The Possibility of the Impossible Wage Increase in Singapore

Last month Mercer Singapore, a consultancy firm, did a survey. It polled 233 firms in Singapore. The survey indicated that wages in Singapore would rise by an average of about 4 per cent next year.

The government's response was quite loud and sarcastic. Here's an ST report (4 Dec 08):

Be realistic about wage increase
By Li Xueying

UNIONISTS and employer group Singapore National Employers Federation (SNEF) have scoffed at a recent survey that shows wages next year will increase by 4.2 per cent.

'It is highly unrealistic,' was how NTUC secretary-general Lim Swee Say put it bluntly on Thursday.

Also questioning the salary projection was SNEF president Stephen Lee who said a study by his federation showed a 'very different picture'.

'Given the sentiments, this 4 over per cent seems to be too high,' he said.

... Mr Bob Tan, chairman of Jurong Engineering, who is also vice-president of SNEF, started the dialogue yesterday with the first question, asking panel members Manpower Minister Minister Gan Kim Yong, Mr Lim and Mr Lee, for their opinion of the projection.

It met with this quip from NTUC president John De Payva: 'The unions sent bouquets of roses to Mercer and thanked them for their optimism.'

(Small note: Minister Lim Swee Say and his friends were speaking in their capacity as unionists ... but in Singapore, you can more or less take that as a government response).

Anyway, I was a little amused by Lim Swee Say's choice of adjective "unrealistic", and the Straits Times' description of Mercer's data as a "projection". Why?

Because the Mercer survey data wasn't a "projection". It was simply survey data. Data isn't "realistic" or "unrealistic". Data is just ... data.

Mercer Singapore wasn't trying to offer its own guess as to how much wages would increase next year. All it did was (1) ask 200+ companies for their expected salary increases in 2009, and (2) calculate the average. That worked out to slightly more than 4%.

Whether companies will indeed actually increase wages by that much remains to be seen. But to say that Mercer Singapore was making a "projection", and that the projection was "highly unrealistic" (when Mercer Singapore was simply doing a survey) doesn't seem, ummm, terribly intelligent on the part of Lim and friends.

On the other hand, Lim can't be all that dumb (I hope). So the essential question is - in these bad times, how would companies be able to afford a relatively generous 4% wage increase?

A rather brutal answer came to my mind. The 4% wage increase would be possible, if firms retrenched more employees now.

Of course, the poor performers would go first. The savings from these job cuts could then be used to partially fund higher wages for the remaining employees in 2009. In fact this way, the top performers might even get quite substantial wage increases:

Carrot for performers
One in 10 bosses invest more in talent, while two-thirds not cutting bonuses, incentives
Tuesday • December 16, 2008
Neo Chai Chin

THE recession is not stopping some bosses from throwing cash at top talent.

While most employers are shrinking or freezing their budgets for salary increases, more than one in 10 — or 13 per cent — are investing more in their high performers, a survey by management consulting firm Hay Group has found.

This targeted allocation of resources is shown in the pay increases Singapore companies are dishing out to their workers. Star performers will see base salaries increase by 60 per cent more than the company’s average this year. This is nearly twice the global average of 33 per cent, but lower than the Asian average of 67 per cent.

So, if the average Singapore employee gets a five per cent increment, the star performer would receive an eight per cent raise.

This is a reflection of the talent crunch in Singapore, said Mr Christian Vo Phuoc, country manager of Singapore for Hay Group’s reward information services.

Companies know they “cannot afford to be complacent and assume their high performers will not have motive or opportunity to leave”, he said.