The cascading of higher wages
Companies especially in the F & B retail, construction, marine and manufacturing will face higher wage pressure and tight labour conditions. Firstly, the progressive wage model will raise the minimum basic wages of the lower-income and extend to retail, food services and waste management sectors. Secondly, minimum wages for employment pass will be raised from the current S$4,500 to S$5,000 (S$5,500 for the financial sector). Meanwhile, S Pass minimum salary is to go up from the current S$2,500 to S$3,000 (S$3,500 for the financial sector). We believe there will be upward pressure on wages. As minimum wages rise at the lower tiers, it could cascade upwards to the higher tiers. The higher demand for local workers or the need to pay higher wages to foreign workers is another trigger for overall wages to cascade higher.
The near-term impact of the higher wages will be cushioned by various government initiatives such as a S$500mn support package for small businesses (eg S$1,000 per local employee), S$2bn Progressive Wage Credit Scheme (to co-fund the wage increase for lower-wage workers) and enhanced Workfare Income Supplement (cash and CPF support for lower-wage workers).
Other highlights from budget speech
*Base Erosion and Profit shifting initiative
**Minimum Effective Tax Rate
# Includes COVID-19-related expenditure