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Squeezing wages not the way to cut costs
By Rachel Chang
PUTTING the squeeze on the wages of workers isn't the way to go if employers want to keep profit margins up while also raising productivity.
Labour chief Lim Swee Say told participants at a tripartite dialogue yesterday that this is because the labour market will be tighter in the coming years.
So, attempts to defray rising costs by cutting wages may backfire.
'Don't forget: Workers have two hands to work, but they also have two legs to walk,' he noted.
The tighter labour market will stem partly from the Government's decision to keep the proportion of foreign workers in the labour force to its present one-third, instead of letting it increase indefinitely.
Assuming the local workforce grows at 1 to 2 per cent a year, this means the foreign workforce can grow only at the same rate, Mr Lim pointed out.
'One common bottleneck (every sector) is going to face is manpower,' he said. 'Please do not underestimate the implication of (just) 1 to 2 per cent growth (of the workforce)... We'd better work together to value every worker.'
He was speaking in response to a worry expressed by market research analyst Lincoln Han that the increase in the foreign worker levy, to start in July, will be passed on by employers to workers through wage cutting.
Mr Hon, a volunteer with Young NTUC, also expressed concern that employers would also pass forward the cost increases in the form of higher prices to consumers.
In a reply echoed by his fellow tripartite leader Stephen Lee, president of the Singapore National Employers Federation (SNEF), Mr Lim said that raising prices for consumers would be similarly unwise.
'It's called competition. Companies that have a 'cost-plus' mindset of passing on costs can never survive in the world of globalisation.
'Today, the world is 'price-minus',' he pointed out to the audience of 550 businessmen and unionists. 'You look at what your competitors charge, and how to charge less to win business.'
The ability to charge less, he added, has to come from innovation.
Manpower Minister Gan Kim Yong also noted that the Government has a rule forbidding employers from making their foreign workers bear the cost of the levy.
'This is something the ministry will continue to monitor and we will enforce if we come across such cases,' he said.
Where do these strictures leave employers, faced with pressures at both ends?
Several businessmen, like managing director of a manpower and outsourcing firm Andy Sim, worried that costs may balloon with little relief.
'As a business manager, if Singapore is not profitable, I'll go overseas,' he added.
Mr Gan said that the Government is mindful of the need to keep wages in check, reiterating that pay increases should come only in tandem with actual improvements in productivity.
Singapore Business Federation chairman Tony Chew spoke out on the added costs of sending workers for training. For the company, he said, it meant manpower shortage, work disruption and operational delay.
'And when workers are trained and return, they demand higher wages, leave for better jobs or return to their own countries,' he said. 'These are the realities of our members.'
Mr Gan said that with the economy in recovery, the Government is turning its focus to measures to boost productivity and spur innovation.
A large amount of funding has been set aside to 'help companies defray the costs of putting in place productivity measures', he added.
The SNEF's Mr Lee put it bluntly to the 150 chief executives in the audience: 'Yes, cost is going up. How do you translate that and use that as a push and pull to gain productivity? It's very much up to management.'
However, while acknowledging the hard work required from employers, he emphasised that 'supporting structures' in terms of resources provided by NTUC and the Government, would help.
This article was first published in The Straits Times.
By Rachel Chang
PUTTING the squeeze on the wages of workers isn't the way to go if employers want to keep profit margins up while also raising productivity.
Labour chief Lim Swee Say told participants at a tripartite dialogue yesterday that this is because the labour market will be tighter in the coming years.
So, attempts to defray rising costs by cutting wages may backfire.
'Don't forget: Workers have two hands to work, but they also have two legs to walk,' he noted.
The tighter labour market will stem partly from the Government's decision to keep the proportion of foreign workers in the labour force to its present one-third, instead of letting it increase indefinitely.
Assuming the local workforce grows at 1 to 2 per cent a year, this means the foreign workforce can grow only at the same rate, Mr Lim pointed out.
'One common bottleneck (every sector) is going to face is manpower,' he said. 'Please do not underestimate the implication of (just) 1 to 2 per cent growth (of the workforce)... We'd better work together to value every worker.'
He was speaking in response to a worry expressed by market research analyst Lincoln Han that the increase in the foreign worker levy, to start in July, will be passed on by employers to workers through wage cutting.
Mr Hon, a volunteer with Young NTUC, also expressed concern that employers would also pass forward the cost increases in the form of higher prices to consumers.
In a reply echoed by his fellow tripartite leader Stephen Lee, president of the Singapore National Employers Federation (SNEF), Mr Lim said that raising prices for consumers would be similarly unwise.
'It's called competition. Companies that have a 'cost-plus' mindset of passing on costs can never survive in the world of globalisation.
'Today, the world is 'price-minus',' he pointed out to the audience of 550 businessmen and unionists. 'You look at what your competitors charge, and how to charge less to win business.'
The ability to charge less, he added, has to come from innovation.
Manpower Minister Gan Kim Yong also noted that the Government has a rule forbidding employers from making their foreign workers bear the cost of the levy.
'This is something the ministry will continue to monitor and we will enforce if we come across such cases,' he said.
Where do these strictures leave employers, faced with pressures at both ends?
Several businessmen, like managing director of a manpower and outsourcing firm Andy Sim, worried that costs may balloon with little relief.
'As a business manager, if Singapore is not profitable, I'll go overseas,' he added.
Mr Gan said that the Government is mindful of the need to keep wages in check, reiterating that pay increases should come only in tandem with actual improvements in productivity.
Singapore Business Federation chairman Tony Chew spoke out on the added costs of sending workers for training. For the company, he said, it meant manpower shortage, work disruption and operational delay.
'And when workers are trained and return, they demand higher wages, leave for better jobs or return to their own countries,' he said. 'These are the realities of our members.'
Mr Gan said that with the economy in recovery, the Government is turning its focus to measures to boost productivity and spur innovation.
A large amount of funding has been set aside to 'help companies defray the costs of putting in place productivity measures', he added.
The SNEF's Mr Lee put it bluntly to the 150 chief executives in the audience: 'Yes, cost is going up. How do you translate that and use that as a push and pull to gain productivity? It's very much up to management.'
However, while acknowledging the hard work required from employers, he emphasised that 'supporting structures' in terms of resources provided by NTUC and the Government, would help.
This article was first published in The Straits Times.
