SINGAPORE - As the economy recovers, productivity growth is expected to reach about 3 per cent in 2017 - accounting for all, or almost all, the economic growth for this year, Manpower Minister Lim Swee Say said on Friday (Nov 24).
This will be the highest productivity growth rate since 2010, and a marked improvement from a 1 per cent growth last year. Productivity growth ranged from minus 0.2 per cent to 0.9 per cent from 2012 to 2015.
The news comes as local employment growth strengthens, even as total employment this year is likely to remain flat or even fall, said Mr Lim.
Productivity improvements are critical to Singapore's economic progress, said Mr Lim.
"Without productivity gains, we will eventually lose our competitiveness. Wages will stagnate too," he said, speaking at an awards ceremony for productive businesses.
"We should not fear that productivity growth will take away jobs and slow down total employment growth. Instead, we should embrace productivity growth because it will help enhance the quality and attractiveness of jobs, thereby helping our local employment to grow faster and better," he said.
The Ministry of Trade and Industry on Thursday (Nov 23) upgraded its forecast for gross domestic product growth this year to 3 per cent to 3.5 per cent, up from an earlier estimate of 2 per cent to 3 per cent.
Mr Lim said that most, if not all, of the projected GDP growth this year will come from productivity gains, since total employment change - the other component of GDP growth - is likely to be flat or even negative.
Total employment fell in the first three quarters of the year by 20,000, excluding maids.
But this affected mainly foreign workers, such as in the marine and construction sectors, where 43,000 jobs were lost.
In contrast, about 9,000 more Singaporeans and permanent residents were in jobs by the end of the third quarter compared with the end of last year, he said.
For the whole of this year, although total employment change will likely be zero or negative, far less than the growth of 8,600 last year, local employment is likely to grow faster than the 11,200 recorded last year, Mr Lim noted.
"As we become more manpower lean, lower growth or no increase in total employment need not mean jobless growth for our local workforce, as long as local employment growth remains positive," he said, addressing about 220 company officials at Shangri-La Hotel, at the event organised by the Singapore Business Federation.
Economists said it is too early to cheer the higher productivity growth, as it is not yet clear if it can be sustained beyond the current phase of the global economic recovery.
"As demand picks up in the early stages of recovery, companies can ramp up production quite easily without having to hire additional workers, especially in manufacturing, which is the sector driving growth right now," said Maybank Kim Eng economist Chua Hak Bin.
It remains to be seen whether firms will be able to achieve the same growth next year without hiring more workers, he said.
Investments by companies, which are important to prepare for future productivity improvements, are also not picking up, which is a worrying sign, he cautioned.
DBS economist Irvin Seah said that while the tighter foreign labour policy of the past few years has likely helped to prod companies into becoming less reliant on low-wage foreign workers, it is hard to measure how much of the economy-wide productivity gains is from technological gains, and how much is from the global economic recovery.
"More importantly, the productivity growth needs to translate into a rising real median income for Singaporeans," he added.
Mr Lim highlighted the manufacturing, finance, professional services and wholesale trade sectors as the ones with "good and improving" productivity levels. With technology and innovation, they will offer more attractive jobs to locals.
But food and beverage services, admin and support, accommodation, retail, and community, social and personal services are sectors in which the local share of employment continues to decline, he said.
"These sectors will need to do more to embrace change, redesign jobs, upgrade skills, and improve productivity and wages," he said, adding that productivity growth must pervade all sectors of the economy, across all levels of the workforce and all sizes of enterprises.
One of the 10 companies which picked up awards on Friday was Chinese restaurant Dian Xiao Er, which uses past sales data to predict demand for its signature herbal roast duck. Each outlet then receives a guideline on the number of ducks to roast at various times of the day.
Construction company Hua Siah Construction was also lauded for its use of computer modelling and technology. For example, it uses advanced machinery with laser guided controls to lay concrete which helped it reduce manpower needs by 30 per cent.