Services sector could shy away from giving $300 bonuses: economist

Companies that had improved productivity were urged to give $300-$600 bonuses.

The Ministry of Manpower (MOM) urged companies to provide a one-off special payment to workers, so that companies with productivity improvements "may share the gains with workers," as per the recommendation of the National Wages Council (NWC). It recommended firms to give bonuses worth $300-$600 to workers earning a basic wage of up to $1,300, on top of the built-in wage increases.

UOB economist Francis Tan told Singapore Business Review that companies are unlikely to follow the MOM's recommendation for bonuses right now. “NWC said that it was to reward the workers due to the strong growth in the labour productivity in the economy in 2017. However, the strong growth was due to an out-sized jump coming from the manufacturing sector,” he said.

He noted that many of the low wage workers are employed in the services sector, which did not experience much increase in the labour productivity at all. “So, I think the bonus may not be followed by companies, especially those in the labour-intensive services sector (that employs the lower wage workers),” he added.

The economist said that businesses in the services sector will have a hard time adjusting to the recommendations, whilst sectors where their employees will benefit include manufacturing and community/social/personal services, like education and healthcare.

Separately, the MOM also followed the NWC’s recommendation and urged firms to grant a built-in wage increase of $50-$70 for workers earning a basic wage of up to $1,300.

Tan was more encouraging of this move as even for the “highest” paid low wage worker, the smallest increment of $50 means an increment of 3.8%. According to his estimates, a $60 increment implies a 4.6% increase, whilst a $70 raise implies a 5.4% wage growth.

He added, “3.8% is exactly the same 2017 wage growth released by MOM in their Wage Report 2017. As such, I will say that although many people think that $50-$70 is ‘too little’, it’s actually quite a generous recommendation that will go a long way in helping our low-wage countrymen.”

The NWC previously said in its review that the proportion of full-time resident employees earning a basic monthly wage of up to $1,200 fell to 7.7% in 2017. The proportion of those that earn $1,000 and $1,100 also fell. Thus they believe the basic wage threshold must be raised from $1,200 to $1,300.