Preliminary estimates showed that the first half of 2023 saw Singaporean's nominal income growing by 0.9 per cent while real median income declined by 4.5 per cent on a year-on-year basis compared to the first half of 2022.
From 2017 to 2022, income growth outpaced inflation, with real income growing by about 9.4 per cent or 1.8 per cent per annum, Senior Minister of State for Manpower Zaqy Mohamad said in Parliament on Nov. 7, 2023.
This income growth was commensurate with productivity growth, measured by real value added per worker of 2 per cent per annum over the same period.
Real incomes declined in the first half of 2023 due to elevated inflation
The decline in real income was due to elevated inflation and a weaker economic outlook, said Zaqy.
The changes in nominal income across sectors also did not outpace inflation, hence the decline in real incomes.
While the economic outlook remains uncertain, the government expects inflation to moderate for the rest of the year, he added.
Overall wage growth to also moderate in 2024
Nominal wage growth for resident workers is also expected to ease in 2024 as labour demand cools and "tightness in the labour market" is alleviated.
However, while overall wage growth is projected to moderate, it could remain elevated in certain sectors.
According to Zaqy, wage increments are expected to "stay firm" in travel-related sectors, where demand continues to recover, and labour-intensive services sectors, where manpower shortages could be more persistent.
Real income of low-wage workers grew 15.4 per cent from 2017 to 2022
Zaqy was responding to multiple questions filed in Parliament about real wage growth, how it has been affected by inflation, how growth will be sustained and how vulnerable Singaporean workers might be affected.
He added that low-wage workers have experienced "good" real income growth from 2017 to 2022.
During this period, the real income of workers from the 20th percentile rose 15.4 per cent or 2.9 per cent per annum, faster than the median of 1.8 per cent per annum at the median.
This means that as the cost of living rose, the incomes of low-wage workers rose even more, narrowing the income gap with the median worker.
Workers covered by the Progressive Wage Model can expect cumulative wage increases of up to 80 per cent by 2028
In addition, the Progressive Wage Model (PWM) has been recently expanded to cover more low-wage workers, Zaqy highlighted.
Over the next few years, workers covered by the PWM can expect cumulative wage increases of up to 80 per cent by 2028.
"Amid a tight labor market, low wage workers who are not directly covered by the PWM should also see meaningful wage increases as employers will have to respond to market forces to attract and retain workers."
What the government is doing to sustain wage growth
Here, Zaqy said that the government's strategy to raise income growth is to continue to sustain productivity.
He pointed out that the government co-funds up to 75 per cent of wage increases given by employers to eligible low-wage workers from 2022 to 2026 through the Progressive Wage Credit Scheme (PWCS).
This scheme softens the cost impact on employers in the near term and gives them time to invest in upskilling workers and improving firm-level productivity so that the wages are sustainable.
Zaqy also cited the recent announcement of the S$1.1 billion Cost-of-Living support package in September 2023 to provide more relief for Singaporean households, especially lower- to middle-income families, as an example of how the government recognises the impact of inflation on wages.
The National Wages Council also called on employers on Oct. 31, 2023 to consider giving a one-off special lump sum payment to workers in recognition of the impact of high prices.
The Workfare Income Supplement Scheme, which was enhanced in January 2023, will also be enhanced again, with additional details to be shared in Budget 2024.
Top photo by Kit Suman via Unsplash