SINGAPORE - Real wages rose faster than productivity in recent years, even though real wage growth should track productivity growth over the long run to be sustainable.
The observation was made by Senior Minister of State for Trade and Industry Koh Poh Koon on Wednesday (July 11), in reply to a question on productivity and wage gains from Mr Saktiandi Supaat (Bishan-Toa Payoh GRC).
From 2011 to 2017, real wages for resident workers rose by 1.9 per cent a year, while productivity grew by only 1.1 per cent a year over the same period.
Said Dr Koh: "If real wage growth outstrips productivity growth for an extended period, businesses will be at risk of losing their competitiveness and potentially be forced to scale back or close their operations."
But there were differences across sectors, he said.
In domestically oriented sectors like construction and other services industries, real wages rose faster than productivity between 2011 and 2017.
This was in part due to a tight labour market which had pushed up wages, as well as weak or negative productivity growth in these sectors.
In comparison, externally oriented sectors generally saw positive productivity growth, which supported real wage growth.
In sectors such as manufacturing, wholesale trade, and finance and insurance, real wages rose in tandem with productivity on the back of their relatively strong productivity performance.
But in other sectors such as transportation and storage and accommodation, real wages grew more than productivity.
Said Dr Koh: "It is crucial that we press on with our productivity drive in order to maintain our competitiveness globally, while enabling continued improvement of Singaporeans' wages and living standards."
The Government helps companies to boost their productivity through schemes, which have shown "some early signs of success", he added.
For instance, companies that used Enterprise Singapore's Capability Development Grant between 2005 and 2012 had a 9.3 per cent increase in revenue on average over time.
Under this grant, projects to improve productivity raised revenue by 12.4 per cent, while technology innovation projects boosted revenue by 7.8 per cent.
Firms that made use of the SMEs Go Digital programme to automate their business functions between 2010 and 2013 experienced a 3.1 per cent average increase in revenue over time.