Singapore wages outpace inflation amid labour market tightness

[SINGAPORE] Singapore’s Ministry of Manpower (MOM) reported 5.6% nominal wage growth in 2024, slightly higher than 2023’s 5.2%, driven by a tight labor market and easing inflation. Real wage growth surged to 3.2% (from 0.4% in 2023) as inflation cooled, though profitability dipped marginally, with 80.8% of firms remaining profitable. Sectoral disparities emerged: manufacturing saw improved profitability, while real estate, construction, and wholesale trade struggled.

Most businesses (78.3%) raised salaries in 2024, up from 65.6% in 2023, but primarily due to past performance rather than future confidence. Wage growth favored rank-and-file (5.8%) and junior management (5.6%) over senior roles (5.1%), reflecting efforts to offset cost-of-living pressures. Administrative & Support Services led sectoral gains (8.7%), while Food & Beverage (4.8%) and Wholesale Trade (4.2%) lagged.

MOM flagged economic headwinds in 2025, including geopolitical tensions and softer business sentiment. A Q1 2025 survey showed fewer firms planning near-term wage hikes, signaling potential moderation in nominal growth, especially in trade-dependent sectors like Manufacturing.

Implications

For Businesses: Sectors with weaker profitability face pressure to balance wage demands with productivity gains. Firms relying on past performance for salary adjustments may struggle to sustain raises amid global uncertainty, necessitating strategic workforce planning and efficiency investments.

For Consumers: Real wage growth boosts purchasing power short-term, but trade-reliant industries’ vulnerabilities could dampen job security and income stability. Workers in lagging sectors may see slower progression, exacerbating inequality.

For Policymakers: Targeted support for at-risk industries, coupled with reskilling initiatives, could mitigate structural imbalances. Monitoring wage-productivity gaps and incentivizing forward-looking salary frameworks may help maintain competitiveness.

What We Think

Singapore’s wage growth reflects resilient labor markets but underscores asymmetric risks. While low-wage workers benefit from catch-up adjustments, senior roles’ slower gains suggest firms are prioritizing retention of core operational staff. The reliance on backward-looking salary decisions risks misaligning with future economic realities, particularly if global demand weakens.

Sectoral divergences highlight the need for nuanced policy interventions. Manufacturing’s recovery contrasts sharply with construction and wholesale trade, indicating sector-specific capacity constraints. Administrative services’ strong performance signals shifting demand toward support roles in a digitalizing economy.

MOM’s caution for 2025 is warranted but may understate domestic buffers. Singapore’s diversified economy and fiscal reserves provide flexibility to cushion trade shocks. However, businesses must pivot from reactive wage policies to productivity-linked frameworks to sustain growth. The real test will be whether wage gains can outpace inflation consistently without eroding Singapore’s cost competitiveness regionally.