Productivity for sustainability

If you haven’t noticed, the Government has in the last few years been talking about Productivity. It started talking about Productivity more than 30 years ago. But the drive for productivity is even more pressing today. (Not I say one horr…Prime Minister Lee Hsien Loong say one…)

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At the inaugural National Productivity Month held in October 2014, PM Lee mentioned that with the economy being more developed, and growing at a slower pace of about 3% a year, there is less free land available, and the manpower situation is tighter.

Productivity - Waiter drone

Besides being important for growth, productivity is crucial for raising the incomes of workers. “In the short term, a tight labour market may make wages rise, but in the longer term, wage rises can only be sustained through higher productivity,” said PM Lee.

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Unfortunately, in the last year, productivity growth has been negative, although the economy has grown moderately well. Manpower-reliant areas such as Food & Beverage, Construction and Retail have not been performing well on the Labour Productivity front.

So why is there a need to push for productivity? The answer is simple. Businesses are beginning to feedback about the increasing costs of operations, some have relocated their business overseas and some are beginning to cut costs by keeping wages down. Hence, if there is no initiative to boost productivity, these businesses will lose out and workers too, will lose out eventually.

To help businesses restructure and prepare for the tight labour market which Singapore now faces, the Government introduced Productivity and Innovation Credit in 2010, which was later enhanced in 2011, 2012 and 2013. This is targeted at encouraging businesses to invest in productivity and innovation by providing incentives such as tax deductions and allowances for investments in productivity and innovation. Last year, Deputy Prime Minister and Minister for Finance Tharman Shanmugaratnam introduced an extension to the scheme known as the PIC+.IMG_0368

The NTUC too has its own programmes to encourage employers to do more to improve productivity, which in turn leads to jobs made better. The Inclusive Growth Programme (IGP) supports companies that embark on productivity improvement projects and share productivity gains with workers.

 

Apart from the IGP, the Labour Movement pushes for the Progressive Wage Model (PWM) as a way to improve the workers’ lot sustainably. The PWM consists of four inter-dependent components (ladders): Jobs, Skills, Wages and Productivity. Companies need to ensure there is an increase in skills and productivity of workers before there is an eventual increase in wages and job worth.

In light of the increase of cost of operating in Singapore, businesses need to find ways to improve productivity in order to perform better and also to pay its workers better.

What would you, as an employer hope that Budget 2015 will bring to help you improve productivity?

 

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Arthur Lee

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