Oral reply to PQ on wage growth

Question

Mr Saktiandi Supaat: To ask the Minister for Trade and Industry (a) whether the wage growth is moving in tandem with productivity gains; (b) whether the sectoral wage growth is commensurate with sectoral productivity gains; (c) which sectors are productivity laggards; and (d) whether the targeted help provided has led to productivity and wage gains.

Oral Answer by Senior Minister of State, Dr Koh Poh Koon

1. Over the long term, real wage growth should track productivity growth in order to be sustainable. This is because if real wage growth outstrips productivity growth for an extended period, businesses will be at risk of losing their competitiveness and potentially be forced to scale back or close their operations.

2. Over the past two decades, real wages have grown broadly in tandem with productivity at the overall economy level. Specifically, from 2001 to 2017, real wages for resident workers grew by 1.5 per cent per annum on the back of productivity growth of 2.1 per cent per annum.

3. In recent years, however, real wage growth has outstripped productivity growth. From 2011 to 2017, real wages for resident workers rose by 1.9 per cent per annum, while productivity grew by only 1.1 per cent per annum over the same period. However, there were differences across sectors.

4. In particular, domestically-oriented sectors like Construction and Other Services Industries saw real wages rise faster than productivity between 2011 and 2017. This was in part due to labour market tightness, which had led to upward pressures on wages, and also weak or negative productivity growth in these sectors. Meanwhile, even though the sluggish global economic environment had weighed on the productivity performance of outward-oriented sectors over this period, real wage growth in these sectors was generally still supported by positive productivity growth. Indeed, in sectors such as Manufacturing, Wholesale Trade and Finance & Insurance, real wages rose in tandem with productivity on the back of their relatively strong productivity performance. However, in other sectors such as Transportation & Storage and Accommodation, real wage growth exceeded productivity growth.

5. Against this backdrop, it is crucial that we press on with our productivity drive in order to maintain our competitiveness globally, while enabling continued improvement of Singaporeans’ wages and living standards. In this regard, we are taking a targeted, sector-specific approach to raising productivity through the Industry Transformation Maps (ITMs). For example, under the Hotel ITM, the Singapore Tourism Board and Singapore Hotel Association have launched the Hotel Innovation Challenge to crowd-source innovative technologies that can improve hotels’ productivity and enhance the guest experience, such as facial recognition check-in.

6. The Government has also provided assistance to firms through schemes designed to help them enhance their capability and productivity. These schemes have seen some early signs of success. For example, firms that tapped on the Capability Development Grant (CDG) managed by Enterprise Singapore for capability improvement projects between 2005 and 2012 experienced a 9.3 per cent increase in revenue on average over time. Productivity Improvement projects had the largest impact, raising firms' revenue by 12.4 per cent, compared to 7.8 per cent for Technology Innovation projects and an average of 6.7 per cent for the remaining project areas. Similarly, firms that tapped on the SMEs Go Digital programme, formerly known as iSPRINT, for IT solutions to automate their business functions between 2010 and 2013 experienced a 3.1 per cent increase in their revenue on average over time.

7. Maintaining a close partnership with industry and unions is also important in order for businesses and their workers to benefit from productivity improvements. For example, NTUC has partnered various companies on measures that raise their productivity and competitiveness. The resultant productivity gains are then shared with the workers in these companies, such as through allowances or payments. As a specific example, the Inclusive Growth Programme (IGP) administered by e2i co-funds companies to embark on productivity improvement projects. The companies are in turn required to share the productivity gains with their workers through a rise in wages.

8. The Government is committed to continue to work with businesses and the unions to help businesses improve their productivity, and ensure that the productivity gains are shared with workers through higher wages.