NWC Wage Guidelines For Jan – June 2003

NWC Wage Guidelines For Jan – June 2003

NWC Wage Guidelines In 2001

The NWC was reconvened in Nov 2001 in the wake of the deteriorating economic environment following the September 11 attacks. In view of the worsening economic conditions, the NWC issued a set of revised guidelines in Dec 2001 calling for severe wage restraint to help companies maintain cost-competitiveness and save jobs. The NWC recommended that companies whose business, profitability or prospects were adversely affected by the severe economic downturn, in consultation with their unions/workers, implement a wage freeze or wage cut commensurate with their performance and prospects. For companies that continued to perform well, they were urged to reward their workers with appropriate wage increases preferably in the form of MVC or special payments.

The NWC also decided that the Council should meet to deliberate on the 2002-2003 wage guidelines after the release of the 3rd quarter GDP results.

Economic Performance In 2002

Since the NWC last met in Dec 2001, the global economic environment has improved slightly. The US economy grew by 1.8% (year-on-year) in the first half of 2002, up from 0.3% last year. The EU, however, slowed from 1.6% last year to 0.6% in the first half while the Japanese economy declined by 2.5% in the first half this year, down from 0.1% last year due to sluggish domestic demand. Most Asian economies saw higher growth in the first half as exports recovered from the trough last year.

The Singapore economy improved slightly this year, with a growth of 2% in the first three quarters after a decline of 2% in 2001. The Singapore economy grew by 3.9% (year-on-year) in the third quarter of 2002. However, on an annualised quarter-on-quarter basis, GDP fell by 10.1%, down sharply from 13.4% growth in the previous quarter. The manufacturing sector was weighed down by weaker global demand for electronics products and a different product mix in the pharmaceuticals industry. The services sector remained weak due to the drop in tourist arrivals and poor consumer sentiments. As the external environment has weakened considerably in recent months, MTI has revised the 2002 growth forecast from 3-4% to 2-2.5%.

The Labour Market

  • The labour market became weaker. Total employment fell by 37,000 in the first 9 months of 2002. This was in contrast to the gain of 14,000 jobs in the 1st 3 quarters of 2001. However, the number of workers retrenched in the first 9 months of this year decreased to an estimated 13,000 from 17,247 for the same period in 2001. The seasonally-adjusted unemployment rate rose to a high of 4.8% in September 2002, from 4.1% in June 2002 and 4.5% in March 2002.

Productivity and Business Cost

  • Labour productivity rose by 3.9% in the first three quarters of 2002 after a decline of 5.4% in 2001. The improvement in productivity is a result of a turnaround in economic activity and a further fall in employment
  • The unit business cost (UBC) index for the manufacturing sector declined by 5.1% in the first three quarters of 2002 compared with an increase of 5.7% in 2001. All three components of manufacturing UBC registered declines. The manufacturing ULC fell by 8.9%, due largely to the strong increase in manufacturing productivity in the second and third quarters as manufacturing activity picked up. Services costs declined by 2% due to lower cost of utilities, financial services and rental. Government rates and fees fell by 12%, due mainly to the drop in property tax receipts and the property tax rebates.

Wages

  • On average, basic wages showed an increase of 2.9% for all employees in 2001. This was about half the gain of 4.9% in the preceding year. In the face of poor business performance in 2001, employers paid their employees lower or no bonuses. Consequently, total wages, comprising basic wages and bonuses, rose marginally by 1.1% compared to 6.6% in 2000.

Outlook In 2003

The outlook for 2003 is still uncertain. But there is more downside than upside on the horizon in the world economy, at least for the first half of 2003. Our major markets, the US, European, Japanese and regional economies, are not showing any prospects of a strong recovery. At the same time, the climate of uncertainty over possible terrorist attacks and the threat of war in the Middle East have cast a cloud over the immediate future. The continuing security threats in the region may have an adverse impact on foreign investment and tourism in the region including Singapore. In view of the weaker external environment, MTI’s preliminary growth forecast for 2003 is 2-5%.

