Introduction
1. In view of the deteriorating economic conditions, the National
Wages Council (NWC) was reconvened to review the wage guidelines
issued in May 2001.
Update On Economic Performance
2. Since the NWC last met in April-May this year, the global
economic environment has deteriorated drastically, particularly
following the September 11 attacks. The US economy declined
by 0.4% in the third quarter, the worst performance in more
than 10 years. Growth in the EU economy has slowed to a dismal
0.1% in the second quarter while the Japanese economy is expected
to have entered a recession, contracting by 0.8% in the second
quarter. Growth in most major economies and Asian economies
are expected to drop sharply this year and remain weak in 2002.
3. The Singapore economy has entered a recession as a result
of the sharp downturn in external demand. Economic growth
deteriorated further in the third quarter of 2001 by 5.6%
(on a year-on-year basis), down from +4.8% in the first quarter
and -0.5% in the second quarter. Growth momentum (on an annualised
quarter-on-quarter basis) fell by a dramatic 11.1%, following
-10.2% and -9.7% in the first two quarters this year. For
the whole year, the economy is expected to decline by around
3%. The outlook for 2002 remains poor. Ministry of Trade and
Industry's preliminary 2002 growth forecast is -2 to +2 %.
Productivity and Business Cost
4. Labour productivity declined further by 8.4% in the third
quarter. For the first nine months, productivity fell by 4.8%
compared with a growth of 5.6% last year. The sharp fall in
productivity is mainly a reflection of a larger drop in output
relative to employment.
5. The unit business cost (UBC) index for the manufacturing
sector rose by 10.1% in the third quarter. For the first nine
months this year, UBC increased by 9.1% compared with a decline
of 1.0% in 2000. Two out of the three components of the UBC,
namely unit labour cost (ULC) and services costs registered
increases in the third quarter. The manufacturing ULC jumped
by 27%, due largely to the 20% drop in manufacturing productivity.
Services costs rose 0.4% while government rates and fees fell
by 2.1%.
Update on Labour Market
6. In tandem with the contraction in economic activity, the
labour market has weakened significantly. Total employment fell
by 12,500 in the third quarter, and the number of job vacancies
per 100 job seekers has fallen sharply to 32 in September 2001
from 61 in June. The average unemployment rate rose sharply
to 3.8% in September 2001, compared to 2.6% in June. In the
third quarter, 8,200 workers were retrenched, bringing the total
number of retrenchments in the first nine months of this year
to 17,100. Total retrenchments for the year is expected to reach
25,000.
Revised NWC Wage Guidelines: Severe Wage Restraint
7. The NWC notes that some companies have found it necessary
to retrench their workers. The NWC acknowledges that retrenchments
may be inevitable as companies have to respond to the sharp
drop in business and do whatever is necessary to survive this
downturn. However, the NWC is of the view that companies should
consider retrenchment only as a last resort, and should instead
implement other cost-cutting measures first. In particular,
the NWC strongly urges companies to tap into the many training
schemes and incentives the government has put in place, to upgrade
the capabilities and employability of their workforce and better
position themselves to ride the economic recovery.
8. Given the worsening economic conditions and the increasing
number of workers being retrenched, the NWC strongly urges
the government, employers and trade unions to take concerted
actions to save jobs. The NWC therefore recommends that for
the majority of companies whose business, profitability or
prospects are adversely affected by the severe economic downturn,
they may, in consultation with their unions/ workers, implement
a wage freeze or cut commensurate with their performance and
prospects.
9. For companies that continue to perform well, they should
reward their workers with appropriate wage increases. Such
wage increase should preferably be in the form of a monthly
variable component or as special payments.
10. To remain viable and save jobs, the NWC notes that some
companies have already implemented various cost-cutting measures.
Such measures include shorter workweek, temporary lay-off,
wage freeze and/ or even wage cut. Where companies have to
freeze or cut wages, the NWC urges the management to lead
by example in wage freeze/ cuts. In this respect, the Council
noted that senior executives in some companies have taken
earlier/ deeper wage cuts. The government has also implemented
a major cut in the monthly salaries of political/ statutory/
judicial appointment holders and senior civil servants whose
salaries are tied to the private sector salary benchmarks.
This is in addition to the significant reduction in the Annual
Variable Component (AVC) for civil servants.
11. Effective implementation of the above severe wage restraint
guidelines will save jobs and control wage costs, to help
companies remain viable and the economy to cope with the recession.
CPF Contribution & Other Costs
12. The NWC notes that while a cut in CPF contribution rate
cannot be ruled out, the government will consider this only
if the situation demands it.
13. The NWC strongly urges the government to continue to
keep other costs of doing business down, as wage costs constitute
only a part of the total cost of doing business in Singapore.
14. At the same time the NWC strongly urges the government
to continue to take measures to moderate the cost of living
for workers
Application Of NWC Recommendations
15. The NWC recommendations are applicable to all employees
(management, executives and rank-and-file employees), unionised
and non-unionised companies and in both the public and private
sectors.
16. To achieve constructive wage negotiations, companies
should share relevant information on company performance and
business prospects with employees and their representatives.
17. To ride the economic recession, the severe wage restraint
guidelines will apply until 31 December 2002. The Council
would next be convened after the release of the third quarter
2002 Grass domestic Product (GDP) growth results or earlier
if necessary, to deliberate on appropriate wage guidelines
for implementation.
Conclusion
18. The spirit of tripartism between the government, employers
and unions, which is founded on the basis of trust, confidence
and cooperation over the years, is a cornerstone of our social
capital. This has helped us to overcome economic adversity in
the past, and has enabled us to achieve strong economic growth
and social progress for the benefit of workers, employers and
the economy. In good years, companies have rewarded workers
with substantial wage increases, higher bonuses and better company
welfare. In times of adverse business conditions, workers have
made sacrifices to help companies remain viable and ride out
the difficulties.
19. Given our strong tripartite partnership, the NWC is
confident that these guidelines will be implemented smoothly
and effectively to help companies remain viable and hence
preserve jobs. It will also help companies recover quickly
from the downturn and the economy to return to the path of
growth. When the economy recovers workers could then look
forward to better rewards and career opportunities.
Stephen C Y Lee
(President
Singapore National Employers Federation) |
Matthias Yao
(Deputy Secretary-General
National Trades Union Congress) |
Eddie Teo
(Permanent Secretary
Prime Minister's Office Public Service Division) |
Kwek Leng Joo
(President
Singapore Federation of Chambers of Commerce & Industry) |
John De Payva
(Secretary-General
Singapore Manual & Mercantile Workers' Union) |
Khaw Boon Wan
(Permanent Secretary
Ministry of Trade & Industry) |
Noriyasu Kagawa
(Councillor
Japanese Chamber of Commerce & Industry, Singapore) |
Tan Chai Kun
(General Secretary
Metal Industries Workers' Union) |
Dr Tan Chin Nam
(Permanent Secretary
Ministry of Manpower) |
Alexander C Melchers
(Vice-President
German Business Association) |
Paul Tan
(General Sectary
Amalgamated Union Of Public Employees) |
Ko Kheng Hwa
(Managing Director
Economic Development Board) |
Cara Reil
(Deputy Chairman Manpower Committee
The American Chamber of Commerce in Singapore) |
Nithiah Nandan
(Executive Secretary
Union of Power and Gas Employees) |
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