Robust pay rises in Singapore last year tempered by inflation

Most workers saw pay hikes last year, but rising prices meant that their gains were tempered.

With a large majority of companies raking in profits, 70 per cent of workers saw their pay packets expand, with resident workers who had stayed in their jobs for at least one year taking home an extra 3.9 per cent on average.

But inflation ate into their gains and their spending power increased by just 1.6 per cent - less than half of their nominal pay hikes.

Despite nominally bigger pay cheques, workers have fared worse only once over the past five years. That was in 2020, when real wage growth was 1.4 per cent despite prices dipping marginally.

Some 59 per cent of workers saw their nominal pay increase in 2020. The biggest hikes went to junior executives, who have become the most sought-after segment of the workforce.

Prospects appeared brighter last year as the economy expanded 7.6 per cent and three in four companies were profitable. But an inflation rate of 2.3 per cent diluted real gains for workers.

High prices are expected to persist for the rest of the year as lockdowns in China and the Ukraine war worsen supply bottlenecks, said Dr Hong Ru, assistant professor of banking and finance at Nanyang Business School.

“The key is how fast we can get out of this supply chain issue and to really increase productivity. If we can do this fast, we will be in a good position next year,” he said.

Inflation is expected to peak at 4 per cent between July and September before easing in late 2022.

Recruiter Michael Page, which reported that most firms were planning to give annual increments of 3 per cent this year, expects that bigger hikes would be made after September.

Its managing director, Mr Nilay Khandelwal, said: “This is when we would really know what exactly would be the AI (annual increment) and inflation rates. Generally speaking, Singapore AI is pretty much tied to the inflation rate to a large extent.”