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Singapore could lose competitive edge if wages grow without productivity gains: HR experts

Data from the Manpower Ministry shows median wages increased by almost 40 per cent from the period between 2004 and 2014, with productivity gains largely lagging behind. Human resource experts warn this is not sustainable. 

SINGAPORE: Singapore could lose its competitive edge within the next decade if wages continued their pace of growth without corresponding productivity gains, according to human resource experts.

For a large part of the last decade, productivity growth has repeatedly fallen below wage growth. Productivity did surge ahead after the global financial crisis, but the momentum was not sustained, and wage growth continued to outpace productivity growth afterwards. 

Between 2004 and 2014, data from the Manpower Ministry’s Statistics Yearbook showed that only in 2004 and 2010 did labour productivity gains outpace wage growth. In 2004, productivity grew 7.7 per cent, and wages by 3.6 per cent. In 2010, productivity jumped ahead by 11.6 per cent in a strong recovery from the recession, while wages grew by 5.5 per cent.

Human resource experts have said that while Singapore's tight labour market will place an upward pressure on wages in the next decade, companies will find it hard to justify healthy pay increases if the trend of lagging productivity growth continues.

"If we can't make this productivity increase, it means that the Singapore economy, from a global perspective, will be less competitive,” said Adecco Personnel's country manager, Ms Femke Hellemons. “If that is the case, that will have an impact on economic growth, and again, on the sustainability of increasing the wages."

This means that businesses that lag in productivity growth will have to shape up or ship out. It is the harsh reality of competition, with unproductive companies left with dwindling resources to support a wage growth strategy for attracting and retaining talent, and having to close shop in the end.

That is why it is imperative that firms find ways to raise productivity, if they want to stay in the game.

The Government has been focusing on encouraging firms to tap technology to work smarter, and supporting ways to upskill workers so that both businesses and employees can be more productive.

"We do not have an inner market, neither do we have natural resources,” said Mr Erman Tan, president of the Singapore Human Resources Institute. “So we only can compete based on the competitiveness of our human capital. Our workforce has to stay relevant, they have to provide high value-add services and knowledge to be able to support our growth of economy."

If not, there is a possibility that wage growth will stagnate in the decade ahead.