Raising wages to address rising costs not the right
solution
By S Ramesh, Channel NewsAsia | Posted: 25 April 2008 2026 hrs
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Raising wages to
address rising costs not a right solution
SINGAPORE: Raising wages to address the issue of rising
costs may be an enticing option but that is not the right solution,
said Acting Manpower Minister Gan Kim Yong.
He said adjusting wages upwards to meet rising prices would only
result in a "price-wage spiral" and Singaporeans should look at the
bigger picture.
"What is more important is for us to have a realistic expectation
of wages that reflect the underlying economic strength of our
industries and also of our productivity. That will allow us to
ensure that our economy will be able to sustain its growth
momentum," said Mr Gan.
Since the last two recessions, tripartite partners – the
government, unions and employers – have been working hard to
encourage companies to restructure their wage systems to make them
more flexible. This would allow companies to respond quickly when
there is an economic downturn.
One component that has been built into the wage system is the
monthly variable component (MVC). Mr Gan said this has worked well,
but more needs to be done.
He said: "It is not an easy instrument to introduce because
companies have to put in place certain mechanisms, particularly in
the small and medium enterprises. Many of them take the position
that in any case, their wages are quite flexible because they are
small and nimble, and are able to adjust the wages as they go
along.
"We do acknowledge that some of these companies already have a
flexible wage system in their own structure... but it is also
important for us to look at other flexible components of the wage
system, including reducing the ratio between minimum and maximum
wages."
A major preoccupation of the Manpower Ministry is to finalise
Singapore's reemployment legislation which is expected to come into
effect by 2012.
Mr Gan said that it would not be a top-down approach – there will
be widespread public consultation with both employers and unions
before the final legislation is crafted.
The acting manpower minister also said the feedback received so far
has indicated that employers welcome the initiative and see the
benefit of employing older workers.
In fact, the employment rate of those aged between 55 and 64 years
went up by 3 percentage points from 2006 to reach almost 56 percent
last year. The tripartite partners hope to achieve a 65 percent
target by 2012.
Mr Gan said: "Employers are ready and willing to give it a try, and
we are now helping them to introduce this system even ahead of the
introduction of the legislation.
"Drafting the legislation is not so difficult. What is difficult is
to decide what are the criteria, terms within the legislation, and
this is something we have to work with the industry and unions so
that we can arrive at some common understanding how reemployment is
to be implemented."
A tripartite work group has also been set up and it will visit
companies to enhance the consultation process before the final law
is introduced.
- CNA/so