Drivers of Labour Productivity Growth in Singapore, 2009-2019

This article examines Singapore’s labour productivity performance over the past ten years against the productivity growth target of 2 to 3 per cent per annum set by the Economic Strategies Committee (ESC) in 2010. Shift-share and growth accounting analyses are also conducted to better understand the drivers of Singapore’s labour productivity performance over the decade.

From 2009 to 2019, Singapore’s overall labour productivity, as measured by real value-added per actual hour worked, grew by 2.8 per cent per annum, achieving the target set by the ESC. Singapore’s productivity growth performance over the past decade was also better than that of most advanced economies.

The shift-share analysis finds that productivity gains over the decade were driven mainly by productivity improvements within sectors, especially the outward-oriented sectors. These gains were dampened slightly by a net shift in employment and hours worked from more productive outward-oriented sectors towards less productive domestically-oriented sectors. There are, however, signs that this shift effect has improved over time, with the effect turning positive in the later years of the decade as more productive outward-oriented services sectors such as Finance & Insurance and Information & Communications continued to gain employment and hours worked shares.

The growth accounting analysis shows that higher capital intensity, especially in non-residential construction & works and research & development, was the main driver of productivity growth over the decade. Overall productivity growth was also supported by labour quality improvements and total factor productivity growth.

The views expressed in this paper are solely those of the authors and do not necessarily reflect those of the Ministry of Trade and Industry or the Government of Singapore.

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