WAGE RESTRAINT

3.41 pm

Mr Goh Chee Wee (Boon Lay): Mr Speaker, Sir, I have claimed the right to speak on the Motion for the Adjournment today on a matter which is of serious concern in the current recession, and this relates to wage restraint.

Mr Speaker, Sir, the pressing issue which occupies the mind of all Singaporeans over the last one year has been the state of our economy, the severe recession and unemployment. The Economic Committee has made a thorough study of the matter, identified the root cause of our problems and recommended remedial actions. The Government has subsequently made several policy decisions to help the businessmen and to stimulate the economy. There has been much public debate on this issue and I do not intend to repeat the arguments on what causes the recession, who is to blame and what could have been done, etc. We cannot possibly keep on talking about recession, we have to get on with the task of overcoming the recession. I would therefore like to offer my views and comments on the implementation aspect of the various measures which are designed to combat recession.

The central theme of the recommendations of the Economic Committee and the decisions of the Government is to lower the cost of doing business in Singapore. The primary purpose is to regain and strengthen our international competitiveness and to make Singapore a more attractive place for investment.

There are two essential components in the cost reduction exercise. One is to reduce the wage cost. The other is to reduce all the other operating and overhead costs. Towards this end, the Government has already introduced measures to reduce the companies' operating and overhead costs by lowering various Government tariff and statutory board charges, like rental, property tax, port charges, etc. To attract investment, corporate tax reduction and a host of other incentives were also introduced.

To reduce the wage cost, the Government has suspended the payroll tax and reduced the Skills Development Fund levies. The most drastic measure was, of course, to cut the employers' rate of CPF contribution by 15%.

The National Wages Council (NWC) has concluded its deliberations recently. Unlike the recommendations of the previous years which gave quantitative guidelines for wage increases, this year the NWC has recommended a severe wage restraint. What the NWC has recommended, in essence, was that there should be no increase in the average national wage level for this year, and thereafter for as long as necessary.

To keep wages down, the NWC recommended that the annual increments to employees be reduced or other components of wages such as the annual wage supplement or the incentive allowance be adjusted. In particular, employees in companies losing money must be prepared not only to forgo their annual increments but also to accept a reduction in wages. Even companies which are still profitable, but are not doing better than previous years, ought not to increase their average wage costs per employee. This is to improve the rate of return on capital and to make investments in Singapore more attractive.

NWC is a tripartite council. Its recommendations represent the consensus or agreement among the three parties - the employers, the unions and the Government. The trade union movement's endorsement of this recommendation reflects the unions' serious concern for the state of our economy and the increasing number of jobs lost and unemployment over the last one year. The unions are prepared to call on the workers to make short-term sacrifices to help economic recovery and to save jobs.

If we ask ourselves, of all the recommendations made by the Economic Committee and the NWC and of all the decisions made by the Government to reduce costs, which is the one issue that has the most profound political implication and is the most difficult to implement, I would say it is the wage restraint policy.

Let us look at all the cost-cutting measures and concessions offered by the Government. Cutting rental, cutting property tax, cutting payroll tax, cutting SDF levies, cutting CPF and cutting corporate tax. All these are administrative decisions and incentives which are more than welcomed by the employers. The Government does not have to worry about carrying the ground with such decisions. The employers are happy. They will give their full support.

But how about wage restraint? Will our workers be happy? Will they support such a policy? Are we in the situation where our workers are so worried and desperate that they would appreciate and support the union and the Government's call for wage restraint wholeheartedly? Or will they view this as unfair sacrifices forced upon them for the sole purpose of benefitting the employers? For companies which are losing money and facing the prospect of closing down, the workers will no doubt see the need to accept wage freeze or wage cut in order to save the company and to save their own jobs. But if the company is still staying afloat or making profit, though with reduced profits, will the workers accept wage freeze voluntarily and willingly?

There is no doubt that the successful implementation of wage restraint policy requires the total understanding of our working populace. The policy has an economic as well as political implication. The Government and the unions have to carry the ground with such a policy. Not only are our political and union leadership put to the test but also are the mettle and determination of our citizens.

A number of people have expressed their views privately that perhaps the Government should not force through the wage restraint policy now. This is an unpopular policy. Why not let the event take its own course and when the situation gets worse and the workers' own jobs are threatened, they themselves will volunteer for a wage cut without being told to do so. They will then not resent the Government or the unions' call for wage restraint.

Should we take the approach? While the suggestion appears to make some sense, I think it is just not the style of the PAP Government, a responsible Government, to tackle problems in such a manner. This is certainly not the way NTUC and the unions respond to challenges. If we are heading for trouble, we just have to face the problem squarely, take immediate action now, unpleasant though it may be. Yes, we run the risk of losing the support of those who do not realize the seriousness of the problems or understand the justification for corrective action. But to do nothing, or to do otherwise, is to court disaster and lead our country into deep trouble and massive unemployment. The end losers will be our own workers, our own citizens.

