Trends in Singapore's Unit Labour Cost During Recessions

This box presents recent trends in unit labour cost1 (ULC) for the overall economy and the manufacturing sector, and compares them with the trends during past recessions. It also examines the drivers of ULC growth over the period 1992-2008 by decomposing it into the contribution of (the inverse of) productivity growth and increases in labour cost per worker.

In 2008, overall ULC increased by 9.6 per cent, a sharp rise from the 5.2 per cent and 1.3 per cent recorded in 2007 and 2006 respectively. Similarly, the manufacturing ULC rose by 11 per cent in 2008, a marked increase from the 3.9 per cent and -3.6 per cent in the previous two years (Exhibits 1A and1B). The ULC has continued its upward trend in 2009. Latest data shows that overall ULC rose by 9.2per cent and manufacturing ULC by 30.0 per cent in the first quarter of 2009.

The sharp increase in ULC in 2008 and in the first quarter of 2009 is consistent with the experience during past recessions in 1998 and 2001. During those periods, ULC also spiked, by 4.0 per cent and 6.4 per cent respectively, and came down only in the year after the recessions.

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