Productivity: Broader, more inclusive approach needed

The Republic embarked on a restructuring drive in 2010 to encourage firms to use better technology and to be less reliant on cheap labour. According to one panellist, instead of focusing on just one productivity metric, policymakers should look at pr
The Republic embarked on a restructuring drive in 2010 to encourage firms to use better technology and to be less reliant on cheap labour. According to one panellist, instead of focusing on just one productivity metric, policymakers should look at productivity differently across sectors. ST PHOTO: DESMOND FOO

The push to raise labour productivity should remain a cornerstone of Singapore's economic strategy, but roundtable panellists said the approach should be broader and more inclusive.

They also noted that firms have made significant progress, but there is still more to be done in areas such as business model innovation.

The Economic Strategies Committee set a productivity growth target of 2 to 3 per cent annually, a target that the Government has since admitted was an ambitious one.

In line with this, the Republic embarked on a restructuring drive in 2010, encouraging companies to use better technology while also weaning them off cheap sources of labour. Despite these efforts, however, labour productivity growth remains stuck in reverse, with the overall figure in the first half of this year in negative territory.

Policymakers should not lose sight of the fact that Singapore's workforce now includes more older employees and people who have rejoined the workforce after a period of unemployment, panellists noted.

Ms Aparna Bharadwaj, a principal at the Boston Consulting Group, said companies here have gone from hoping for a U-turn on the tighter foreign labour policy, to accepting their new operating conditions and trying to achieve "quick wins" in areas such as automation and business processes.

"The next stage is how to make more fundamental changes... Can we move towards new business models? Can we internationalise? Build local home-grown brands?

"I think we're still somewhere at the quick-wins stage and moving, hopefully, towards more business model changes."

Instead of focusing on just one productivity metric, policymakers should look at productivity differently across sectors, said Mr Joshi Venugopal, the managing director of Singapore and Asian emerging markets at pharma giant Novartis.

For instance, Singapore gets good bang for its buck in healthcare spending.

It ranks among the best in terms of healthcare dollars spent versus outcomes such as life expectancy and the disease burden.

"How are we doing in terms of education, how are we doing in terms of defence, how are we doing in terms of transportation, when it comes to what we spend and what we get out of it? I think that's an analysis that needs to be done. And then you might see more opportunities in one area and less in others," he added.

Policymakers should not lose sight of the fact that Singapore's workforce now includes more older employees and people who have rejoined the workforce after a period of unemployment, panellists noted. One way of increasing productivity in an ageing population is to make sure that there is healthy ageing, said Mr Venugopal.

This also has implications for the workplace, he noted.

For instance, carmaker BMW's plant in Germany made assembly lines more friendly for senior workers by installing bigger screens and wooden floors, and saw a rise in productivity.

Professor Ng Yew Kwang, the Winsemius Professor of Economics at Nanyang Technological University, noted that labour force participation has gone up in recent years.

"We now employ more older people, and people with lower productivity who were previously not employed. Their productivity and their salaries are usually lower than average, so we expand the workforce but the average productivity actually goes down. This decreases our productivity growth."

However, this is not necessarily a bad thing.

"If people want to get jobs and they like to continue working, that is a good thing, so the overall picture is positive despite lower productivity," he added.

However, Mr Venugopal noted that lacklustre productivity growth here might be part of a wider global trend. "There is a school of thought... which says that the productivity increases have declined over time for the last 100, 150 years. And they think it's reasonable to expect that will continue."

This is because modern innovations have less of an incremental impact compared with previous radical ones such as the telegraph and printing press, he noted.

A version of this article appeared in the print edition of The Sunday Times on October 18, 2015, with the headline 'Productivity: Broader, more inclusive approach needed'. Print Edition | Subscribe