The Monetary Authority of Singapore (MAS) expects wages to be 'hardest hit' instead of jobs
Wages will “bear the brunt” of the COVID-19 shock amid higher retrenchments, said the Monetary Authority of Singapore (MAS).
Industries most vulnerable to layoffs include workers in retail trade, F&B and recreation services. This could be because of their consumer-facing nature, which would have been severely affected by extended social distancing measures.
In their latest review of the economy, MAS said Singapore will enter a dire recession – although we will eventually recover, “there is significant uncertainty over the depth and duration of this recession”.
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As company revenues shrink, MAS acknowledged that firms are likely to reduce labour costs via a combination of reductions to wages and headcount.
Regardless of financial support measures, they noted that some firms affected by COVID-19 may still have to undertake cost adjustment measures such as putting workers on shorter work weeks or no-pay leave.
“This could occur as wage subsidies and other support may still be insufficient to cover revenue losses for some firms,” said MAS. “Alternatively, some firms may ask workers to take cuts in pay. A decline in overall remuneration in some sectors could also occur through reductions in bonuses.”
The report then quoted survey findings that showed how hiring intentions have fallen sharply amid heightened uncertainty.
However, despite the overall cautious outlook, MAS believes the government’s COVID-19 measures, such as the Job Support Scheme wage subsidies should incentivise firms to retain current workers, while also helping to reduce the incidence of furloughed workers and wage cuts.
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“Apart from measures to forestall excessive firm closures and job losses, the government also sought to bolster job creation, particularly in areas that are expected to see strong long-term demand,” said MAS.
For one, the report highlighted the public sector’s “accelerated hiring plans for permanent roles” as well as in areas such as healthcare, early childhood care and education, and social services.
In the financial services industry, MAS said they will double the salary support for financial institutions that hire local fresh graduates or workers from other industries.
Such schemes can help strengthen job creation in parts of the market that are “more insulated from pandemic effects”, or which are experiencing an increase in manpower needs as demand surges during the outbreak.
“Notwithstanding the large financial buffer provided by the government, as well as labour market adjustments on the intensive front, the large, abrupt shock to the Singapore economy is still likely to cause retrenchments and unemployment to rise,” MAS said.
“Similar to previous downturns, firms that were already in a weak financial position before the COVID-19 outbreak are more likely to retrench.
“Overall, the combination of a pullback in hiring and rise in retrenchments will likely cause the resident unemployment rate to step up.”
