Pay raises return to pre-pandemic levels

SINGAPORE - Amid a tight labour market in 2021, more employees - seven in 10 - received wage hikes, an increase from just six in 10 the year before.

The Ministry of Manpower (MOM) said on Monday (May 30) that the total wage growth last year among employees who had been with the same employer for at least one year was 3.9 per cent, a similar figure to 2019.

This was an increase from the previous year. In 2020, the year the Covid-19 pandemic hit, total wage growth slowed to 1.2 per cent.

MOM said the rebound in total wage growth was due to a broad-based economic recovery across industries and a tight labour market from border restrictions slowing down the inflow of non-resident labour.

About 75 per cent of employers were profitable in 2021 - an increase from 63 per cent the year before - as the economy recorded an expansion of 7.6 per cent.

This enabled employers to restore wage cuts that had been made in 2020, MOM said.

Seventy per cent of employees received a raise last year, an increase from 60 per cent in 2020, with the extent of these increases improving from 4.5 per cent in 2020 to 6.3 per cent in 2021.

The proportion of employees who experienced a wage cut was halved to just 10 per cent in 2021 compared with 23 per cent in 2020, with these cuts being less steep as well, from 6.9 per cent in 2020 to 5.2 per cent last year.

The wage growth of 3.9 per cent recorded in 2021 was less than in 2010, which saw wages increase by 5.7 per cent during the recovery following the global financial crisis that hit in 2008.

MOM attributed this to the longer tail of the pandemic, which might have made employers more cautious about raising wages, as well as the less severe impact that the pandemic had on wages compared with the global financial crisis. This meant that wages had less ground to recover in 2021 compared with 2010.

The higher total wage growth in 2021 was experienced across all sectors, with retail trade recording the highest growth at 5.5 per cent.

Outward-oriented sectors such as the information and communications industry recorded a wage growth of 5.1 per cent; financial and insurance services had a growth of 4.1 per cent; and manufacturing sector, 4 per cent. These sectors account for about 70 per cent of the economy and are projected to benefit from the pickup in external demand.

Among sectors that were hit hard by the pandemic, wages rose in tandem with a return of demand for manpower as border restrictions were eased.

The accommodation sector - which includes hotels, serviced apartments and dormitories - saw wages increase by 1.7 per cent last year, from a 5.3 per cent decrease in 2020.

Transportation and storage saw a similar turnaround with wages increasing by 2.8 per cent, from a 3 per cent decrease the year before, while food and beverage services saw an increase of 2.6 per cent in 2021, up from 1.5 per cent in 2020.

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Real wage growth, which takes into account the inflation rate, was, however, dampened by higher inflation.

In 2021, when the inflation rate was 2.3 per cent, real wage growth was registered at 1.6 per cent. This was slightly above the previous year's figure of 1.4 per cent, when inflation rate was negative 0.2 per cent, and less than half of the 3.3 per cent reported in 2019 that had an inflation rate of 0.6 per cent.

MOM said that wage growth is expected to continue in 2022 due to the tight labour market, which would slowly be eased by the significant relaxation of border restrictions, allowing non-resident workforce numbers to recover.

The ongoing Russian-Ukraine war and protracted global supply disruptions were factors cited by the ministry that could dampen demand and wage growth in 2022.

Recent shocks to global supply chains meant that inflation was expected to remain high and dampen real wage growth as well, MOM added.

This article was first published in The Straits Times. Permission required for reproduction.