Manpower Minister Gan Kim Yong said wage increases must come with increased productivity.
He added that the National Wages Council, which makes the annual wage recommendations in May, is also mindful of this.
He was addressing comments made at a tripartism forum on Friday. The forum heard concerns about productivity putting pressure on wage costs.
Tony Chew, chairman of the Singapore Business Federation, said when workers go for training to help increase their productivity, companies face manpower shortage and trained workers would demand higher wages.
But Mr Gan stressed that any wage increase must be accompanied by productivity gains.
He said: "If we keep on increasing wages without actual improvement in productivity, we will lose our cost competitiveness and it will not be sustainable in the long term. So we need to watch wages, wage costs, at the same time watch the productivity improvements. Both of them have to be in line."
Even though companies want to keep wages affordable, it is important to share productivity gains with workers.
Philip Overmyer, chief executive, Singapore International Chamber of Commerce said: "In the process of improving productivity, the company sees higher output because of the improved productivity. And most good companies recognise that you have to share the amount of benefits that goes to the company and the benefits that goes to the employee, who of course have developed better skills."
However, gains from productivity improvements may not necessarily lead to higher wages, and could be in the form of a productivity bonus. One company offering this is SIA Engineering.
Lim Swee Say, secretary-general, NTUC said: "Phase one of the operation, they saved S$10 million. Now the next question is what happens to this savings.
"So the union and management came to an agreement that 24 to 33 per cent of the savings will be shared with the workers in the form of a quarterly productivity bonus, and their target is to save S$50 million a year by the end of this year.
"If they can achieve that, then the quarterly productivity bonus for the workers could be as much as S$1,000 per quarter."
The tripartite partners also agree that management must take the lead in enhancing productivity. Managers must also attend training to improve work processes.
From Channel NewsAsia, "Wage increases must come with increased productivity: Gan Kim Yong".
