Impact of Inflation on Workers and Provision of Appropriate Wage Increments

Mr Christopher de Souza asked the Minister for Manpower how is the Government ensuring that employers consider the impact of inflation on workers and provide wage increments that meet inflation.

When inflation goes up and prices rise for employees, costs similarly rise for employers. Employers themselves fundamentally need to make their companies more productive to be able to pay more to employees and cope with inflation. Employers, employees and the Government therefore work together as tripartite partners to press on with economic transformation, raise productivity and turn our current challenges into longer-term opportunities. This is what we have been doing through the 23 Industry Transformation Maps (ITMs). The ITMs seek to sharpen the competitiveness of companies and industries to enable our workers to deepen their skills and increase their productivity. These improvements translate into better wages for our workers.

The Government is supporting employers to restructure their businesses and upskill their employees. For example, Workforce Singapore has rolled out Job Redesign and Reskilling Programmes to support employers to upskill their employees to take on enhanced job roles. Other schemes such as the Enterprise Development Grant and the Productivity Solutions Grant, are also available to help businesses strengthen their capabilities. The Economic Development Board also works to attract investments in a wide range of sectors. The profile of investments has increasingly moved towards higher value-added and innovation-focussed activities that generate higher-paying jobs with good wage growth prospects which need to be filled by Singaporeans.

Our foreign workforce policies encourage employers to embark on productivity-led, manpower-lean growth. For example, we have tightened the Dependency Ratio Ceiling (DRC) and S Pass sub-DRC to nudge employers to reduce over-reliance on lower-skilled foreign workers so that they would press on with productivity improvements and strengthen their Singaporean core. The new Progressive Wage moves implemented on 1 September 2022 also include the new Local Qualifying Salary (LQS) requirement, which ensures that locals are employed meaningfully, rather than be given token salaries for firms to access foreign workers.

Given the labour market we have today, where employment is back at pre-COVID levels and vacancies significantly outnumber jobseekers, employers who do not provide fair and sustainable wage increments will risk losing their workers. To provide guidance to employers, the National Wages Council (NWC) will issue its annual wage guidelines to employers and employees later this year. The NWC, represented by employer, employee and government groups, recently convened on 1 September 2022 to formulate the new set of annual wage guidelines that will take effect from 1 December 2022. The NWC will set out wage recommendations taking into account both the economic recovery over the past year, and the uncertain global economic outlook going forward, including the impact of inflation on employees.

Lower-wage workers have experienced good wage growth over the last five years. From 2016 to 2021, real1 income at the 20th percentile has risen 2.7% per annum, faster than at the median2. This has put lower-wage workers in a better position to cope with inflation. The Government and tripartite partners will continue to uplift our lower-wage workers through the Progressive Wage Model. Nevertheless, we recognise that the impact of inflation hits lower-wage workers harder. To help lower-income households and vulnerable groups with inflation and cost of living concerns, the Government has announced several support measures, including the $1.5 billion Support Package announced in June 2022. We stand prepared to provide more targeted help for lower-income and vulnerable groups if the situation worsens.