wage policy In 1972, the government established the National Wages Council (NWC), a body representing government, employers and employees. It examines wage issues and recommends wage guidelines. These guidelines, while not mandatory, are taken up by the Singapore Civil Service— Singapore’s largest employer— and are largely followed by the private sector as well. During the 1970s, the NWC’s recommendations prevented excessive wage increases in the face of a tight labour market.

In 1979, the government introduced a ‘wage correction policy’ as a means of fostering industrialization. The plan was to significantly raise wages for three years so as to hasten the economy’s transition from labour intensive production towards capital intensive and high value- added industries. However, in the years that followed, wages began to escalate due to a shortage of labour. This eroded Singapore’s international competitiveness and was a major factor leading to the 1985 recession. Subsequently, the NWC recommended that wages be maintained at current levels and employers’ mandatory contributions to the Central Provident Fund be cut. A more responsive wage policy, known as the flexible wage system, was also implemented. Instead of quantitative recommendations, the NWC started to issue qualitative guidelines. Wage increases would consist of two parts— a fixed increment and a variable portion, the amount of which was left to employers to decide (this usually depended on the performance of the company). This scheme would allow employers to better weather downturns and minimize retrenchments.

Singapore does not have a minimum wage but it does have a National Trades Union Congress— which is represented in the NWC— that promotes workers’ welfare. The Employment Act stipulates employee benefits such as vacations, sick leave and maternity leave for employees covered under the Act.