Employment data points to drop in productivity growth last year

Employment growth here was better than expected last year, even as global uncertainties caused economic growth to slow.

This suggests that productivity improvements Singapore achieved in recent years have not been sustained at that level, which is a concern, Manpower Minister Josephine Teo said yesterday.

Productivity in 2018, measured as real value added per worker, rose by 2.4 per cent.

Preliminary figures from the Ministry of Manpower showed that total employment rose by 55,200 last year, excluding foreign domestic workers. This meant a growth rate of close to 1.6 per cent over 2018.

Meanwhile, flash estimates released by the Ministry of Trade and Industry this month showed that gross domestic product expanded 0.7 per cent last year.

Thus productivity in terms of output over the number of workers most likely fell last year.

Mrs Teo said one reason could be firms holding on to workers even as business conditions were challenging because they were taking a longer-term view. "It could also be because they see opportunities and they want to ensure that they have the right ability to capture those opportunities," she said.

Economists said that productivity growth is likely to be quite uneven across various sectors.

Anecdotally, it seems to have improved in the manufacturing sector and, to a lesser extent, services, said DBS senior economist Irvin Seah. For instance, many back-end processes in the financial sector are already being automated.

 
 
 
 

The conventional way of defining productivity as output per worker is more applicable to big, domestically driven economies, he added.

"By this measure, Singapore's productivity is more dependent on the global business cycle and not how productive each worker really is."

Official full-year figures on the alternative measurement of productivity - as value add per actual hour worked - have not been released yet for last year.

CIMB Private Banking economist Song Seng Wun noted that the productivity question is not unique to Singapore. "Many larger developed economies are still trying to figure out why productivity on the surface seems to lag behind even though so much has been invested in automation processes and machinery," he said.

A version of this article appeared in the print edition of The Straits Times on January 31, 2020, with the headline 'Employment data points to drop in productivity growth last year'. Subscribe