Survey Shows Wage Growth Outpaces Past Years, but Inflation Erodes Purchasing Power
SINGAPORE: A new survey reveals that salary increments in Singapore are set to exceed pre-Covid-19 levels in 2023, but inflation is expected to reduce the real wages of employees. According to Mercer’s Total Remuneration Survey, the average pay rise is projected to reach 3.75%, surpassing both 2022 (3.65%) and 2019 (3.6%).
The survey, which polled over 1,000 companies across 18 industries, found that the logistics sector is offering the highest salary increases, followed by banking, finance, and high technology. In contrast, the real estate sector is providing the lowest increments.
Mansi Sabharwal, Reward Products Leader at Mercer Singapore, explained that logistics is leading salary growth due to the resurgence of international trade and the booming e-commerce sector. She noted that overall pay increase budgets are expected to reach 5% in 2023, surpassing the pre-pandemic level of 4.7%.
Despite this, real wages are projected to decline by 2.95% in 2022, primarily due to high inflation. Although some companies are increasing salary budgets to combat rising living costs, only 22% are making these adjustments. The majority, 45%, have no plans for further increases, while 54% are taking a wait-and-see approach, anticipating a reduction in inflation in 2023.
Employers are cautious about raising wages to keep pace with inflation, preferring temporary measures such as benchmarking against competitors and focusing on total rewards communications. Sabharwal warned that responding to inflation with higher wages could push up labor costs and harm businesses in the long term.
The survey also highlighted a global talent shortage, with voluntary turnover rates in Singapore expected to reach 15.2% by the end of 2022, up from 12% pre-pandemic. The main reasons for resignations were lack of career growth opportunities and low pay competitiveness. Companies are addressing this by offering higher promotional increments, retention bonuses, and benefits aimed at improving work-life balance.
However, even with these efforts, businesses are struggling to retain talent, with many employees leaving for direct competitors or other industries. According to the survey, employees now value job security, career progression, and flexible working arrangements alongside salary and bonuses.
Sabharwal advised companies to focus on what matters most to employees by revisiting their employee value proposition and clearly communicating any changes to compensation and benefits.
