SINGAPORE - Graduates entering the job
market here in a recession start off with lower pay, but their salaries catch
up with the wages of those who start in economic booms after about three years
on the job.
This compares with an 18-year disadvantage
faced by graduates joining the United States workforce in a recession, says a
study published in the latest issue of the Economic Survey of Singapore,
released yesterday.
Economists from the Ministry of Trade and
Industry's (MTI) Economic Division found that a one percentage point increase
in the unemployment rate at the time a university graduate starts work reduces
his starting pay by about 6-8 per cent.
The results of their statistical regressions
are similar to those of a US study of graduates which finds an initial wage
loss of 6-7 per cent for a one-point increase in the US unemployment rate.
But this negative impact diminishes over time
and disappears after a graduate has gained three years of work experience.
"Singapore's labour market would thus appear to be efficient enough to
prevent the perpetuation of downward wage persistence for 'unlucky' cohorts of
graduates," the study's authors said.
The US study found that it takes almost 18
years before a graduate's initial wage disadvantage is mitigated. Singapore's
recovery period could be shorter due to higher job mobility of university
graduates here, or greater variable and performance-linked components in the
wage structures here, which could make it easier for "unlucky"
graduates to catch up with the skills acquired, the MTI economists said.
Their results do come with caveats though. The
data available, from 2000 to 2007, covers just one recession and the short time
frame may exclude long- term negative effects. Also, without information on
individual ability and job switches, they were unable to assess how different
segments of university graduates are affected - key because wage persistence
can differ for people of varying abilities.
The economists said that this exploration of
whether joining the labour force in recession-time has a negative impact on
wages is an area "of growing importance", given the "rising
economic volatility in Singapore". There have been three recessions in the
last 15 years, and only one before 1996.
Job creation was stronger in Q3, with 32,300
jobs added in the quarter compared to 24,800 in Q2.
But with economic slowdown now underway,
economists like OCBC Bank's Selena Ling expect the labour market to
"soften this quarter and next year". Pointing to recent official
business expectations surveys, she notes that employers have already turned
cautious about hiring.
Teh Shi Ning | The Business Times
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