Divergence in Costs Incurred by Labour-intensive Domestic Sectors and Outward-facing Industries

Mr Mark Lee asked the Deputy Prime Minister and Minister for Trade and Industry in light of the 2025 Economic Survey which shows that aggregate cost indicators moderated but reveals sectoral divergence with unit labour costs rising in labour-intensive domestic sectors and uneven productivity gains in outward-facing industries, such as general manufacturing where many SMEs operate, how the Government assesses the risk of a widening two-track economy and its implications for cost competitiveness.

In 2025, the unit labour cost (ULC) of domestically-oriented sectors rose, while that of outward-oriented sectors declined. This divergence was due to weaker labour productivity growth in domestically-oriented sectors relative to outward-oriented sectors, even though the increase in total labour cost per worker was similar across both groups1.

The Government is aware of the cost pressures faced by domestically-oriented businesses, especially the small and medium-sized enterprises. We have been helping them manage these cost pressures. The Government will further provide a Corporate Income Tax Rebate and Cash Grant, through which businesses can receive up to $30,000 in benefits in the Year of Assessment 2026.

However, such assistance can only go so far. Businesses must continue to transform and upgrade to remain competitive in the long run. The Government will work closely with firms that are willing to embark on this journey. For instance, the Enterprise Development Grant supports Singapore companies in building new capabilities, investing in research and innovation, and venturing into overseas markets.

The Government is also investing heavily in training and skills development to raise workforce productivity. For example, in domestically-oriented sectors, such as retail and food services, the Progressive Wage Model provides structured career pathways that incentivise lower-wage workers to upgrade their skills and increase productivity.

We must continue pressing on with efforts to achieve broad-based productivity growth. This is the only way for businesses in Singapore to remain competitive and for Singaporeans to enjoy sustainable wage growth. The Government stands ready to provide further support to businesses and workers where needed.