Wage Guidelines For The Period January To June 2003

The NWC notes that Singapore’s economic recovery so far is narrowly based and uneven. The global and Singapore’s economic outlook beyond this year remains unclear. The NWC therefore recommends extension of the Dec 2001 Revised Guidelines for another 6 months covering the period from 1 Jan to 30 June 2003. Specifically, the NWC would reiterate the following:

  • For companies whose business, profitability or prospects are still adversely affected by the severe economic downturn, they may, in consultation with their unions/workers, implement a wage freeze or cut commensurate with their performance and prospects. In doing so, the management should take the lead.
  • For companies that continue to perform well, they should reward their workers with special payments or wage increases. Any wage increase should preferably be in the form of a monthly variable component to improve the flexibility of the wage system.

Restoration of the Employer’s CPF contribution

  • The NWC notes the government’s recent announcement that it would defer the restoration of employer’s CPF contribution rate in view of the economic uncertainty. The NWC supports a cautious approach on the restoration of CPF in the light of the uncertain economic environment.

Flexible Wage System

  • The prevailing seniority based wage system, which ties wage increases to length of service instead of productivity growth and performance, has an impact on Singapore’s wage-cost competitiveness. It also undermines the wage competitiveness of older workers with long years of service. To address the issue of the seniority based wage system, the NWC had, in 1996, recommended the narrowing of the maximum-minimum salary ratio and the adoption of the Base Up Wage System (BUWS). In 1999, the NWC had recommended the implementation of the Monthly Variable Component (MVC) to further enhance the flexibility of our wage system.
  • While some progress has been made in the implementation of the MVC in the unionised sector from 29% of companies in 2000 to 34% in 2001, only 3.4% of non-unionised firms have adopted the MVC. On the BUWS, the take-up rate has also been slow.
  • For companies to remain cost competitive and to be able to respond to the volatile business environment, the NWC strongly urges companies, particularly those in the non-unionised sector, to make greater efforts to implement the MVC and the BUWS as soon as possible. Additional measures may have to be introduced to expedite the implementation of the MVC and the BUWS.

Training

  • In today’s knowledge economy, our workers must constantly upgrade their skills or acquire new capabilities so as to remain employable and seize the job opportunities provided by high value-added industries. Companies having workers who have the right skills and are adaptable could better cope with the challenges of the changing business environment. The NWC notes that the government has introduced various training programmes and schemes, such as the Skills Re-development Programme, the Manpower Development Assistance Scheme, the National Skills Recognition Scheme and the Strategic Manpower Conversion Programme. The NWC urges employers to take advantage of these programmes and schemes and invest more in workers’ training and upgrading.

Non Discrimination In Employment

Singapore is a multi-racial society. It is important that employers and employees appreciate the diversity of the workforce and work together to enhance workplace harmony. The NWC is pleased to note that the Singapore Business Federation, Singapore National Employers Federation and the National Trades Union Congress intend to issue a Joint Code of Responsible Employment Practices to help employers promote and observe responsible employment practices in their workplaces, including non-discrimination on account of race, religion, age, gender, marital status and disability. The NWC notes that the Singapore government has ratified ILO Convention 100 on Equal Remuneration and strongly supports the adoption of the Tripartite Declaration on Equal Remuneration by the 3 social partners to re-affirm the commitment to uphold the principle of equal remuneration for men and women performing work of equal value.

Other Costs

The NWC strongly urges the government to continue to keep other costs of doing business down, as wage costs constitute only a part of the total cost of doing business in Singapore.

At the same time the NWC strongly urges the government to continue to take measures to moderate the cost of living for workers.

Application Of NWC Recommendations

The NWC recommendations are applicable to all employees – management, executives and rank-and-file employees, unionised and non-unionised companies and in both the public and private sectors.

To facilitate wage negotiation, companies should share relevant information on company performance and business prospects with employees and their representatives.

These recommendations shall apply for the period 1 Jan 2003 to 30 June 2003. The Council would meet in Apr/May 2003 to resume its normal cycle of issuing guidelines to cover the period from 1 July to 30 June of the following year.

Conclusion

The NWC is confident that with strong tripartite co-operation among employers, workers and the government, Singapore will ride through the economic storms. The strong partnership will facilitate the smooth implementation of the guidelines to help companies remain viable and hence preserve jobs for workers.

The NWC looks forward to the government’s acceptance of its recommendations.

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