MTI: Productivity grew further than thought, based on hours worked

A different measuring approach shows that labour productivity has grown at a steadier pace than previously thought, the Ministry of Trade and Industry (MTI) said yesterday.

When measured by real value-add (VA) per actual hours worked (AHW), productivity grew at a compound annual rate of 2.9 per cent between 2009 and 2014.

This is higher than the 2.5 per cent growth recorded by the current measurement of real VA per worker employed.

Between 2010 and last year, productivity by real VA per AHW grew 1.3 per cent annually, also higher than the 0.3 per cent recorded by the current measurement.

MTI disclosed the findings in a paper released alongside second-quarter economic data, which showed that productivity declined 0.6 per cent year on year in the quarter according to the current measurement.

But the new perspective suggested that "there is some room for optimism that labour productivity has not been as weak as we thought it was", said MTI economics director Yong Yik Wei.

"Real VA per AHW is more reflective of actual productivity, but the data (on working hours) is harder to collect compared with headcount, which is always available," MTI permanent secretary Ow Foong Pheng noted, adding that countries such as the United States and Australia also measure productivity by hours worked.

Initial findings have shown that actual hours worked in Singapore dropped by 3.6 per cent between 2010 and last year, due partly to the slowing economy and an increasing number of part-time employees in the workforce. As a result, all sectors recorded greater productivity growth during that period based on the new measurement.

Manufacturing's productivity grew 3.1 per cent on that count, compared with the previously recorded 2.3 per cent growth.

Retail trade's productivity growth was flat compared with a 2.2 per cent decline, while food services grew 0.9 per cent compared with a 0.6 per cent drop.

Mrs Ow said the MTI will work on improving the compilation of actual hours worked data to enable a more regular publication, but productivity data as measured by the current method will not be phased out.

DBS economist Irvin Seah welcomed the added clarity on Singapore's restructuring process.

"Right from the start the productivity exercise has focused on the wrong target.

"A headline figure like output per worker is tied to gross domestic product, which is volatile for a small and open economy like Singapore. It has nothing to do with how productive you actually are," he said.

"Having a more accurate indicator is important because it dictates the policymaking process.

"We need to know where we are in the restructuring effort.

"Or else we will just keep tightening the labour market just because the headline productivity figure keeps dropping."

Wong Wei Han

A version of this article appeared in the print edition of The Straits Times on August 12, 2015, with the headline 'MTI: Productivity grew further than thought, based on hours worked'. Print Edition | Subscribe