Impact of COVID-19 Work Arrangements on Sectoral Productivity Rates

Mr Speaker, Sir, since the start of the COVID-19 pandemic, the productivity of various sectors of the economy has been uneven, reflecting in large part the differentiated impact of the pandemic.

In 2020, labour productivity, as measured by real value-added per actual hour worked, or AHW, rose for outward-oriented sectors such as manufacturing, wholesale trade, and finance and insurance. For example, the productivity of the manufacturing and wholesale trade sectors increased by 18.6% and 3.1%, respectively. By contrast, sectors which were severely disrupted by travel and domestic restrictions, such as construction, transportation and storage, accommodation and F&B services, experienced declines in productivity. In particular, the productivity of the transportation and storage and F&B services sectors fell by 22.1% and 17.7%, respectively.

For 2021, productivity growth is expected to remain positive for the most outward-oriented sectors, given the pick-up in global economic activity. Sectors that continue to be disrupted by weak travel demand and domestic restrictions such as transportation and storage and F&B services, are not likely to return to pre-COVID-19 productivity levels, as activities in these sectors are not expected to recover fully this year.

Since 2015, the Ministry of Trade and Industry (MTI) has compiled statistics on real value-added per actual hour worked, to complement statistics on real value-added per worker. Real value-added per actual hour worked is recognised internationally, including by the International Labour Organization (ILO), to be the most appropriate measure of labour productivity as actual hours worked capture the intensity of labour input more accurately.

In the context of a hybrid model of working, real value-added per actual hour worked also provides a more accurate measure of labour productivity, as it accounts for the varying intensity of labour input by employees under different types of work arrangements. These include (a) flexi-time arrangements that grant employees flexible work schedules, depending on their work, of course, and personal commitments; (b) flexi-load arrangements that involve employees who are hired on a part-time or project basis; as well as (c) flexi-place arrangements that allow employees to telecommute and record hours worked in both workplace settings and at home.

Mr Speaker, I would like to thank the Minister of State for his answers. I have got two supplementary questions.

First is in relation to my earlier Parliamentary Question (PQ), can the Minister of State share about the outlook for the productivity by sector, if possible, in 2022; and beyond 2022, given growth and other variables?

The second supplementary question I have is, in relation to the second part of my PQ. Are there plans for MTI to do any further granular data studies to examine productivity, in terms of both labour and multi-factor productivity, especially during the COVID-19 period and possibly into the endemic period? The reason is, if we look at the actual hours worked data, which is good that it is in quarterly basis, whether there will be more measures that MTI plans to collect, going forward, similar to what other developed countries like in the US, so as to measure productivity more accurately, going forward?

I thank the Member for his two supplementary questions. I will take the measurement of labour productivity first and then go into the outlook across sectors.

First is on how is labour productivity typically measured and what are the differences between existing labour productivity measures? Labour productivity measures actually measure how effectively or efficiently labour inputs are used to produce output. They are computed in terms of, as I mentioned, real value-added (VA) per actual hour worked, or real VA per worker. There are differences between these two because of changes in the average number of hours worked per worker over time. I think that also has been quite accentuated during COVID-19.

Of the two measures that we talked about, real VA per AHW is recognised internationally including, as I mentioned earlier, by ILO, to be a better measure of labour productivity, because the actual hours will capture the intensity of labour input more accurately.

In Singapore's context, this measure has also become more relevant in recent years with the rising number of part-time workers in the economy and the cyclical changes in the number of hours worked by full-time workers.

If you look at TFP or Total Factor Productivity, which is also known as multi-factor productivity, is also an alternate measure of productivity and captures how efficiently both capital and labour are used together in the production process. It is computed as a residual on an annual basis and is defined as a change in GDP not attributed to changes in capital and labour inputs.

So, for example, an increase in TFP may be due to factors such as a rise in technology, improvements in management practices and organisational structures or maybe even the diffusion of technology across firms. So, while not a 100% accurate indication, I think this particular measure, for now, manages to capture productivity in the most accurate form. But we will be open to looking at other ways to measure, given the changing nature of work across the world and given how COVID-19 has also looked at productivity across workplace and at home.

With regards to the outlook for productivity, both Minister of State Low and myself have shared earlier on that the growth as well as recovery across sectors are uneven. There are domestically oriented sectors and there are the outwardly oriented sectors. The domestically oriented sectors experienced a steeper contraction in value-add in 2020, a reduction in 15.9% as compared to the outward oriented sector's decrease in 0.9%. But our productivity performance tends to be pro-cyclical and so it has resulted in an uneven productivity across various sectors.

I wanted to also just share a little bit that what we are doing is we are not being stagnant in this regard, productivity has been an issue in advanced economies and in particular, Singapore has been managing or trying to increase productivity for decades.

Our refresh of the Industry Transformation Maps (ITMs), the 23 ITMs that Minister of State Low had mentioned earlier on, seek to find ways to increase productivity. The increase in technological advances and progress in the way in which we work and how we work, will help in no small measure to help us to increase productivity. But the key part of this is we need to make sure that we upskill, which is a key factor in our ITM and we make sure that there is a good job and skills match such that our people can take on better jobs, increase their productivity and make use of the technological advances available so that as a whole, across multi-sector, productivity advances can be seen over time.