Inflation. It’s THE buzzword in our recent post-pandemic times. Singaporean families are worried about it, and so are local employers.
In response, the Singapore government has made moves to tighten our country’s monetary policy in April, with the Monetary Authority of Singapore (MAS) saying in a statement: “The war in Ukraine has driven global inflation forecasts higher and dented the outlook for growth.”
“The fresh shocks to global commodity prices and supply chains are adding to domestic cost pressures,” it added, and warned that inflation risks remain “elevated over the medium term.”
Singaporeans still want pay raises
Amidst all the economic tension, Singaporean workers apparently maintain expectations of being given pay rises, according to a report cited by the Straits Times.
Human resources services company ADP revealed in its 2022 People at Work report that 60% of Singaporean workers are prepared to request a raise, with the number rising to 70% for those aged between 25 and 34.
It also said that 50% of local employees expect to get a pay rise in the next 12 months, and more than 40% expect to be given a bonus, with “only a third expecting to be given a promotion or any increased responsibility.”
With rising operating costs from inflation though, there are concerns about whether these expectations can be met. According to a survey by Singapore’s Ministry of Manpower (MOM) cited by MAS’ semi-annual brief on the Singapore economy (which was published in February 2022), Singaporean-based firms remain cautious in raising wages.
“Only 24.5% of companies polled in December 2021 indicated plans to raise wages within the upcoming quarter, lower than the previous two surveys of 32.1% in June and 24.7% in September”, it revealed.
But how are Singaporean industries faring with inflation?
Manufacturing, a key pillar of the Singapore economy and its plans for the future, has already seen its outlook for 2022 weaken due to an increase in rising costs, despite global markets improving in the aftermath of Covid-19.
Amongst manufacturers, 2% of a net weighted balance expect business conditions to be better in the next six months than in the three months before. This is a decline from the 8% reported by Singapore’s Economic Development Board (EDB) in a previous survey in end-2021.
A net weighted balance, used to gauge business sentiment, is the difference between the weighted shares of positive and negative responses.
“The manufacturing sector is cautious in its business outlook for the period April to September 2022, as the ongoing Russia-Ukraine conflict adds to supply chain and inflationary pressures, resulting in higher cost of operations,” the EDB said in its report.
Biomedical manufacturing saw a net weighted balance of 22% of companies projecting weaker business conditions, which the EDB attributed to expectations of material shortages and rising costs in the pharmaceuticals segment.
But it’s not all doom and gloom, of course.
A net weighted balance of 21% of manufacturers expected to step up hiring in the second quarter of 2022 compared to the first quarter, compared with 12% in previous polls.
For those in the services sector, there is still optimism despite the inflationary climate, except for retail.
The wholesale industry and finance and insurance industries showed positive sentiments of 19% and 18% respectively, while recreation, community and personal services jumped to 16%, up from 11% in the last quarter.
This was influenced by post-pandemic demand, with the Department of Statistics Singapore (also known as SingStat) revealing: “Operators of sports facilities expect to organise more events and with larger capacities.
“Healthcare providers foresee increased demand for their services as non-urgent elective surgeries are able to resume.”
But in food and beverage (F&B), industry hiring sentiment dropped to 3%, from 8% previously, and retailers to a negative net weighted balance of 5%, compared to a positive 11% before.
SingStat reported the retail industry expects slower business from April to September 2022, compared to the previous quarter.
Explaining inflation and what it means for your own financial and career prospects
Workipedia by MyCareersFuture spoke to Professor Joseph Cherian from the Department of Finance at NUS Business School, and Associate Prof Lee Boon Keng, from the division of Banking & Finance at Nanyang Business School, to break down exactly what is inflation, and its consequences on your salary, savings and Singapore’s employment market.
What causes inflation and how does it affect my employment opportunities, salary and savings?
Associate Prof. Lee Boon Keng (LBK): Inflation is caused by excess demand. This can be due to supply shortages or rising demand. While excess demand can lead to higher wages for you, as producers hire more workers to meet demand, inflation will also reduce your purchasing power. This can lead to further upward pressure on wages, leading to a vicious cycle of higher wages and higher prices.
Inflation hurts your savings because the purchasing power of what you’ve put aside falls. Whatever you’ve saved today will buy you less tomorrow, as prices increase.
What becomes more expensive with inflation?
Prof. Joseph Cherian (JC): All commonly purchased goods and services. It includes costs associated with staples such as food and beverages (F&B), housing, transportation, health care, tech (mobile phones, computers), travel & leisure, etc.
Which industries in Singapore are more likely to be hit than others by high inflation?
JC: Almost every industry in Singapore will get affected by inflation, since we are an import-driven economy. But some more than others, for example utilities, real estate, energy, consumer staples, and healthcare.
How long has it historically taken for inflation to come down?
JC: It depends on a bunch of factors, including fiscal policy, monetary policy, technological developments, etc.
In the 1970s, there was a period of inflation that lasted around 10 years. But an active government and central bank can shorten that greatly. For example, Singapore’s MAS has already started that process of “slowing inflation momentum and helping ensure medium-term price stability”.
In April 2022, the MAS further tightened monetary policy by adjusting the Singapore dollar nominal effective exchange rate policy band.
What tips are there for the average worker dealing with a high-inflation environment?
JC: Unfortunately, we don’t have a natural, first-best hedge against inflation as the US, Canada, UK, Israel, Japan, etc., have. Their governments issue what’s called inflation-indexed bonds.
I guess in Singapore we have to be more frugal, try to invest in the industries that will benefit from higher inflation, and pray MAS is successful in slowing inflation momentum, which helps ensure medium-term price stability in Singapore.
We should also hope the global economy doesn’t go into a state of stagflation, which simply translated means high inflation with no, or low economic (stagnant) growth.
LBK: Stay in your job. The current tight market may prompt some to jump for small wage increase. However, given that no one knows when higher interest rates will cause a recession, workers don’t not want to find themselves in a last-in-first-out employment situation.
The important career and financial steps to take are to prepare for a monetary policy tightening-induced recession. High inflation is already here.