TL;DR – Singapore’s NWC plays a pivotal role in ensuring workers’ wages are increased in a sustainable manner according to economic realities.
On 28 September 2022, the National Wages Council (NWC) celebrated its 50th anniversary at Parkroyal Collection with Deputy Prime Minister and Finance Minister Lawrence Wong in attendance.
At the anniversary celebrations, DPM Wong noted that Singapore is experiencing a “very tight labour market” as employers are facing difficulties finding workers to fill positions – which causes wages to increase. This increase must be regulated in order not to hurt Singapore’s global economic competitiveness.
When Singapore loses its ‘shine’ to global investors, employers and employees lose out in the long run.
Here’s a quick and easy read on the history and relevance of NWC throughout Singapore’s nation-building.
50 years of fair wage adjustments
The National Wages Council (NWC) was formed by the government in February 1972 as a tripartite advisory body on wage adjustments. Before NWC’s existence, wages were negotiated based on the bargaining power of trade unions and management. Such an arrangement was not the most ideal, as back then, when trade unions did not see eye to eye with the management, industrial disputes and strikes broke out easily.
Singapore’s rapid industrialization in the 1970s caused acute labour shortages. If you’ve studied economics before – when workers are in short supply, it causes wages to increase. This is also more complicated than the trading of goods and services: when employers increase wages for workers, they must do it fairly and across the board, not just for a few workers.
At that time, the rapid rise in wages worried the government as it was concerned that it would outpace national productivity gains. Higher wages naturally meant higher business costs for employers, and they might choose to move elsewhere where workers are ‘cheaper’ in terms of wages. Singapore was not the only place investors could invest in – there was regional and international competition.
Every stakeholder represented
NWC comprises of representatives from trade unions, employers and the government. It formulates guidelines on wage policy, recommend wage adjustments that are in sync with Singapore’s economic growth and outlook, and advise on incentive schemes that would spur operational efficiency and productivity of firms.
While drawing up annual guidelines, the public is also consulted. To ensure neutrality in discussions and deliberations, the chairman of the NWC is not a representative from the government, union or management.
The NWC’s recommendations are derived based on the principle of tripartite consensus reached during deliberations and in collective agreements. All stakeholders are consulted in the process, which allows their interests and concerns to be heard. In a nutshell, NWC represents a non-confrontational approach to seek out the best solutions.
In tandem with wage increases, the Labour Movement invests efforts to improve worker productivity and skills for the benefit of both employers and employees. This improves employability of workers by ensuring workers keep up with rapid changes (in terms of skills) in today’s economy. The Labour Movement also works with employers to help them manage manpower shortage issues.
The relevance of NWC
NWC’s recommendations are guidelines that serve as a basis for wage negotiations, as well as labour issue discussions between employers and employees. The guidelines are not legally binding, but they have been generally accepted by employers, most notably the Singapore Civil Service – Singapore’s largest employer. They are used by both unionised and non-unionised companies as a framework for wage negotiation. Non-unionised companies who do not engage in collective bargaining also relied on NWC guidelines to pace their wage increases for their workers.
Over the years, NWC’s annual recommendations successfully averted confrontations and promoted cooperation and mutual understanding. By pegging wages to economic performance, it is a stabilizing force for Singapore’s market and enhances its economic development. This is a guiding principle continually held by the NWC to ensure wage increases are realistic and sustainable to preserve Singapore’s economic competitiveness – paramount to the survival of our nation.