increase in the first half of last year and the 10-year historical average of 3.7 per cent.
This slowdown was due to a number of factors, MAS said in its biannual Macroeconomic Review out yesterday:
One is the higher proportion of part-time workers in the resident workforce, rising from 6.8 per cent in 2008 to 10.5 per cent last year.
The effect has been to lower average wage levels and economy-wide wage growth, even though the pay of part-time workers has increased recently.
Given that the monthly pay of part-time workers is typically about a quarter that of their full-time counterparts, overall wage growth could have been 0.4 percentage point higher if the proportion of part-time workers in the labour force had remained the same as in 2013, MAS said.
The second factor curtailing wage increases is that job growth for residents has been concentrated in the domestic-oriented sectors such as construction, retail trade, administrative and support, and food services.
The average pay in these industries is typically lower than that in export-oriented sectors such as manufacturing, wholesale trade and transport and storage.
These segments have accounted for a diminishing proportion of the workforce since 2010.
Wage gains could also have been dampened by sluggish economic conditions, said MAS.
Salary adjustments in the export-oriented sectors have been capped by uncertainties and weak growth overseas, while firms in some domestic services sectors have not been able to raise wages significantly, given their difficulty in passing on higher costs to consumers.
Lastly, the continued sluggishness in labour productivity has reduced the extent to which firms are able to increase wages for workers.
Labour productivity fell by a further 1.2 per cent in the second half of last year over the corresponding period in 2013, led by a drop in the construction and services sectors.