Chart of the Day: See the crippling surge in retailers' labour costs

It’s a fourteen-year high.

In an industry which is heavily reliant on manpower due to the customer-oriented nature of the business, retailers are now facing escalating costs stemming from the combination of minimum wage policies, foreign labour policies and low unemployment rates.

A report by DBS says that whatever the source of the gripe, retailers in Singapore collectively face two problems: first, escalating labour costs which impinge on their profitability; second, even if retailers are able to contain their labour costs and afford additional labour, there isn’t any labour to be found.

Across the economy, firms have been hit by rising labour costs due to the low unemployment rate. Given the relative unattractiveness of service staff positions, the historically temporary nature of the job, and perception that such jobs are low paying, retailers have been forced to raise the starting pay for locals as they seek to retain existing staff and entice new job seekers to fill vacant positions. We can see that, across the economy, unit labour costs have accelerated since March 2012.

DBS adds that rising wages are but one aspect of the true cost of labour. Retailers must also continue to increase until 2015. Depending on current foreign/local staffing ratios and varying skill sets, firms face 30-70% in the monthly levy for S pass holders, and 5-25% increases for work permit holders. These additional levies all but ensure that whatever salary cost savings from reduced headcount would be transferred to the government in the form of higher monthly levies.