State battles toughest recession in a generation

PUBLISHED : Monday, 03 December, 2001, 12:00am
UPDATED : Monday, 03 December, 2001, 12:00am

Singapore's powerful National Wages Council (NWC) is likely to call on workers to accept an aggressive round of pay cuts this week as the government battles its toughest recession in a generation.

In an unusual move the tripartite body, staffed by representatives from government, employers and labour unions, is set to meet for a second time to update its annual guidelines.

'Given the deteriorating economic conditions both in and outside Singapore, there is a need for the NWC to review its . . . guidelines and decide whether fresh guidelines should be formulated,' an official from the Ministry of Manpower said.

'[This will] enable companies to preserve jobs and to minimise retrenchment where it is unavoidable,' he said.

Economists believe the NWC is likely to endorse hefty pay reductions and a more widespread acceptance of variable pay, which employers can adjust by the month according to individual circumstances.

In its 29-year history, the NWC has only once before backed pay reductions. During the regional financial crisis in 1998, the NWC asked workers to accept cuts of between 5 per cent and 8 per cent.

It also successfully argued for a halving of employer's contributions to their worker's mandatory pension scheme, the Central Provident Fund (CPF).

The NWC's first round of advice was issued in May this year and was intended to cover the 12 months starting in July. At that stage, the influential body recommended employees accept more modest pay rises than last year or take pay freezes or salary cuts if they worked at loss-making firms.

Last year, take-home pay rose an average of 6.6 per cent as gross domestic product expanded by almost 10 per cent. This year - buffeted by the rapid cooling of the global economy and impact of September 11 - GDP is set to shrink by 3 per cent.

The NWC is one of the key forums for managing business costs in the Singapore economy.

Although its recommendations are non-binding, they are typically accepted wholesale by the government and form the basis for negotiations between workers and their employers.

The NWC usually issues a range of advice, matched to a company's profitability, freeing employers from a one-size-fits-all pay policy.

As Singapore's economy has worsened this year, news of redundancies, pay freezes and pay reductions has mounted.

Several high-profile companies, including flag-carrier Singapore Airlines and DBS Bank have already announced symbolic pay reductions for their executive staff.

Senior civil servants have also faced a pay cut, while ministerial salaries are linked by a pre-set formula to the performance of the national economy.

A recent survey quoted in The Straits Times revealed that 18 per cent of Singapore-based companies had already frozen pay levels this year and 28 per cent of companies planned to do so next year.

The NWC, which has appealed in recent weeks to the public for views on appropriate pay rates is expected to unveil its new guidelines on Saturday.

Also meeting this week is the Economic Review Committee, headed by Deputy Prime Minister and Finance Minister Lee Hsien Loong.

This new group is to re-examine all of Singapore's economic policies and in doing so formulate a fresh medium-term plan for the development of the economy.