Higher salaries in SG in 2010.
Bigger S’pore pay packets in 2010.
Good news for those who are currently in the workforce, yes. But what about those who are still struggling to find jobs?
While companies polled in the Mercer survey were reportedly optimistic about salary increases and putting an end to salary freezes, only four in 10 said they were looking to expand headcounts again. 18 months after a major global financial crisis, and despite news of economic recoveries the world over, the fact remains that there are companies that are still retrenching staff, if you talked to enough industry players. Recovery does not mean stabilization, and we can expect to see companie failures in the midst of a somewhat cautious global economic recovery– and more people may be unemployed in 2010. [FT: US jobless claims show unexpected rise]
What most people do not understand is that it takes a while for the various economic stimulus by governments to work their magic, and it wouldn’t be surprising to see joblessness rates to rise in the interim before the economy stabilizes. Job creation is highest during periods of economic stability, not recovery.
Here’s a thought though: is this the right time to be thinking about salary increases? Or could employers have directed budgets designed for better pay packages for existing staff be better invested in job creation, or improving their existing productive capabilities, or the training of staff to ensure they are better able to value-add to their organisations?
Next, who benefits most from salary increases: the top 10% earners in the organisation, or the remaining 90%? A 3.2 per cent increment to someone earning $200,000 a year is markedly more than an employee earning $40,000 a year (i.e. $6,400 vs $1,280) and unless salary increases are structured such that the bottom earners see a larger salary increment compared to the top tier earners, it is still the top earners who benefits most.
During the crisis, many companies adopted a flat-rate salary reduction across all levels, and the reverse was true: the bottom earners felt the pinch, while for the top earners, the salary freezes didn’t make much of a difference to them based on relative purchasing power parities. Now that companies are planning to “reward” staff for their sacrifices during the crisis, it is still the top earners who stand to gain more in terms of nominal salary increases.
If prudence is the way to go as we come out of this financial crisis, I would think it is more meaningful for companies to put their budgets to better use by reinvesting in themselves and improve on their operational and productive capabilities, strengthen reserves, and perhaps create new jobs, rather than think about increasing salaries too soon.
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