Improvements to Productivity and Workers' Salaries

Mr Speaker, Sir, we need good quality economic growth to provide well for our people. As our labour force growth slows, we will need to ensure that good productivity growth continues, so that our lives can continue to improve. Hence, in 2010, we set an average productivity target of 2% to 3% per annum. These are stretch targets, but they are necessary. In 2010, we saw exceptional productivity growth of 11.1%, but this is one-off as it was due to the strong recovery from the economic downturn in 2008 and 2009. Inevitably, coming off a high base in 2010, our productivity growth in 2011 was 1%. In fact, productivity this year has not been very positive either. This is because employment has grown much faster than GDP over the period.

While productivity growth measured in terms of value added per worker is really quite sensitive to economic cycles and can swing substantially over the short term, the low productivity growth rates over the past one-and-a-half years is a matter of concern and it is something that we are watching quite carefully. It shows really how urgently we need to step up our productivity efforts. We do need to press on with efforts to restructure our economy, meaning to move up the productivity chain. Companies need to reduce their reliance on manpower, and workers need to continue upgrading themselves so that they can take on the higher value-added jobs created as we restructure the economy. If we are to succeed, we must persist in the gradual tightening of our foreign worker policy.

The Government is fully committed to helping businesses and workers to manage these challenges, and will continue to provide support through the many programmes and schemes. The National Productivity and Continuing Education Council (NPCEC) has taken a sectoral approach to engage industries and develop productivity roadmaps tailored for each priority sector. A considerable amount of time and effort has been spent in ensuring that the strategies and schemes can support progressive companies and help them cope in our tight labour market through productivity improvements. Much of these come about from discussing with the industry themselves.

Over the long term, we also want to restructure our economy into one that provides higher value-added and higher skilled jobs, so that Singaporeans will have improved opportunities and be able to earn higher incomes. While many of these programmes and schemes are in their initial implementation phase, take-up rates have been encouraging, and we expect this to increase further. I have said this quite often, it is very important for industries, businesses to provide feedback so that we can continue to tailor the programmes so that it is right on target and that it is effective for the sectors concerned.

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Now, let me just share an example. There is this programme, the iSPRINT scheme, or the Increase SME Productivity with Infocomm Adoption & Transformation, which is administered by IDA. It helps SMEs defray the costs of implementing info-comm solutions. The scheme has seen strong take-up since it was started in April 2011. More than 1,800 SMEs have benefited from the scheme. Companies can claim up to 70% of the qualifying costs for the purchase of info-comm technology (ICT) solutions, such as an accounting and payroll system, or enterprise resource planning solutions. The payoffs for such investments will come through over time. This is just one example amongst many schemes available. We are committed to developing more schemes as the need arises.

We have committed significant resources to this productivity drive. There are many schemes available for companies to tap on. In fact, one of the common feedback from companies is that because of the large number of productivity schemes available, it is not easy for them to navigate through all of them and to determine which scheme suits them best. This is a challenge we do need to continue to address. The best designed schemes with the best intentions are not very helpful if no one makes use of them. Therefore, we need to continue to work to improve them, to improve the accessibility of these schemes so that companies can really tap on them, and like I said before, it is very important that we receive the feedback so that we can continue to refine the process.

While we focus on implementing the various sectoral productivity strategies well, we must importantly not lose sight of why we are doing this in the first place. Productivity is not an end in itself. What we are trying to do is to achieve better outcomes, better incomes, better living standards for all Singaporeans in a sustainable way. We believe that increasing productivity is the right way to do so, without jeopardising, at the same time, our competitiveness, which is important, to make sure that companies remain viable because when companies remain viable, jobs are created for our people. At the same time, our workers' livelihood depends on this.

Data has shown, by and large, that this is the right strategy. Real wages of our workers have risen broadly in line with productivity improvements over the long term. In parallel with our productivity drive, we also need to press on with efforts to help workers upgrade their skills and move up to higher value jobs, while keeping the labour market tight.

