Slower wage growth, higher unemployment this year: MAS

April 28, 201611:52 am378 views
Slower wage growth, higher unemployment this year: MAS
TODAY file photo

SINGAPORE — Overall resident wage growth is expected to slow to about 2.5 to 3 per cent this year, from 3.5 per cent in 2015, as employment demand wanes and tightness in the labour market reduces, the central bank’s twice-yearly Macroeconomic Review report showed on Wednesday (April 27).

Meanwhile, jobless numbers are also likely to edge up alongside the weak cyclical conditions and in sectors facing weak external demand and undergoing restructuring, the Monetary Authority of Singapore (MAS) said.

“In line with subdued employment demand and reduced tightness in the labour market, wage pressures are likely to ease in 2016,” the MAS said.

In the report on Wednesday, the MAS noted that both labour demand and supply in the economy are settling at permanently lower levels, in line with the moderation in Singapore’s Gross Domestic Product (GDP) growth and an ageing population.

The Republic’s economic growth was flat on an annualised basis in the first quarter compared with the previous three months, slowing sharply from the 6.2 per cent expansion rate in the preceding quarter.

“Alongside the fall in labour demand, there has been a reduction in foreign labour supply growth amid the tightening of foreign worker policies. Meanwhile, the supply of resident workers grew at a fairly stable pace, despite an increase in the entry of part-time workers into the workforce. Going forward, structural headwinds and demographic ageing could intensify and further moderate the trend component of employment growth,” the MAS said.

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However, salary increments will vary. The central bank noted that pay rises will be stronger in sectors such as community, social and personal (CSP) services, where vacancy rates are higher; and weaker in sectors with greater slack, such as manufacturing.

UOB economist Francis Tan said: “The CSP services sector has high wage growth because it is very labour intensive even though labour productivity is tough to grow. This sector constitutes hospitals, schools and dialysis centres, which provide jobs for nurses, teachers.”

For manufacturing, the general manufacturing industries is a cluster facing slower wage growth because of  lower labour productivity, amid lacklustre demand from exports, said Mr Tan.

Other sectors that will also experience weaker salary increments are retail and food & beverage, Mr Tan added. “These sectors have been facing stagnation in terms of real wage growth as (they are) also low in labour productivity.”

In its report on Wednesday, the MAS noted that redundancies could rise slightly this year.

“With lower labour demand and supply, total job creation this year is expected to stay modest. As such, overall and resident unemployment rates are likely to rise slightly in 2016,” the MAS said, alongside weak cyclical conditions, intensifying industry reconfigurations in some sectors, as well as increasing skills mismatches within the resident workforce.

“Redundancies could continue to rise in sectors facing weak external demand and undergoing restructuring,” the central bank added.

In his May Day message this year, Manpower Minister Lim Swee Say noted that manpower could become the bottleneck of the Republic’s future growth “unless we speed up efforts to become a more manpower-lean economy and a more productive workforce”.

“In the future economy, even though there will be abundant supply of technology, capital and innovation, good people will always be in short supply. It is to the mutual benefit of employers, unions and workers, with the strong support of the Government, to work together to transform our limited manpower resources into our most valued human capital to drive our future growth,” he said.

Companies should learn to make better use and take better care of all employees regardless of age and qualifications, invest in them and help them develop to their fullest potential, Minister Lim said.

Meanwhile, unions will have to rally workers to keep learning and re-learning, upgrade and update their skills to be of greater value to their employers.

The Government said that on its part, it will strengthen its policies, and resource support for companies and workers to adapt and grow in the future economy.

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