THE NATIONAL WAGES COUNCIL : AN INCOMES POLICY EXPERIENCE

Abstract

Conventionally, incomes policy has been described as an instrument to curb inflation. A more recent interpretation includes the use of incomes policy to maximize employment. This thesis adopts a broader framework in classifying the National Wages Council (NWC) as a form of incomes policy, based on the impact of the NWC to maximize employment, not only in the short-run, but also in the long run, taking into account the economy's dynamic comparative advantage. The thesis begins with a brief survey of wage theories, and of various forms of incomes policy. It then goes on to examine the nature of the NWC guidelines. It also analyses the extent of implementation of the guidelines. It is found that implementation is generally positively affected by degree of unionization, firm size, excess demand for labour, and especially by the increasing acceptance of the NWC guidelines over time. Also analysed in the study is the impact of the NWC guidelines on wage determination at the aggregate and industrial level for Professional, Clerical, and Production workers. It is observed that the guidelines affects the wages of Clerical and Production workers more than that of the Professional workers. It is also found that the NWC guidelines are implemented differently across different industries for each occupational group. The impact of the guidelines on wage structure is also studied. It is found that, generally, the guidelines have no effect on wage structure, although they have reduced the Professional Clerical and Professional-Production skill differentials, and widened male-female wage differentials in the public sector, and reduced male-female wage differentials in some private sector industries. The NWC guidelines also have a favourable impact on income distribution in Singapore. The NWC has been a very successful social experiment. It has promoted harmonious industrial relations. Past and present members of the Council generally indicate that the NWC has contributed significantly to the economic success of Singapore. The study concludes that the NWC still has a fundamental role to play, and closes with some recommendations to enhance the effectiveness of the NWC.