Our target of 2% to 3% productivity growth per annum is, like I said, a stretch target. It is not easy because most developed economies tend to achieve an average of 1% to 2% productivity growth per annum. But we believe that there is an upside. When we compare ourselves to many of these developed countries, we think that there is quite a lot of room for us to grow in that area. If we are able to hit the upper end of this range over the long term, we believe that we should be in a good position to provide opportunities for higher wages for all Singaporeans and, at the same time, to remain competitive.

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A supplementary question, Sir. I agree that productivity is a good strategy to enhance the salary of our workers in the long run, but the real challenge is that it is a stretch target. How then can we make people understand – employers and employees – that productivity is the way to go, and are we seeing results in real wages of our workers? And are we expecting some of these to kick in within the next few years before the 10-year target that we have set for ourselves?

Mr Speaker, Sir, I would like to thank Mr Zainudin for his follow-on questions. What we have seen in the last 10 years is that productivity growth has moved in tandem with real wage increase. Productivity growth was about 1.7% in the course of the last decade, and real total wages grew at about 1.6% per annum during the same period. Our sense is that with wage productivity growth, as a whole, there would be a possibility for wages to rise at the same time.

But as the Member mentioned, it is also important at the same time to have a tight labour market. This is where it is important for us to continue to grow the economy so that it remains competitive. That will also create pressures, which is why the effort of productivity does not exist on its own. The effort in terms of raising productivity is very much tied to our policies in terms of tightening the workforce, especially the foreign workforce. Something that we have embarked on – it largely peaked in the 2008 period and has gradually come down. We continue to step up. There is a range of measures that we take, whether it is a DRC, whether it is a levy and so on. That is very much an effort that we need to continue to focus on.

As we tighten the labour market, especially access to foreign labour, companies are feeling the squeeze. We know that. We speak to the companies regularly. But at the same time, we have to begin to restructure. They need to think about how they can operate with fewer workers. We look at developed economies elsewhere. Companies in the same sectors, in the service sector, in the retail sector and so on, their productivity levels are significantly higher. They also operate with a much more restricted access to foreign labour.

It is a combination of these measures which we need to unfold in the course of the next few years. This is part of the whole restructuring of the economy, where we can move towards lesser reliance on foreign workers. The workforce still needs to be diverse. That is something we need to accept. Most Singaporeans understand that. But we need to manage that growth and manage that dependency. In the process, companies must adjust.

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Forced by circumstances, companies, in order to survive, in order to thrive, they will have to find measures to adjust. Secondly, we can also help in the process, which is why the whole range of incentives and programme schemes are available to incentivise the companies. SPRING works actively with companies as well. We have a lot of dialogues and a lot of sessions with the federations and associations. The best practices are also shared.

We are confident that companies will adjust. We have begun to see companies adjusting. My message to the companies, whenever I meet them, is we are not U-turning on this policy. This is a path that we need to embark on and we cannot turn back in terms of loosening the tightened-up measures. It is really a combination of these measures that will unfold over the course of the next few years, which I think will put us in a very good position to compete on a very competitive basis but at the same time, generating good jobs for people, and with that, good wages as well.

Mr Speaker, Sir, I would like to ask the Acting Minister this: Minister mentioned that overseas, in similar sectors, they are more productive. But a lot of SMEs have given the feedback that they do not know what to do. I just want to ask, does MOM have any expertise or consultancies that can guide SMEs along, so that they can further improve on their productivity?

I would like to thank the Member for her question. It is an important feedback and something that we are aware of. The industry is very large. Especially with SMEs, we do recognise, in particular for the smaller enterprises, they may not always have the capacity and resources to really scour the market to find out what is happening elsewhere. We do know that when we look at other industries, for example in F&B industry – if you look at, say, Japan, the way they construct, it is almost like a production line. The way you operate your shop, your restaurant, it is really geared towards maximising the productivity, maximising the output, in terms of the fewer workers that they have. So, the same person could be the cashier, he could be serving, he could be also running from the kitchen and so on; because they operate in a much tighter labour market.

