SINGAPORE - Singapore’s unit labour cost for the overall economy rose at a slower pace in 2023, and could moderate further in 2024, according to a study released on Feb 15.

Unit labour cost is a measure of how much it costs a business to pay its workers to produce each unit of a product or service.

The unit labour cost for the key manufacturing sector dipped 0.1 per cent in the fourth quarter, a reversal from the 10.4 per cent increase in the third quarter, said the report, which appeared in the latest Economic Survey of Singapore. 

The drop was due to an increase in labour productivity, which outpaced the increase in total labour cost per worker. 

However, Singapore’s relative unit labour cost for manufacturing – a measure of its competitiveness against 16 economies – rose in 2023 compared with 2022. 

This means the Republic is less competitive when compared with Australia, China, France, Germany, Hong Kong, India, Indonesia, Japan, Malaysia, the Netherlands, South Korea, Taiwan, Thailand, Britain, the United States and Vietnam.

The deterioration was mainly on account of an increase in Singapore’s manufacturing unit labour cost and a stronger Singapore dollar, the report said.

The economy’s overall unit labour cost rose at a slower pace of 7.5 per cent in 2023, compared with the 9.1 per cent increase in 2022.

For 2024, the report said the growth in remuneration per worker is likely to soften amid easing labour market tightness. At the same time, the costs of utilities, fuel and transportation are expected to remain stable, in line with the outlook for global oil prices in 2024.

In the fourth quarter of 2023, the overall unit labour cost rose 3.2 per cent year on year as total labour cost per worker rose and labour productivity declined.

Still, the growth in unit labour cost in the fourth quarter was less than the 7.9 per cent increase in the previous quarter.

For the services sector, the unit labour cost rose 3.6 per cent in the fourth quarter, slowing from the 6.6 per cent increase in the previous quarter. 

Most services sectors saw a pickup in their unit labour cost, with the accommodation sector registering the largest increase of 10.6 per cent.

The construction sector registered a unit labour cost increase of 2.7 per cent in the fourth quarter, a moderation from the 8 per cent rise in the third quarter.