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Singapore Wage Policies
Following the rapid economic growth of the late 1960s
and early
1970s, signs of a tight labor market emerged along with a
concern
that wages might escalate. In response, the government in
1972
established the National Wages Council, a tripartite forum
with
representation from the employers' federations, trade
unions, and
the government. As a government advisory body, the council
recommended annual wage increases for the entire economy;
ensured
orderly wage development so as to promote economic and
social
progress; and assisted in the development of incentive
schemes to
improve national productivity.
The wage guidelines were not mandatory but were
followed by the
public sector (by far the largest employer) and widely
implemented
in the private sector. The influence of these
recommendations
generally was not applicable to private-sector
professional and
managerial workers, whose wages were determined more by
international forces, but was more important for
non-professional
white-collar workers. For blue-collar workers, who
constituted
about 40 percent of the labor force in both the public and
private
sector, union influence was more crucial than the National
Wages
Council's recommendations, but market forces were even
more
important.
Between 1973 and 1979, actual wage increases followed
the
council recommended wage increases closely. In 1979 the
"wage
correction policy," in which there were three years of
high-wage
recommendations, was designed to force an increase of the
productivity of higher value-added operations, to reduce
the
reliance on cheap unskilled foreign labor, and to raise
labor
productivity. From 1980 to 1984, however, actual wage
increases
exceeded the recommendations by an average of 2.4
percentage points
per year, as the increasingly heavy demands for labor
apparently
outstripped its supply. Additionally, collective
agreements for
unionized workers lasted for two or three years with
built-in wage
increases. Although starting pay was relatively low, large
gaps in
wages were institutionalized through longevity of
employment and
annual raises.
The effect of wage increases, compounded by a further
raise in
the mandatory Central Provident Fund component of wages,
was to
price Singapore out of the market. High wages were a major
contributor to Singapore's 1985 recession. Consequently,
in 1986
and 1987 the government instituted a wage restraint
policy: wages
were frozen and the employer's contribution to the fund
substantially reduced. The policy's relative success could
be
attributed to close government-labor ties and to the
tripartite
forum of the National Wages Council.
Proposals for wage reform--a "flexi-wage policy"--were
announced in mid-November 1986 and became effective with
the
enactment of the 1988 Employment (Amendment) Act. Under
this plan,
the basic wage remained relatively stable with adjustments
for good
or bad years made by increasing or reducing the annual
bonus.
Negotiating the size of the bonus--frozen to the
equivalent of one
month's salary since 1972--was left to employers and
unions, who
would be able to bargain for its retention, abolition, or
modification. Profit-sharing, productivity incentive, and
employee
share plans were encouraged to ensure that high wage
payments
awarded in fat years were not perpetuated in lean years
and that
individual as well as company productivity, growth,
profitability,
competitiveness, and prospects for the industry were taken
into
account. The government was anxious that wages not
increase
precipitously. This concern was shared by management,
which worried
about shrinking profit margins resulting from higher
operating
costs. Workers, on the other hand, wanted to share in the
benefits
of the economic boom after giving up wage increases to
help cope
with the 1985 recession.
Data as of December 1989
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