[SINGAPORE] The SME Committee (SMEC), an advocacy group led by the Singapore Business Federation (SBF), has weighed in on the debate over the merits of Prof Lim Chong Yah's shock therapy proposals for radical wage hikes, saying that the sudden and sizeable increase in wages will hit businesses, in particular small and medium-sized enterprises (SMEs), hard.

Earlier this month, Prof Lim, former chief of the National Wages Council, raised a controversial three-year wage restructuring proposal aimed at tackling rising income inequality and low productivity. The restructuring exercise would see a 50 per cent pay hike over three years for those earning less than $1,500, while those drawing $15,000 or more would see their wages frozen for three years. He believed that a radical wage increase would force productivity increases.

While lauding Prof Lim's objectives of narrowing the rising income gap and reducing Singapore's reliance on foreign labour, the SMEC noted that SMEs employ a large number of workers in the low-wage category. The shock of a sharp pay hike may therefore be more than they can bear.

Instead, Lawrence Leow, chairman of the SMEC, suggested that pay increments come in tandem with productivity gains.

"Increasing the productivity of the workforce is essential to staying ahead, especially in a highly competitive environment. An unmitigated wage increase without productivity improvements will stifle growth.

"Productivity gains should come through job redesign, automation and skills upgrading. Pay increments can and ought to be justified on these grounds, and the lower-income earners will stand to benefit in terms of re-employability and rising wages."

Ho Meng Kit, CEO of Singapore Business Federation, said Singapore should press on with the "current approach, where trade associations and chambers work closely with the unions and government agencies to spur ground-level productivity improvements in companies".

"This requires more effort but the result would be more sustainable," added Mr Ho.