Tharman's trampoline and the productivity puzzle

(Front row, from left) Switzerland's Finance Minister Eveline Widmer-Schlumpf, Saudi Arabia's Finance Minister Abdulaziz Al-Assaf, Germany's Finance Minister Wolfgang Schaeuble, People's Bank of China Governor Zhou Xiaochuan and Singapore's Finance M
(Front row, from left) Switzerland's Finance Minister Eveline Widmer-Schlumpf, Saudi Arabia's Finance Minister Abdulaziz Al-Assaf, Germany's Finance Minister Wolfgang Schaeuble, People's Bank of China Governor Zhou Xiaochuan and Singapore's Finance Minister Tharman Shanmugaratnam gather for a group photo of the International Monetary and Financial Committee (IMFC) governors, during the IMF and World Bank's 2015 Annual Spring Meetings, in Washington, April 18, 2015. PHOTO: REUTERS

A few days of enforced rest while on medical leave battling the flu granted one benefit: I had plenty of time to watch Youtube videos.

One that made the rounds was Deputy Prime Minister Tharman Shanmugaratnam being quizzed at a symposium by BBC’s HARDtalk presenter Stephen Sackur. It was less a no-holds barred interview than like eavesdropping on a slightly prickly conversation between two serious-minded people with different worldviews.

It made for entertaining, and educational viewing.

My favourite moment from that 48 minutes of video came when Sackur got a bit irritated, asking for a straight answer to a straight question.

You can see it at the 24:50 point in the video.

Sackur: Do you believe in the concept of a safety net?

Tharman: So we believe in the concept of support for you taking up opportunities. So we don't have...

Sackur: (interrupting) I believe in the sometimes simplicity of yes or no answers. What about this idea of the safety net? Do you believe, does Singapore believe in the notion of a safety net for those who fall between the cracks of a successful economy?

Tharman: I believe in the notion of a trampoline.

In the video, you can see the one-second pause while Sackur digests the answer, and the laughter from him and the audience when they get it.

No, Mr Tharman believes less in a safety net that catches all who fall, than in a trampoline - a net there to catch you, and give you a bit of a bounce back onto your own two feet.

A good answer; and more than that, an apt image of Singapore’s hard-headed approach to social welfare. In Mr Tharman’s words again: “We are achieving a paradox on active government support of personal responsibility, rather than active government support to take over personal responsibility or community responsibility.”

Of course the idea of a safety net as trampoline gives rise to all kinds of other metaphors. Can a one-legged person bounce back? Will the sick elderly get bounced right off the trampoline onto the hard floor or abyss? Will the poor get a soft landing from a trampoline or would they benefit from a more stable safety net?

It’s food for thought.

Another article that made me pause and think of Singapore in a different way was a Financial Times commentary by John Kay. It was about why productivity has been falling in Britain since 2008.

As in Singapore, productivity in Britain fell even as work hours went up and employment went up.

So what might explain this productivity puzzle?

One explanation is that the new people entering the workforce are less productive. This would lower overall productivity.

Who might these new people be? Migrants is one category. Or they could simply be new entrants to the workforce who are less-skilled.

As John Kay wrote: “Economic migrants tend to be people who have above-average productivity in the countries from which they come; the skilled and enterprising are often those who leave. But they may have below-average productivity in the country in which they arrive, where they may struggle to fulfil their capacities in a foreign environment.”

But this isn’t the case for Britain.

“The main cause of the rise in employment is not that more foreigners are working in Britain but that more British people are working in Britain.

“What have these additional workers been doing? Professor Jonathan Haskel and his colleagues at Imperial College London argue that they have not been employed in low-productivity industries, nor have they been particularly low-skilled.

“Yet the Bank of England's analysis is that - especially in the past three years - an increasing proportion of employment growth has been in low-skilled jobs.

“Perhaps the abilities of the workforce are underused. Or perhaps easy monetary conditions have enabled low-productivity companies, which disappear in normal recessions, to survive. Any explanation of the productivity puzzle must be found by digging into the detail of how aggregate statistics are built up.”

What of Singapore? Is our declining productivity due to lower productivity of new entrants to the workforce such as migrants, or retirees and housewives?

To answer that question, we need studies that decompose productivity by labour segments, rather than more Productivity and Innovation Credits.

muihoong@sph.com.sg

Chua Mui Hoong blogs weekly on notable commentaries and issues.