The Straits Times says

Wages must sync with productivity

That families in all income groups earned more last year affirms the beneficial effect of economic policies that cater to the interests of workers across the board. The rise in wages is most pronounced in the bottom 30 per cent. This is even more heartening news given that the Gini coefficient, which measures income inequality, has been cause for concern for some time.

The growth rates that took per capita income from US$516 in 1965 to US$56,742 in 2014 are figures that belong to a receding past. Today, the challenge is to fine-tune economic policies so as to ensure a sustainable balance between the demands of growth driven by globalisation and the exigencies of social equity at home. Thus, public policy has to reconcile the divergent claims of equally legitimate forces - the global economic push and the local social pull.

Herein lies a knotty problem. Distributive programmes can work only so long as there is enough to distribute. A sound economy permitted the higher contribution rate of employers to workers' Central Provident Fund accounts. That nudged up wages. Even more telling, a tight labour market also contributed to the rise in incomes. But this situation will not last indefinitely given uncertainties in the global economy, which are likely to reduce the demand for workers.

Policies that are funded by economic buoyancy will be stretched in a downturn. Not only will businesses be under strain, so will social schemes. There will be greater economic need precisely when the state is less equipped to meet it, particularly if the nation chooses to maintain its reputation for fiscal discipline that makes it attractive to investors, local and foreign alike.

The answer lies in not what needs to give but what needs to be done while the country still enjoys economic breathing space. Productivity and innovation are tools that should be harnessed to support wage hikes. Worryingly, a study reveals that the real average wage growth of workers outpaced labour productivity from 2005 to last year. Since Singapore's competitiveness will be hit if the trend continues, all must support productivity initiatives. As the National Productivity Council notes, companies need to focus closely on some of the fundamentals of productivity: generating more output for each unit of resource used, and optimising the use of both labour and capital.

Alongside this effort, one should strengthen the culture of innovation and risk-taking that are intrinsic to the economic fortunes of countries. It would not do to just focus on what has worked before and seek only to do more of the same. Instead, a sense of economic adventure should impel Singaporeans to explore new opportunities, including disruptive technologies. Collectively, these moves would amply justify wage growth to secure higher living standards.

A version of this article appeared in the print edition of The Straits Times on March 07, 2016, with the headline 'Wages must sync with productivity'. Subscribe