Real wages may drop 2.7 per cent this year

Ms Chan Shu Jun has her eye on a new camera, but her rising monthly expenditure is making her think twice about buying it.

The 25-year-old analyst in the financial sector estimates that she spends about half of her monthly income - in the region of $4,000 - on food, shopping and entertainment.

Although her wages have increased by about 7 per cent in recent years, Ms Chan is still concerned by inflation and the spectre of shrinking incomes here.

She said: "I'm exploring investment opportunities to offset inflation. There's no point saving money in banks as the interest rates they offer cannot keep up with inflation."

Her concerns are shared by many, with real incomes likely to fall by 2.7 per cent this year, according to a survey by the Singapore Human Resources Institute (SHRI) and wage consultancy Remuneration Data Specialists.

This is despite an expected increase of 1.5 per cent in nominal wages. The survey - which was conducted last month and covered 167 companies across key sectors, like services and construction - shows that further wage stagnation is expected next year.

Although nominal wages are expected to increase by 3.1 per cent next year, that will be offset by an expected 3 per cent inflation rate.

The former chief economist for the Government of Singapore Investment Corp, Mr Yeoh Lam Keong said that Singapore faces both "wage stagnation" and "inflationary problems".

"Wage stagnation appears to be a general trend globally but, in Singapore, this is exacerbated by the massive influx of low-wage workers, which depresses nominal wages," he said.

SHRI executive director David Ang said he is especially concerned with the ability of low-wage workers to manage their daily expenses on transport and food. Any increases would eat into their disposable incomes, he explained.

Mr Yeoh said that these expenses make up a big proportion of low-wage workers' "consumption baskets", thus an income drop will hurt their pockets.

He suggests that the Government raise the Workfare Income Supplement Scheme payout significantly by "about two to three times, and allocate a bigger share of the payout in cash rather than in the form of CPF".

This will help push low-wage workers past the poverty line, rather than "wait for productivity levels to increase to push real wages up". He said: "That would take too long."

The survey also found that about eight in 10 companies are expected to hire new staff this year. This is projected to drop to fewer than six in 10 firms next year.

Mr Yeoh believes that the sluggish United States economy, euro-zone crisis and China's faltering growth may dampen business sentiments here.
"This could then cause a lack of business confidence to hire," he said.