Trends in Actual Hours Worked and Implications for Labour Productivity

Trends in Actual Hours Worked and Implications for Labour Productivity

Real value-added (VA) per worker employed is the most commonly cited measure of productivity in Singapore. Ideally, labour productivity should be measured on a per hour worked basis, as hours worked better capture the actual amount of labour input in the economy. Measuring productivity based on real VA per hour worked has also become more relevant for Singapore given the entry of more part-time workers in the economy in recent years and cyclical changes in the hours worked by full-time employees.

 In this study, we estimate Actual Hours Worked (AHW), a measure of labour input used internationally and recommended by the International Labour Organisation (ILO) as the basis for international comparisons of hours worked and productivity. We then examine the trends in AHW per worker in Singapore, and derive productivity estimates based on real VA per AHW for Singapore.

We find that AHW in Singapore has varied over the period of 2009 to 2014, in line with the economic cycle. AHW per worker in the economy rose by 1.5 per cent in 2010, along with the economic recovery. It then declined by 3.6 per cent on a cumulative basis between 2010 and 2014. The decline in AHW per worker over this period was observed across all sectors of the economy. We find that the fall in AHW per worker was driven predominantly by a fall in hours worked by full-time local employees. A shift in employment patterns towards a greater reliance on part-time local employees also contributed to this trend.

Consequently, growth in labour productivity, as measured by real VA per AHW, has been higher than the growth in real VA per worker at the overall economy level. Exhibit 1 summarises the trends in labour productivity growth for the overall economy from 2009 to 2014. Real VA per AHW increased at a compounded annual growth rate (CAGR) of 2.9 per cent from 2009 to 2014, as compared to the 2.5 per cent recorded for real VA per worker. It also increased by a CAGR of 1.3 per cent over the four years from 2010 to 2014, higher than the 0.3 per cent per annum for real VA per worker. Similar trends were observed across all sectors in the economy. The higher rates of growth based on real VA per AHW reflect the fall in AHW per worker, as well as the greater reliance on part-time local employees.

Exhibit 1: Real VA and Labour Productivity Growth, %

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