Pay rises unlikely

Pay rises unlikely


Rising business costs affecting employers’ ability to pay more


Friday • May 23, 2008


Esther Fung and Lin Yanqin



Workers are not likely to have much bargaining power for higher wages even as consumer prices continue to soar.


This is because the job market is expected to soften in the second half of the year.


“The rosy picture on the labour front is short-lived,” said DBS economist Irvin Seah, who forecasted the unemployment rate would “creep up to 2.4 per cent in the fourth quarter” from 2 per cent at the end of March.


He estimates that the purchasing power of wage earners is now 2.4 per cent lower than a year ago, because high inflation has offset wage increments.


The inflation rate, as measured by the consumer price index (CPI), hit a 26-year high of 6.7 per cent in March. The CPI could reach 7 per cent in April, according to the average computed from the forecasts of four economists surveyed by Today.


And feeling the pain of rising business costs such as rentals, the price of fuel and raw materials, employers are finding it hard to match the salary increments made last year.


To help wage earners cope with the double whammy of rising prices and lagging wage increments, the National Wages Council has recommended that companies pay their staff, especially the lower wage earners, a one-off bonus. It also recommended employers reward staff more through the monthly variable component (MVC) in salaries.


The MVC, used by employers to manage wage costs in severe business downturns, can also be used to provide temporary relief to workers during this period of uncertainty.


Mr Koh Juan Kiat, the executive director of the Singapore National Employers Federation, said some of its member companies that were doing well have taken into account the impact of inflation when working out the MVC earlier this year.


“They would have given a bigger increment on top what is being given for performance, because of inflation,” he said. Of the federation’s 300 member companies, 120 make wage adjustments in January, while the rest do so in July.


But other employers are unlikely to use the MVC as a tool to help workers cope with inflation. “It would be a nice gesture for organisations to do that if they have the ability,” said Mr Douglas Foo, chief executive of Apex-Pal.


“But unless they are in the oil business, I don’t think many can do that.”


Source: Today Newspaper


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