Pay rises have hit an all time high of almost 11 percent, however, employees should check the reality of their pay increment. With the recent soaring of prices of items that are directly or indirectly affected by oil prices, what you are getting may not be real increments but more of to cushion the impact.

Interestingly, I had this conversation with someone and asked if pay rises in his company would match the inflation rate. His reply was a little mind boggling for me, but I thought I’d just share the crux of the conversation here:

Me: So, will pay increment be likely to be at least on par with inflation?

Him: I’m not sure. You see, inflation only affects you on the amount you spend. So, if you have a $3000 salary and you spend, say, $1000 per month on stuffs, that means only that amount spent, which in this case is $1000, will be affected by inflation. Your other $2000 will not.

It was… mind boogling because it seemed that the idea behind that short conversation was how inflation will hit you only if you spend. Erm… according to his theory, inflation hits different people differently. If you are a big spender, then inflation hits you more than someone who is very thrifty.

However, I thought that inflation is all about diminishing the value of your current money-on-hand, isn’t it? Or did I fail my economics? To me, I’d think that inflation hits me regardless of how much I spend because the moment I spend it, I am affected. It’s like, how I may be able to buy a bowl of Laksa with just $0.20 some 50 years ago, and assuming that I keep that $0.20 and not spend it, I am hit by inflation the moment I decide to spend it. In short, inflation affects you regardless of what you do with your money, no?

WAGES here have risen by close to 11 per cent, the highest in almost a decade.

But the impact of soaring food and fuel prices meant that for employees in manufacturing, transport and administrative jobs, their real wages – pay minus the effect of inflation – actually fell.

The Manpower Ministry’s labour market report for the first quarter, released yesterday, is the first set of official figures to show the impact of inflation, at a 26-year high of 6.6 per cent, on the wage increases that workers across different sectors received.

And with annual inflation forecast at 6 per cent this year, analysts were not entirely optimistic.

National University of Singapore labour economist Park Cheolsung said it is a matter of time before real earnings dip for those in other sectors.

The report noted that on average, real earnings grew by 3.6 per cent compared to the same three-month period last year.

Workers made $4,316 a month on average this quarter. But after adjusting for inflation, they effectively earned $3,982.

This monthly figure is derived from an average of all full-time and part-time CPF members.

Rising global prices of food and fuel saw the consumer price index rise by 6.6 per cent in the first three months of this year.

The Government rolled out help schemes for the needy and the strong Singapore dollar is helping maintain purchasing power. The National Wages Council also asked firms to give one-off bonuses to help rank-and-file workers cope with inflation.

Still, Prime Minister Lee Hsien Loong has said the best way to manage rising prices is to grow the economy so real incomes outpace inflation.

But for now, salary consultant Peter Lee is not optimistic real earnings can do so. ‘Nobody can control inflation, and most employers cannot adjust wages to fight it,’ said the managing consultant of RDS Remuneration Data Specialists.

His firm’s recent survey of 200 companies showed pay packets were likely to rise by 5 per cent – lower than what prices have risen already by, and below the 6 per cent inflation forecast this year.

But for now, the economy is growing, with jobs aplenty.

The ministry’s report showed a record 73,200 new jobs from January to March. This includes 46,500 in services, 14,500 in construction and 11,800 in manufacturing.

But unemployment crept up to 2 per cent in March, from 1.7 per cent in December. Among residents, the rate was 2.9 per cent, up from 2.4 per cent.

As for vacancies, there were 38,200 openings in March with more jobs for professionals, managers, executives, technicians, clerical, sales and service staff.

Analysts like Dr Park believe unemployment may rise and job growth could slow – a point backed by a Monetary Authority of Singapore survey of economists, who see growth slowing to 4.7 per cent this quarter.

zakirh@sph.com.sg

Article obtained from straitstimes.com on 17 June 2008



Reader's Comments

  1. The Singapore Daily » Blog Archive » Daily SG: 18 June 2008 | June 18th, 2008 at 11:17 am

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  2. xtrocious | June 18th, 2008 at 10:01 pm

    Hi Jean…

    If what you say is true, then it is really really very scary!

    No wonder Singaporeans are such an apathetic lot – most of us are too dumb to understand even simple issues like inflation…

    I think he got it mixed up with GST – sorry sod he is…yoda would say…hahah

    If only ignorance is bliss…then your “friend” would be the happiest person on earth – never mind the spending power of his future dollar is worth a lot less due to inflation…

  3. 40s | June 19th, 2008 at 11:01 am

    I’ve been in the manufacturing industry for the past 13 years, yearly pay increment are usually between 2 to 4% and increment with promotion is another 3% more.

    11 percent?? Maybe other industries. The other way of getting your pay to match up is by job hopping, but this is not always applicabled and it is not a solution, you just can’t keep on changing your job.

    Be it you spend it now or save it (with the current low interest rate) for the future, there is no difference, you still get less out of it.

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