Singapore wage growth slows but deflation helps accelerate pace of real wage rise

Hit by softer economic conditions in the City, profitable firms declined and loss makers increased in 2015.

In Singapore, the number of profitable firms declined in 2015 hit by softer economic conditions while real wage growth accelerated despite slowing nominal wage growth helped by negative inflation, according to the Ministry of Manpower report on Thursday (2 June).

Nominal wages in the private sector grew by 4.0% in 2015, lower than the 4.9% increase in 2014. Accounting for the -0.5% CPI inflation, real total wages rose by 5.4% last year compared to the 3.9% growth in 2014, the MoM said.

Meanwhile, 79% of private establishments reported that they were profitable in 2015, down from the 82% in 2014. At the same time, the number of firms reported loss increased to 21% from 18%.

The report showed that only 64% of firms raised the total wages in 2015 compared to 72% in the previous year. The share of firms that kept wages unchanged increased to 25% from 20%. In addition, 11% of firms cut wages, compared with 7.7% in 2014.

Among firms that did not increase wages, half of them indicated that they were already paying the workers the market rate, while others cited poor business and high business costs as reasons, the report showed.

The report also noted that more firms were adopting flexible or performance-based wage measures. Most employees, or about 90% of all private-sector employees, were under some form of flexible wage system last year – the highest figure since 2004, MOM said.

Some of the more widely-adopted measures included having a narrow maximum-minimum salary ratio, linking variable bonus to Key Performance Indicators, and having a Monthly Variable Component in the wage structure.