CLEANERS ARE HELD up as the battered face of Singapore’s low-wage quandary. Their jobs have been among the most visibly hurt by the nation’s unfettered reliance on cheap foreign labour of the last few years. While salaries for many Singaporeans climbed, theirs have been squeezed. That is being addressed now, with some town councils putting their local cleaners through a skills upgrading programme, leading to a hike in their pay to $1,000 a month, from about $700 a month.
On Feb 28, the largest union in the building sector said it aimed to unionise more cleaners, to better protect them. In five years, it wants to represent a third of the Singaporeans in the cleaning workforce. There are currently about 50,000 locals in cleaning jobs, making up about 72% of the industry.
Poorly paid jobs that most Singaporeans don’t want to do are in focus as the government strives to reduce the import of cheap foreign workers and prod companies into improving wages and output per worker. The concentration is not just on the bottom strata of workers, though. By 2020, the government wants to lift the median wage across all sectors to $3,800 a month, from $2,633 as at June 2011. That works out to a compound growth rate of 4.2% a year, which is much higher than the 2.9% increase charted from 2001 to 2010.
At the same time, it wants to engineer an increase in productivity, which has been stubbornly feeble, largely because it has been cheap to hire foreign workers. In some industries, both real wages and productivity contracted over the last five years, according to a study by the Ministry of Trade and Industry released on Feb 16. These industries were retail trade, restaurants and real estate (see chart).
The government has already raised levies on foreign workers and, more recently, tightened quotas on foreign hiring. However, in some sectors, such as construction and F&B services, companies say it is difficult to replace foreign workers with locals. Singaporeans are simply not coming forward to take on jobs in F&B, says Kenneth Ang, CEO of the Restaurant Association of Singapore (RAS). Prime reasons for that include irregular days off, having to stand for long hours at a stretch, shift work and having to face customers every day, he adds.
COSTS ALREADY CLIMBING
Last year, despite elevated costs, companies continued to hire foreigners. For the construction industry, that trend has implied a jump of 20% to 25% in labour costs, estimates DBS Group Research. That is no small change. Yet, for many employers, there is little reprieve, as Singapore is on the brink of a wage revolution. A second one, really.
Back in the late 1970s and early 1980s, Singapore had among the most upwardly mobile wages in the region. During the 1985 recession, however, it was felt that Singapore was pricing itself out of the market. Hefty cuts in employer contributions to the Central Provident Fund were made and an ethos of wage cost-competitiveness took over. As a result, the share of wages as a percentage of GDP has fallen from a peak of 46.3% in 1985 to about 42.3% in 2011.
Policymakers are pushing for higher wages to motivate companies to become more efficient and devise ways to get more out of fewer people. This is already happening in industries where certain functions can be automated but, in the services industries, it is more difficult. Ang of the RAS acknowledges that the F&B industry needs to enhance working conditions and redesign jobs with the worker in mind. He also points out, however, that some restaurants are turning to technology, using e-menus on tablets and wireless payments. That is improving the efficiency of taking orders and receiving payments. Meanwhile, online reservations have also reduced the amount of time spent on taking telephone bookings.
ARE SINGAPOREANS PREPARED?
Still, it is early days in the wage-cum productivity revolution. While the average worker will welcome an era of higher wages, is he prepared for the higher costs that come with higher incomes? As much as possible, employers grappling with higher-wage bills will try to pass on those higher costs to consumers.
Moreover, this is not going to be a one-off event. Given that the government has a 2020 target for wage growth, it is going to be a recurrent theme. Rising wages will feed into food as well as healthcare and education costs. This will mean years of higher headline inflation than what Singapore has been used to.
Last year, CPI inflation reached 5.2%. About two-thirds of this figure can be traced back to the spike in accommodation costs and private road transport costs (that is, COE premiums). Excluding these two items, core inflation was closer to 2%. That sort of core inflation is unlikely to recur, as we now have long-term cost pressures in the labour-intensive components of the CPI. As Singapore embarks on a much-needed wage and productivity revolution, a painful period of adjustment lies ahead. Higher salaries come at a cost.
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