Singapore wage body backs pay freeze or wage cuts

Nao Nakanishi

SINGAPORE: A government advisory body last week-end called upon most companies to freeze or cut wages to save jobs and remain viable as Singapore faced its worst recession since 1964.

But unlike previously, the National Wages Council (NWC) did not make any specific recommendations on the size of possible wage cuts, allowing flexibility to individual companies.

The council said in a statement that companies adversely hit by the economic downturn might implement a wage freeze or cut commensurate with their performance and prospects in consultation with their workers or unions.

“The NWC is of the view that companies should consider retrenchments only as a last resort,” it said, adding they should also use the period for training and upgrading their workforce for a better time.

It also urged companies that perform well to reward workers with appropriate wage increases. The recommendations, which the government is likely to accept on Sunday, serve as the basis for negotiations between employers and unions until the end of 2002.
Economists surveyed by Reuters had expected the NWC, which comprises representatives of employers, unions and the government, to recommend cuts of at least 6 per cent in line with guidelines issued during the 1997-98 Asian financial crisis.

The NWC, which normally meets once a year in May, reconvened as the economic outlook deteriorated particularly after the September 11 attacks on the United States.

Singapore’s export-driven economy is headed for a 3 per cent contraction this year after 9.9 per cent growth in 2000. Its unemployment rate is expected to climb to 4 per cent by the end of this year, with retrenchment in 2000 reaching 25,000. The government foresees another 15,000 jobs being axed next year.

“The outlook for 2002 remains poor,” the NWC said, referring to the government preliminary 2002 growth forecast of between -2 and 2+ per cent.

Provident fund cut not ruled out
On the mandatory Central Provident Fund (CPF) pension scheme, the NWC said, while a cut in the employers’ contribution rate could not be ruled out, the government would consider this only as a last resort. The employers’ contributions to the CPF has been restored to 16 per cent after being halved to 10 per cent during the Asian crisis on recommendation by the NWC.

Lim Pin, NWC’s chairman, told a news conference a cut in contribution to the CPF, which can be used for housing and certain specified property investments, mutual funds and insurance products, would have large socio-economic implications. Past experience showed such blunt measure should be avoided unless absolutely necessary, he said.

The NWC also urged the management of companies to lead by example in wage freeze and cuts, and the government to continue its efforts to keep other business costs and the cost of living for workers down. It did not provide further details.

To help its citizens ride out the recession, the government had set out a S$11.3-billion ($6.2 billion) stimulus package featuring tax rebates infrastructure projects and cash handouts.

— Reuters