Productivity Talks

It seems like an aberration when Singapore economy can do well in some dimensions and yet suffer a fall in labour productivity. Whether it is labour under-utilization that contributes to the dip in labour productivity, the government, union and employers are gripping with the links between labour market deregulation and real fall in labour productivity.

Our current manpower policies exercise a great deal of labour market flexibility by allowing foreign labour supply to support business growth and needs. These policies are designed not to substitute local labour content. The quota system is constantly adjusted so that the local labour utilization may be increased with the hiring of foreign labour. The wider implication of this is that, with a freer flow of foreign labour, the real wage growth of the local labour stagnant at best. The wage-setting equilibrium between foreign and local labour is affected.

Indiscriminate use of foreign labour does contribute to lower productivity. Hence to reverse a fall in labour productivity, labour market training must be in force to upgrade and adapt the skills of workers, foreign and local. Lower productivity is a result of structural problems which revolve around low rates of labour utilisation.

The crucial determinants of labour policy effectiveness will be to ensure that skilled labour, local or foreign, is applied to the work role and productivity can be increased with better mechanization, work flow and planning. Skilled labour can only come with training.

In order to compete for labour and extract optimal effort from their work forces, employer must put in place a robust training regime to train workers fit for their roles. The equilibrium values of foreign and local labour must be constantly moderated to ensure that Singapore can have a faster and better workforce - not cheap per se but with each unit of labour producing more.