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Oral Answer by Mr Tan Chuan-Jin, Acting Minister for Manpower & Senior Minister of State, National Development, to Parliamentary Question on Improving Wages of Workers through Uplifting Productivity

Notice Paper No. 283 of 2012 for the Sitting on 11 Sep 2012
Questions No. 625 for Oral Answer

MP: Mr Zainudin Nordin

Question

To ask the Acting Minister for Manpower in light of efforts to uplift productivity so as improve the salary of our workers (a) whether there has been significant improvement in productivity; (b) what are the challenges faced; and (c) whether the goals set on improvement of workers' salaries will be met.

Answer

  1. We need good quality economic growth to provide well for our people. As our local 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. 2010 saw exceptional productivity growth of 11.1%, but this is a one-off as it was due to the strong recovery from the economic downturn in 2008-2009. Inevitably, coming off a high base in 2010, our productivity growth rate in 2011 was 1.0%. In fact, Productivity this year has not been very positive either. This is because employment has grown much faster than GDP over the period.
  2. While productivity growth measured in terms of value added per worker is 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. It’s something that we are watching carefully. It shows 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.
  3. The Government is fully committed to helping businesses and workers 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 to 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 efforts include discussing with the industries 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, the take-up rates have been encouraging, and we expect this to increase further. I’ve said this quite often – it’s very important for industries and businesses to provide feedback so that we can continue to tailor the programmes, so that they are right on target and are effective for the sectors concerned.
  4. Let me share an example. The iSPRINT scheme (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 SMEs1 have benefitted 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.
  5. We have committed significant resources to the productivity drive. There are numerous Government support schemes available for companies to tap on. In fact, one 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 that we 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 improve the accessibility of productivity schemes so that companies can tap on the help that we are providing more effectively. And like I’ve said before, it’s important that we receive feedback so that we can continue to refine the process.
  6. While we focus on implementing the various sectoral productivity strategies well, we must, importantly, not to lose sight of the reason why we are embarking on this productivity drive in the first place. Productivity is not an end to itself. What we want to achieve is better outcomes – better incomes and better living standards for all Singaporeans in a sustainable way. And we believe that increasing productivity is the right way to do so, without jeopardising Singapore’s competitiveness, which is important to make sure that companies remain viable so that jobs are created for our people. Our workers’ livelihood depends on this. Data has shown that this is the right strategy. Real wages of our workers have risen broadly in line with productivity improvements over the long term.2 In parallel to 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.
  7. Our target of 2 to 3% productivity growth per annum is, as I said, a stretched target. It is not easy as most developed economies achieve an average of 1 to 2% productivity growth per annum. But we believe there is upside when we compare ourselves to many of these developed countries. We think there is still quite a lot of room for us to grow in this area. If we are able to hit the upper end of this range in a steady state over the long term, we believe we should be in a good position to provide opportunities for higher wages for all Singaporeans and at the same time, remain competitive.

 

1 As at 31 March 2012.
2 Since 2000, our productivity grew at 1.7% per annum, while real total wages grew at a comparable rate of 1.6% per annum.