Similarly so in the construction industry which the Member would be familiar with. I just came back from Australia and I have seen how the industry has transformed. They have a limited workforce. They also have a very highly skilled workforce. The difference, of course, is theirs is a domestic workforce. But, as a result of that, the construction industry has also transformed into a lot more pre-fabricated work. Something that we are encouraging our industries to go into and a lot of other new innovations which I am quite keen to see how they can be best explored, and a combination of these various events.

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We are looking at how study visits have taken place. Companies have participated. SMEs have participated in study visits led sometimes by industries, sometimes by Government. It is important to see how it is done. It is one thing to read about it, hear about it but when you go there and you see that, "Oh! It is quite straightforward, I could actually, potentially do it." The key is how we share these best practices. I have mentioned it before that it is always challenging because they are all competitors as well. Some companies might have taken on board some of these changes. What we really need and I do urge the business federations and associations is to come together and help the industry as a whole, because the ability to do things differently and to do it better is out there. Some companies have embraced it.

What we need is to make sure this information is shared and transmitted across-the-board. This is an effort that we continue to work on and we will be quite happy to consider options – even putting materials online, pamphlets, whatever means available – to provide companies with ideas. That is something that we do want to explore. We do see the upside. It is a very fair point. We do get that feedback but we are actively trying to promote this effort in terms of gathering lessons learnt from overseas. That is the continual effort that we need to press on with.

I would like to ask the Minister about the real wage increase and also better quality jobs. Can Minister share on whether there have been Singaporeans taking up these better jobs that have been created, and also what has been the real wage increase in terms of the jobs that have seen real wage increase?

I would like to thank the Member for the question. We have talked about how real wages have grown, especially in the last five to six years. As we have mentioned, when we look at the decade as a whole, in the first half of the decade we did not really see particularly strong income growth. If anything, in real terms, there was a slight decrease. But for the second half, we were grappling with how the economy was going, how do we then anchor ourselves in a competitive world to find the right opportunities. That was also the period when we began to look at new opportunities. We did also, as we acknowledged, open up access to foreign workers coming in, in terms of the foreign labour workforce, which we know has also caused some strain on our infrastructure.

But what that period also produced was a growth in terms of jobs created, and very good quality jobs. That was also the same period where we saw real income growth. And it is not just at the middle class and the upper end but even at the low-income level, that was where we actually saw the growth, which helped to improve the overall data for the decade.

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What is quite clear to us is that economic growth remains important. Not growth at all cost, but good quality economic growth. When we look at how we have evolved over the last decade, it has put us in a decent position. We need to calibrate because there are obviously disamenities that come and the labour force has grown a bit faster than perhaps we could have adapted to. But we are in a strong position to adjust.

We do see jobs continue to be created. Foreign multi-national companies and good Singapore companies remain anchored here, even though we know that Singapore is not a low-cost operating base. But companies find it worthwhile because there is stability, there is certainty. Over time, we have also developed as a hub in many different areas. Much as the world is wired up, a lot of businesses still need to be done on a face-to-face basis. People need to meet. There is a legal infrastructure. There is a financial infrastructure in place. And this hub is created over time, and you create a dependency that exists here. That is why companies remain here. When good companies remain here, good jobs are created.

We all know that, increasingly, there are more young people entering the workforce as graduates − one in three; in fact, one in two if we include all the Polytechnic graduates who, after working a few years, will then go on to acquire more degrees. With that, come aspirations, and aspirations for good dynamic competitive jobs. Singapore, by and large, has become that way. But to do that, we need to maintain a decent level of economic growth while at the same time making sure that Singaporeans are at the core of it, so that these good quality jobs can be created to meet the aspirations of young Singaporeans.

That is something that we will continue to work at. In terms of take-up rates, in terms of employment for young graduates and so on, we have seen that the employment rates are good. We do see that real wages continue to grow. But that is not something we want to take for granted. This competition is quite acute, it is something that we need to try to calibrate, and at the same time, maintaining it at a sustainable level.

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