It is a fallacious belief that the situation today is not serious enough to warrant immediate action. Look at the dismal performance of our economy. Look at the number of workers retrenched. Look at the falling investments. The figures are telling. It calls for immediate action now. We cannot afford to wait until more companies close down and more workers are unemployed before we start to take remedial action. We cannot wait until all the foreign companies start to relocate elsewhere before we take effective measures to attract investment to create jobs.

Our union leaders have the unenviable task of telling and convincing the workers to accept an unpleasant alternative for the time being, ie, to accept wage restraint. I do not doubt the ability of our people to accept good reasoning and explanations. I am quite confident that our workers are rational. But, of course, that is not to say that all these wage restraint policies can be implemented so smoothly without any hitch. We face some obstacles.

Firstly, we have to face all the false allegations made by the opportunists and Opposition politicians who are out to discredit the Government and the unions. They will confuse the public. They will not say that all these wage restraint policies are indeed necessary to protect employment and preserve jobs. I do not expect them to say so. What they will say is that all these are just exercises to exploit workers.

When the Government pursued a high wage policy, forced the wages to go up, forced the employers to contribute more to the employees' CPF accounts, all for the benefit of the workers, the Opposition parties said that the Government policies on high CPF and high wages have caused the economic downturn. They joined the employers in campaigning for lower CPF. So when the Government lowered the CPF rate and advocated wage restraint, they said that this was not fair to the workers. So what is wrong and what is right? There is simply no principle involved. The ground will be confused by such statements and allegations and we just have to keep on countering all these illogical and nonsensical arguments. And we can expect to hear more cries for unemployment benefits, as if the solution to retrenchment and unemployment is to put more people on the dole. Experience elsewhere has shown that the more attractive the unemployment benefits are, the higher the rate of unemployment will be.

Secondly, we have to face with some employers and management personnel who do not follow the spirit and the underlying principle of wage restraint or who fail to give adequate explanations to the workers. I have more to say on this later on.

Thirdly, there will be some workers, minority though it may be, who are reluctant to accept wage restraint because their employers are seemingly still doing well.

I must stress that it is the responsibility of the management to explain and justify to the workers the need for wage restraint. Management must be prepared to share information with the workers and the unions. Whatever wage restraint policy agreed upon must be applied equitably. Management must also demonstrate that the return for wage restraint is job security and employment stability. I would like to propose the following Do's and Don'ts for the employers to consider. Altogether, there are 10 proposals.

1. Do consult and discuss with the union before introducing wage restraint or wage freeze. Do not take unilateral action. If wage increments are embodied in the collective agreement, union's consent must be sought before implementing wage freeze.

2. Do share information concerning the company's financial position with the employees and the union. This will help to convince the union leaders who will in turn be better equipped to explain and convince the workers.

3. Do not abdicate the responsibility to explain to the employees the reasons for wage restraint. Do not tell the workers, "I do not mind paying some increments, but the NWC and Government say no."

4. Do not pass the buck to the union. When confronted by any workers, do not take the easy way out by saying, "Your union has agreed to the wage cut. Ask your union."

5. Do not attempt to undermine the position and strength of the union. Employers who think that this is the time to weaken the union and take the opportunity to prove to the workers that the union is indeed useless is committing a grave mistake. You may be successful in undermining the confidence of the workers in the present union leadership. But, in fact, you may be helping in the removal of a responsible union leadership and instal- ling in its place a group of more militant union leaders. The most precious commodity or rather one of the most precious ingredients contributing to our success in attracting investment and maintaining employment stability has been the absence of industrial strife. So, I say, do not destroy our industrial peace and harmony.

6. Do apply the principle of equal sacrifice. Do not freeze the wages of bargainable workers but at the same time give increments, bonuses and other fringe benefits to the management staff.

7. Do not take hasty decision to retrench workers. Workers make sacrifices because they think that will help the company to survive and help to preserve their jobs. So do not make the workers feel that they have been taken for a ride for agreeing to a wage freeze.

8. Do make good use of the savings resulted from the CPF cut and wage restraint. Invest in new machines, upgrade operations, and improve productivity. The job security of the workers hinges on the viability of the companies they work for.

9. Do not let up in the training of the workers. Do not discontinue the basic education and other skill training and upgrading programmes just because business has slackened. Make full use of the dull period to train the workers.

10. Do share the fruits of success with the workers when good time returns. Devise a suitable productivity incentive and profit sharing scheme.

I hope the Acting Minister for Trade and Industry has taken down all my suggestions and observations and convey them to the employers.

I have some suggestions for the Government too. I have five proposals to make to the Government.

1. Keep a close eye on the state of industrial relations and ensure that fair play, good sense and reasonableness prevail.

2. Check against companies taking advantage of the situation by -

Mr Speaker: Mr Goh, you have come to the end of your teaching lesson!

