Productivity in some areas 'in positive territory'

In food services, the sector-specific measure of revenue per square foot went up 5.4 per cent per year over the 2009 to 2014 period, but Mr Damien Koh (above), of cafe chain Joe & Dough, said food and beverage companies are facing more competition on
In food services, the sector-specific measure of revenue per square foot went up 5.4 per cent per year over the 2009 to 2014 period, but Mr Damien Koh (above), of cafe chain Joe & Dough, said food and beverage companies are facing more competition on top of high rentals and the manpower shortage.ST FILE PHOTO

MTI figures show gains with new indicators, but experts say methods not robust enough

Productivity in the sectors of construction, retail and food services appears better than previously thought, according to new indicators that aim to account for the peculiarities of each industry.

Economists and industry players welcomed the use of alternative indicators, but said they are not robust enough. The standard measure of productivity is value-add per worker. Based on this measure, labour productivity growth remains stuck in reverse, with the overall figure in the first half of this year in negative territory.

In particular, the construction, retail and food services sectors have been laggards.

However, the standard indicator has been criticised by some as being too broad and subject to the vagaries of economic cycles and so masks the actual situation on the ground.

In response to queries from The Straits Times, the Ministry of Trade and Industry (MTI) said sector-specific productivity indicators which complement the standard measure show "positive signs of improvement" in construction, retail and food services.

Construction site productivity, measured in terms of floor area in square metres completed per man day, increased by 1.2 per cent per year between 2009 and 2014.

This is higher than the standard measure of value-add per worker, which rose just 0.8 per cent per year over the same period.

In the food services sector, the sector-specific measure of revenue per square foot went up 5.4 per cent per year over the 2009 to 2014 period, while revenue per worker rose 2.5 per year.

Retail productivity also did well, with revenue per square foot in the sector growing 4.2 per cent per year over the same period.

"This suggests that mindsets towards productivity have changed and companies are taking steps to raise both space and labour productivity," the MTI said.

Economists agreed that alternative methods of measuring productivity in different sectors are necessary, but pointed out some shortcomings in MTI's data.

"It's good for us to have sector-specific productivity measures, because some sectors are more labour intensive while some are more externally-oriented and more subject to business cycles," said UOB economist Francis Tan.

However, he noted that the indicators, such as revenue per square foot, do not take into account many other factors that affect businesses.

For instance, a retail outlet could downsize because of high rental costs, which might push up revenue per square foot but not necessarily imply higher productivity.

OCBC economist Selena Ling noted that the indicators are not adjusted for inflation.

DBS economist Irvin Seah said profit, instead of revenue, would be a more accurate indicator of productivity as it also takes into account a company's costs.

Companies say the tight labour market and rising business costs remain key challenges in their efforts to become more productive and profitable.

Mr Damien Koh, founder of cafe chain Joe & Dough, said food and beverage companies are now facing more competition on top of high rentals and the manpower shortage. The company has nine outlets and also supplies to other cafes and restaurants.

"We have to look at what we can automate, but we also do not want to compromise on the quality of food and customer service," he said.

A version of this article appeared in the print edition of The Straits Times on November 09, 2015, with the headline 'Productivity in some areas 'in positive territory''. Print Edition | Subscribe