Singapore’s 2024 wage report paints a heartening picture: more companies handed out pay raises, real wages outpaced inflation, and fewer workers faced salary cuts. For employees who have weathered years of belt-tightening, this is welcome news.

But before we declare a win for workers across the board, business leaders must take a measured step back and ask: is Singapore setting itself up for sustainable growth, or building a wage bubble that could burst in leaner times?

Signs of moderation

According to the Ministry of Manpower’s latest wage practices report, 78.3% of firms raised salaries in 2024 – a jump from 65.6% in 2023. Meanwhile, real wages climbed 3.2%, buoyed by cooling inflation at 2.4%. By all accounts, it looks like a wage revival.

Yet even as more firms opened their wallets, the average salary increase nudged down from 7.2% in 2023 to 6.6% this year. That’s an early signal of moderation.

The percentage of firms cutting pay also fell, and where cuts were made, they were gentler than before. This suggests that businesses are trying to strike a delicate balance. That is, by rewarding employees without overstretching.

Some sectors have more room to manoeuvre than others.

Administrative and support services saw the biggest leap in wages at 8.7%, largely due to the Progressive Wage Model. Financial services (6.7%) and community and social services (5.7%) also punched above the national average.

Meanwhile, Food & Beverage (4.8%), wholesale trade (4.2%), and manufacturing (5.1%) saw more modest growth – a reflection of their tighter margins and vulnerability to global tremors.

The need for productivity gains and revenue growth

It’s clear that some sectors are sprinting while others are pacing themselves. But this divergence poses a risk. If salary expectations continue to rise across the board without matching productivity gains or revenue growth, it could put businesses, particularly SMEs, in a bind.

There’s also the question of long-term competitiveness. Singapore has built its global standing on high skills, high value, and high productivity. Wage increases untethered from these fundamentals risk undermining the city-state’s value proposition.

Paying more makes sense when it aligns with stronger output and better outcomes. But if it becomes a race to appease inflation or match market trends, the strategy becomes unsustainable.

This is not an argument against fair pay. On the contrary, companies must continue to invest in their people, especially those in lower-wage brackets. MoM’s data shows rank-and-file workers saw a 5.8% increase, slightly above junior managers (5.6%) and senior leaders (5.1%).

This suggests a healthy move toward inclusive wage practices, particularly for those bearing the brunt of living costs.

But wage growth cannot happen in a vacuum.

Businesses still face an uphill climb. Geopolitical tensions, trade protectionism, and slowing global demand are all in the mix.

MoM has already flagged that wage growth is likely to taper in 2025, especially in export-driven sectors like manufacturing and wholesale trade. The road ahead remains uneven.

Lasting value for employers and employees

Rather than chasing aggressive wage hikes year after year, companies should be playing the long game. That means tying salary strategies to skills development, automation, and operational resilience.

Better still, invest in total rewards frameworks that go beyond cash – flexible work, health care, career mobility, and learning opportunities. These benefits often deliver more lasting value for both employee and employer.

As the labour market stays tight and the war for talent rages on, firms must avoid falling into the trap of short-termism. Salary hikes alone won’t win the loyalty or performance of a future-ready workforce.

What’s needed is a clear-eyed approach that balances competitive pay with the fundamentals of business sustainability.

After all, in business as in life, it’s not just about how much you give – but how well you can keep giving when times get tough.