Raising Productivity will not Result in Higher Incomes – What have we been taken for?

By Roy Ngerng

PM Lee said the government’s solution to increase incomes of Singaporeans is to raise the productivity of workers, so as to create sustainable growth of incomes for the long term. The Ministry of Manpower recently released labour market statistics for the first quarter of 2012 [1]. Let’s take a look at how feasible the government’s proposal is.

According to The Straits Times, “the current method of measuring labour productivity is to divide the country’s GDP by the total number of workers [2].” Using this formula, the government’s recommendation for increasing our incomes through raising productivity can only be achieved through the following:

1.     Sustained increase in GDP over the next few years

2.     Reduction in the total number of workers

However, these are both unlikely scenarios,

1.     “Singapore cannot avoid slower growth in the next decade and beyond.” said PM Lee. He also revealed that Singapore’s GDP growth rate has slowed gradually from 8.9% in the 1970s to 5.6% in the 2000s. Thus Singapore’s GDP is expected to grow at a much slower rate if the trend is not reversed [3].

2.     Our labour force is constantly increasing – from 2.3 million in 2001 to 3.1 million in 2010 [3], and this trend is unlikely to change in the near future. The total number of workers will continue to rise.

According to the government’s proposal, if we were to increase productivity to increase our incomes, then our incomes will continue to fluctuate or remain at a constant level in the foreseeable future.

The question then is, if the government knows that our productivity is unlikely to increase dramatically in the near future or might remain at a constant level or fall during some years, when did the government propose to increase incomes through the recommendation of tying it with increases in productivity?

Of course, PM Lee has also acknowledged that, “for Singapore, slow growth will mean that new investments will be fewer, good jobs will be scarcer, and unemployment will be higher. [3]” So, the government is committed to GDP growth but can they change the situation?

How will GDP growth be increased, or sustained, if PM Lee said “(it) is natural (that our GDP growth rate slows down) because we are now more developed.” How does the government intend to go against the “natural” flow of economic development for economically advanced countries?

Moreover, there are other questions – is productivity best calculated through this formula? The government has recommended that workers “learn new skills and contribute ideas to improve performance [4]” to raise productivity. How is this qualitative improvement in our skills likely to contribute into a quantitative improvement in the GDP, according to how this formula is calculated?

Why are qualitative improvements by workers not taken into account? Are we to assume that qualitative improvements by each worker will definitely result in a quantitative increase in GDP automatically? We know that even with skills upgrade, this does not necessarily translate to financial growth. Is there a disjoint in the government’s proposal to increase productivity to increase incomes, if productivity is measured using this formula?

According to Prof Christopher Bruce, a Professor of Economics at the University of Calgary, “not only does economic theory predict that the connection between industry productivity and wages in that industry will be tenuous at best; empirical evidence reveals that there has been virtually no connection whatsoever between industry wages and industry productivity. [5]” You can read his article for a more accurate link, or lack thereof between raising productivity and increase in incomes.

There is also the question that even if higher productivity does indeed result in higher revenues for companies, how can we know if this increase in revenue is the result of higher productivity? We cannot. There is no way to do this. An analysis done by Nikhil Sachdev shows that, “(the) wage productivity gap might be explained by the fact that firms have been reaping the benefits of increased productivity by keeping the costs of labour in line and maximizing corporate profits. [6]”

Does the government know that this can happen? You bet. Thus companies will not be convinced to pass on the increase in revenue to their workers as higher wages. In the end, who benefits? The government – the increased in revenue will result in higher corporate taxes that benefits their coffers. Will they then increase our wages? No, they have shown that they are unwilling to do so.

One might question, is the government taking us for a joy ride, by claiming that they will increase our incomes through increasing productivity, knowing full well the challenges and near impossibilities in their proposal?

