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Singapore: Wage growth in 2023 to stay robust even as slowing economy cuts labour demand
AS COVID-19 restrictions eased in 2022, Singapore’s labour market moved towards pre-pandemic normalcy. Manpower demand rose in consumer-facing industries, while the return of foreign labour relieved shortages. Total employment surpassed pre-Covid levels in the third quarter, and unemployment rates have also recovered.
In contrast, slowing economic growth in 2023 is expected to reduce labour demand – yet upward pressures on wages remain.
The aftermath of 2022
Any labour market easing in 2023 may represent a normalisation from tightness, rather than an outright slowdown. In 2022, Singapore’s labour market was “exceptionally tight, perhaps even more than anticipated”, said Terence Ho, associate professor in practice at the National University of Singapore’s Lee Kuan Yew School of Public Policy.
Jaya Dass, managing director of permanent recruitment in Asia-Pacific at Randstad, said that in the last two years, companies entered wage wars to secure talent for unprecedented business demands, over-inflating salaries for some roles. But this will not be sustainable in the long run, she added.
Bernard Tay, founder of fast-casual restaurant Jinjja Chicken, believes that wage rises will plateau in 2023. Even though businesses have to raise wages to be competitive, it “doesn’t make sense to keep raising” salaries for the same jobs, he said.
Yet even if demand eases, elevated inflation will put continued pressure on bosses. Nominal resident wage growth has stayed ahead of inflation, with real median income growth at 2.1 per cent for the 12 months till June 2022. As Dass put it, “employees would expect wage increases to match the increasing cost of living as long as inflationary pressures remain”.
Granted, a wage-price spiral – in which rising consumer costs spur wage demands, pushing up business costs and thus prices – is unlikely.
Sim Gim Guan, executive director of the Singapore National Employers Federation, noted that the National Wages Council recommendations for 2022/23 provide flexibility for employers to exercise moderation in built-in wage increases, and give variable payments instead.
“Employers are also constantly reminded that (any) wage increase has to be supported by productivity growth so the risk of a wage spiral is relatively low for now,” he added.
Inflation has traditionally not figured in wage decisions in Singapore, said Chew Soon Beng, senior associate at the Centre for Liberal Arts and Social Sciences, Nanyang Technological University: “If employers have to pay higher wages on account of inflation, it will cause retrenchment.”
But Jinjja’s Tay has already had to help foreign employees cope with rising rentals and living costs, raising monthly wages by about S$600 to a range of S$1,800 to S$2,000.
Sectors to watch
Labour demand may not weaken across all sectors – just as how tightness was uneven in 2022. David Yeo, founder and chief executive officer of workforce edtech provider Kydon, said: “A lot of hyper growth in terms of salary is particularly pushed up by the tech industry and aggressive hiring over the last couple of years.”
Recent tech layoffs have made headlines, but industry players say that demand for actual tech talent remains robust. In Singapore, 1,270 resident workers were retrenched in the information and communications sector between July and mid-November, but four-fifths were in non-tech roles.
“The demand for tech talent still outstrips supply, and the gap is widening in many cases,” said Ivan Chang, co-chair of the talent steering committee in industry body SGTech.
Camellia Chan, founder and CEO of cybersecurity firm Flexxon, said that the layoffs may not represent sectoral cooling, but could indicate a change of business models or a step back from pandemic-era aggressive hiring.
The labour market may also stay tight in the consumer-facing sector, despite the continued return of non-resident workers. Said Prof Ho: ”Manpower shortages may ease but remain elevated.”
White Restaurant CEO and chairman Victor Tay said that “everybody has been hiring” foreign workers since reopening began. With competition for a limited pool, Jinjja’s Tay noted that workers are not staying as long as before, instead moving around to seek higher pay.
And even if supply improves, bosses will face wage pressures from the upcoming hike in S Pass qualifying salaries. These were raised once this September and are set to rise again in September 2023 to at least S$3,150 overall, or at least S$3,650 in financial services, with details to be finalised.
Lifting wages at the bottom
Another policy change will lift wages for low-income residents. In 2023, tripartite progressive wage models (PWMs) will kick in for the food and beverage (F&B) sector in March, and for waste management in July, setting out minimum wage ladders. Occupational PWMs for admin staff and drivers will also be introduced.
To retrain and attract locals, it may not be enough to just match these minimums, said F&B operators. White Restaurant already pays more than S$1,400, which is the qualifying salary for locals to be included in foreign worker quota calculations.
Indeed, for firms hiring lower-wage foreign workers, such quotas are likely to be more of a constraint than PWM wages “simply because of the general local manpower shortage”, said Walter Theseira, associate professor of economics at the Singapore University of Social Sciences.
The PWM might drive employer interest in Long-Term Visit Pass-Plus holders – usually foreign spouses of Singaporeans or permanent residents – who do not need to be paid at PWM rates but do not count against work permit quotas, he added.
Finding top-end foreign talent
At the higher end, Employment Pass (EP) conditions will also be tightened, but top-tier talent will have a new route into Singapore.
EP qualifying salaries were raised this September for new applicants. From next September, the higher salaries will apply to renewals too, while the new points-based Complementarity Assessment Framework will kick in for new applicants. The framework assesses applications on both individual and firm-related attributes, such as diversity of nationalities.
Meanwhile, on Jan 1, 2023, applications will open for the new Overseas Networks and Expertise (One) Pass for top international talent.
Though the One Pass is not just for industry, but also fields such as the arts, sports, sciences and academia, SGTech’s Chang expects it to “aid in expanding the talent pool and enhancing the local tech ecosystem”. He sees it as complementary to the existing Tech.Pass, a visa for established tech entrepreneurs, leaders and technical experts.
Digital trust, cyber security, digital transformation, neobanking, data analysis and sustainability may benefit from this, he added. Kydon’s Yeo sees health tech, robotics and automation as other industries that may gain.
With its narrow scope, the One Pass will not have a large impact on overall inflows, but “could make a difference to Singapore’s attractiveness to economic ‘rainmakers’ and other top global talent”, said Prof Ho: “The focus is on quality rather than quantity.”
While the marginal impact of the One Pass will be hard to quantify, Prof Theseira added: “(It) is more about generating some positive news and discussion about Singapore as a foreign talent destination in the communities of entrepreneurs, scientists, talents that we want, and hopefully that leads to increased interest in coming to Singapore.”
Besides the pull factor of the One Pass, a specific push factor could cause top talent to head here: Covid restrictions and uncertainty in long-time rival Hong Kong, which have tipped the scales in Singapore’s favour.
“It’s not like people are going to be rushing back (to Hong Kong) as soon as Hong Kong opens up,” added Oxford Economics senior economist Alex Holmes. “How quickly the government can just sort of take away your rights to travel and go in and out is going to weigh on people’s minds for a while.”
As US and European multinational corporations head from Hong Kong to Singapore, talent could make the same journey, said Kydon’s Yeo.
But Randstad’s Dass believes that this will be short-lived. Such migrants may seek greater freedom and flexibility, but could return to Hong Kong when it fully reopens due to high costs of living here, she said.
Source: https://www.businesstimes.com.sg/singapore/economy-policy/wage-growth-2023-stay-robust-even-slowing-economy-cuts-labour-demand