A discussion on wages, must be also a discussion on productivity

Fact: Wages have been increasing.

But even though it has increased, it is not entirely good news…and you should read on.

Oh, and if your own wages haven’t been increasing… you should also read on.

The reason for both the above is: productivity, or the lack of it. Either way zero productivity is bad news for Singapore whether your wages have increased or not.

You see, if your wages have increased – but your productivity hasn’t…. that means someone has been subsidising your salary. It is either a government grant or your employer had to suck it up and pay you more.

If your wages hasn’t increased, it means you’re not doing something such that your employer could pay you more. Your employer can only pay you more money, if he himself has made money – enough to pay for rent, utilities and the rest of your colleagues.

What is happening in Singapore, is that wage growth is artificial. Have a look at the following chart:

Of course, there are some industries which by their very nature, have lower levels of productivity. In the F&B sector, for example, small owner-run businesses will find it hard to embark on significant automation. To them, short term savings in hiring cheap manpower would help them more. When they can finally afford it, then perhaps they can pay their staff better and acquire new technologies.

In this case, what can the employee do? Well – if he’s motivated enough, that is to say, if the employer has made him feel like a part of the team – the employee find ways to improve sales. Serve the customers faster, keep them happy, turnover the customers quickly… that’s just one way. Finding effective ways to market and advertise the place is another. If a waiter is incredibly smart, perhaps even find new ways to expand the services and reach out to serve more customers. That would have been impressive.

But there are some industries that could transform themselves further.

construction and manufacturing have been identified as some of the worst under performers  of productivity. They have also been allowed the highest shares of foreign manpower, because realistically there would be no Singaporean…or Malaysian even that would want to do construction work.

These firms have been forced to implement cost-cutting measures to preserve their margins. As the government tighten the tap further on foreign manpower, construction firms will  either have to start substituting their labour with technology or forgo profit.

In the manufacturing industry, the similar problem exists. The number of Singaporean residents employed as plant/machine operators and assemblers have been falling since 2005 and more prefer to work in white-collar jobs. What follows is that the employers have reduced foreign worker ratios.

The result of this, is that the tight labour market is likely to lead to certain manufactures to leave Singapore. There are far more exciting and cheaper countries to do this work in: China, Vietnam, Thailand and even the Philippines.

Productivity is bad – and it directly affects the health of our economy. As we talk about the state of wages in Singapore, we must also raise a discussion on productivity…and it’s close cousin, morale. Both of which work hand in hand to keep the economic eco system healthy.

 

 

About the author

Tay Leong Tan

Tay Leong Tan is a collective of 3 writers. Tay, Leong and Tan. (Who were you expecting?!) We are enthusiastic about labour issues, economics and current affairs in particular.

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