Has the government created the idea of increasing-productivity-for-increased-incomes as a diversion tool to buy enough time for them, before they finally decide to address our real concerns? Do we not deserve enough respect as the people who voted them into power to ensure that our interests and needs are met? Like what most Singaporeans are asking, are we being taken for granted?

What pro-active steps do I want the government to take? Be honest to us. If you do not want to increase our incomes, tell us why. Do not tie it up with some grand-looking proposal of increasing productivity when that would amount to nothing, or to increase wages of low wage workers by $60 and make a big deal out of it. If you do not want to increase it, let us know why honestly, and perhaps we will buy the argument. Conversely, if we don’t buy it, then perhaps this begs the question, are you treating us with respect? Are you taking us for granted?

Do you know why Singaporeans are concerned over their incomes and often upset over it? I think Singaporeans know the value of their incomes and what it can afford them. We are grateful for that. What they are resentful about is, why are the income differences so wide? Why do the rich earn so much more than those at the bottom? Why are our leaders drawing such a high salary, when we are earning many times less than they are?

Why is it that we have huge financial reserves but does not translate to higher incomes, that we have to continue footing our own medical bills, education costs etc? Why is the system so complicated that for me to see a doctor and to be subsidised, I have to go through complicated processes to apply for Medifund? Why is it that if I need financial assistance, I have to maneuverer the systems just to receive $400 monthly allowance? Why are we paying low wage workers $500, or $800 every month for household expenditures that exceed their monthly incomes?

Why am I working so hard so that I can increase the wealth of those at the very top?

Is this fair? For a country that prides itself based on equality, is this right? What is the government’s role? To solely increase profits for the country or to ensure equal distribution of wealth to its people? The answer is – both, but right now, the government’s focus largely rests on the former than the latter.

To start with, let’s begin with the very poor. They shouldn’t need to worry day in, day out, on whether they will have enough to eat, or to worry for their children. If we want to enforce the principle of “meritocracy”, for them to find a job and put food on the table, do we think they are able to concentrate on doing so, when what is topmost in their minds is the empty stomachs or themselves and of their children, and how to make ends meet for each day that passes? Or do we actually care about meritocracy, unless it’s for those who matter financially?

All I am asking for is this – can you be honest about why you make decisions? We know it’s for the economy. We know you treat us like workers in your company. What we want you to do is tell us that you are doing it, so that we can tell you – we do not want to be workers in your company. We want to be humans treated with dignity and respect, who happen to want to work with you in our country to grow together.

Eventually it leads to the question, if the government is honest in its decision-making, how responsible and critically measured would we be to respond as socially careful decision makers?

Can we see beyond ourselves and our own needs to the needs of others, so that what decisions we make, is not just for ourselves, but for others in our society as well?


[1] Singapore Yearbook of Manpower Statistics, 2011 http://www.mom.gov.sg/Documents/statistics-publications/yearbook11/mrsd_2011YearBook.pdf

[2] “Labour productivity continues to slide, experts divided”, The Straits Times, Saturday 16 June, 2012 (Source: http://www.mom.gov.sg/statistics-publications/national-labour-market-information/Data%20Visualisation/Pages/videographics.aspx)

[3] “Singapore’s Future Among the Leading Global Cities” – Speech by PM Lee at Economic Society of Singapore Annual Dinner, 8 Jun 12  https://www.facebook.com/notes/lee-hsien-loong/singapores-future-among-the-leading-global-cities-speech-by-pm-lee-at-economic-s/372760369453342

 [4] ntuc thisweek 4 May 2012 http://www.ntuc.org.sg/wps/wcm/connect/81f28a004b92cac0b27ffefc7fc7dcdb/4+May.pdf?MOD=AJPERES&CACHEID=81f28a004b92cac0b27ffefc7fc7dcdb

[5] The Connection between Labour Productivity and Wages http://www.economica.ca/ew07_2p1.htm

[6] An Examination of the Wage Productivity Gap http://economics.stanford.edu/files/Theses/Theses_2007/Sachdev2007.pdf