Annual real wage growth of 1.9 per cent in recent years outstrips productivity: Koh Poh Koon

Annual real wage growth of 1.9 per cent in recent years outstrips productivity: Koh Poh Koon

Koh Poh Koon
Senior Minister of State for Trade and Industry Koh Poh Koon (Screengrab)

SINGAPORE: While the real wages of resident workers have grown broadly in tandem with productivity over the past two decades, they have outstripped productivity in recent years, said Senior Minister of State for Trade and Industry Koh Poh Koon on Wednesday (Jul 11).

"From 2001 to 2017, real wages for resident workers grew by 1.5 per cent per annum on the back of productivity growth of 2.1 per cent per annum," he said in reply to a parliamentary question from MP Saktiandi Supaat.

But from 2011 to 2017, real wages for resident workers rose by 1.9 per cent per annum, while productivity grew by only 1.1 per cent per annum over the same period, Dr Koh said.

Elaborating, he said domestically-oriented sectors such as construction and other services - which include arts, health and social services - saw real wages rise faster than productivity due to labour market tightness, which led to upward pressures on wages. 

"Meanwhile, even though the sluggish global economic environment had weighed on the productivity performance of outward-oriented sectors over this period, real wage growth in these sectors was generally still supported by positive productivity growth," Dr Koh said. 

In sectors such as manufacturing, wholesale trade, and finance and insurance, he said that real wages rose in tandem with productivity.

However, in sectors such as transportation and storage, and accommodation, real wage growth exceeded productivity growth.

Dr Koh said that over the long term, real wage growth should track productivity growth in order to be sustainable. 

"This is because if real wage growth outstrips productivity growth for an extended period, businesses will be at risk of losing their competitiveness and potentially be forced to scale back or close their operations," he added. 

Dr Koh added that it is "crucial" to press on with driving productivity to maintain Singapore's competitiveness globally and to continue improving Singaporeans' wages and living standards. 

"I think the key is that wage growth will not be uniform across all sectors and fundamental to driving sustainable wage growth would be to improve productivity.

"So it is one of the important tenets of the Industry Transformation Maps that we want to help companies to better increase productivity by leveraging on technology such that the companies can make better profit margins while controlling their costs from various pressures," he added. 

Government assistance through schemes designed to help firms enhance their capability and productivity are also bearing fruit.

He said firms that tapped on the Capability Development Grant (CDG) managed by Enterprise Singapore for capability improvement projects between 2005 and 2012 experienced a 9.3 per cent increase in revenue on average over time.

Productivity improvement projects had the largest impact, raising firms’ revenue by 12.4 per cent, compared to 7.8 per cent for technology innovation projects and an average of 6.7 per cent for the remaining project areas, Dr Koh said.

“The Government is committed to continue to work with businesses and the unions to help businesses improve their productivity, and ensure that the productivity gains are shared with workers through higher wages.”

Source: CNA/fs