The Acting Minister for Trade and Industry (BG Lee Hsien Loong): Mr Speaker, Sir, I agree with the sentiments expressed by the Member for Boon Lay on how wage restraint ought to be implemented and carried out over the next couple of years.

Wage restraint is, in fact, one of the most important measures in the entire package of measures taken to restore our competitiveness. It is also the most difficult to carry out. It is the most important one because if we do not get it right, then everything else which we have done can be eroded away and undone. We have cut back on CPF contribution on the employer's side; we have cut back corporate taxes; we have reduced costs all round. If we are not careful about wage costs in these couple of years, then wage costs may continue to increase, and very soon we will be back into a position where we are uncompetitive again. And then we will no longer be able to cut our CPF further, and we will no longer be able to bring our corporate tax rates down very much more. Therefore, it is absolutely crucial for us to hold our wage levels at a reasonable standstill in order that all our other measures are not nullified.

It is the most difficult measure to implement. As the Member for Boon Lay has pointed out, other measures can be imposed by fiat, at a stroke of the pen. Wage restraint requires cooperation, good sense, understanding, comprehension, all round amongst a large number of workers, a large number of employers, union leaders, political leaders. So it is much harder to develop this consensus, this understanding, and make it work.

So far, our progress has been good. We have come quite a long way since the Economic Committee published its report. The Government has accepted the Economic Committee's recommendations, and now the NWC, having debated the issue, has endorsed the recommendations substantially. It has come up with a statement this year explaining in practical, concrete, unambiguous terms, what wage restraint means for different types of companies and for different groups of people. But it is not just the NWC which has been hard at work; so have the unions been, so have the employers been. I have spoken to employer groups organized by SNEF; I have spoken to union groups organized by NTUC - closed-door, frank sessions. They understand the problem, and I think they also support the policies.

So we have made substantial progress, but we are not through yet. We are not through yet because wage restraint is not just a one-time action but it is a continuing matter, continuing for the rest of this year and if the recession is not over by next year, which is likely, into next year as well.

The Member for Boon Lay very systematically identified 10 Do's and Don'ts for employers. I have not taken them down, but I have taken note of them. And those which make sense, I have conveyed to the employers. Most of them do. Therefore, to balance the picture, I should point out that it is not just employers who have an important role to play but also union leaders, because the union leaders are the grassroots activists, the grassroots opinion formers, whose views, whose persuasive powers, will set the responses of the unionists, of the members, and indeed of the non-unionized workforce in the population. They look to these grassroots leaders for support, for guidance, for an indication of what is good for the population. The leaders have trust. They have established themselves. They have now got to use whatever authority they have to lead their flock in a direction which they know is good for their own people.

So union leaders must convince themselves, first, that the policy is a wise one, that it is good for the population and, secondly, that there is no other choice, that this is the way for us to create jobs, to develop opportunities, to bring in new investments, in new growth areas. And then, having convinced themselves, they can bring their ground along with them.

I had some visitors recently from Britain, visitors from a country which has spent many years grappling, not very successfully, with precisely the same problem - how to moderate expectations of a population in an economy which is not growing very rapidly, how to persuade people that wages have to be held down because out- put is not going up. And they asked me, "How did you manage it - ask people to accept a standstill in wages and a cut in their savings, instead of improving your competitiveness in other ways by manipulating the value of your currency?" In other words, "Why did you ask for a wage standstill, instead of a currency devaluation?" My answer to them was, "That is not the choice before us." Whatever we do, our standard of living is not going up. In fact, it may even come down. The question is: do we do it in an orderly, well-conceived fashion, by trimming our costs and holding our wages down? Or do we allow it to be imposed upon us by unemployment, leading to balance of payment problems, leading to a devaluation of the Singapore dollar, leading to inflation which will erode the value of workers' take-home pay? If there is no output, then there can be no higher pay. Whether the pay becomes lower because we save less in the CPF, or whether the pay becomes lower because every dollar we have is worth less (and the Singapore dollar has gone into a tailspin), the final result will be the same, namely, we are not as well off. And yet it is not the same, because in the first case we have determined our destiny, and we have got it right. In the second case, it will be done to us, and we will have to suffer many other grievous consequences. That is the choice, and that is the choice which we must understand and which we must get our workers to understand that this is the only way.

The measures are now in place. Let us implement them with good sense. We are looking for a wage standstill; we have not set a wage freeze. Adjustments will be necessary - corrections where there are difficulties in particular sectors of the labour market, corrections where there are particular individual professions which are in very short supply. These have to be accommodated with good sense and goodwill, and without damage to our overall objective of keeping our wages at a standstill. Let us have this good sense, let us have this determination - make our wage restraint policy work, and let us all work for recovery of the economy together. Thank you, Mr Speaker, Sir.

Question put, and agreed to.

Resolved,

That Parliament do now adjourn.

Adjourned accordingly at Ten minutes past Four o'clock pm to a date to be fixed.