Feb 6, 2010
Paradigm shift or pendulum swing?
Productivity is back in vogue and older Singaporeans wonder why it was allowed to slide in the first place. Wasn't productivity the mantra in the 1980s? So what happened? What's different this time around? How will the Economic Strategies Committee proposals affect the worker and the businessman?
Mr Lee Kuan Yew giving a speech at the inauguration of Productivity Month in 1982. A national campaign was started to 'work better and smarter'. -- ST FILE PHOTO
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SINGAPORE'S labour force will grow by only 1 per cent to 2 per cent a year in the next 10 years, and further unlimited inflow of foreign workers is out of the question.
As a result, the country has no other option but to ensure that future economic growth is based on high productivity improvements each year.
This sounds like a recommendation from the Economic Strategies Committee (ESC) report this week. It is not.
Believe it or not, it comes from page 123 of the Report of the Economic Committee, published in 1986, which identified new directions for Singapore's economy.
Productivity - the ability to create valuable goods and services through the use of the country's human, capital and natural resources - has long been a concern for the Government.
It is not hard to see why. Over the decades, ministers have stressed that raising productivity is key to sustaining the country's economic growth and consequently the standard of living and prosperity of its people.
Gains in efficiency have translated into better wages and jobs for many.
But the changing nature of economic challenges as Singapore industrialised and entered the league of developed nations has meant that this message needs to be renewed - and adjusted - over time.
Productivity in the past
IN THE first 15 years after Independence - between 1966 and 1980 - the economy grew some 10 per cent a year on average.
New businesses and investments poured in, creating jobs for people.
But by the end of the 1970s, the nation's productivity was growing much slower than that of industrialising competitors Hong Kong, Taiwan and South Korea.
It had to buck up, or be left behind.
So when the Government drew up a 10-year plan for the following decade, improving productivity became a key plank if the economy was to keep growing at 8 per cent to 10 per cent a year.
To induce employers to optimise labour use, mechanise operations and shift to higher value-added economic activities, the National Wages Council recommended a higher than usual wage increase of nearly 20 per cent a year from 1979 to 1981.
Then Prime Minister Lee Kuan Yew said in 1979 he was concerned that workers here were not as proud of or as skilled in their jobs compared to the Japanese or the Germans.
In 1981, he met key Japanese employers in Singapore to discuss practices, work attitudes and productivity in Japan and what could be applied here.
A committee on productivity was soon formed, and it recommended that a productivity movement be launched to tackle the issue.
Thus began the national campaign to work better and smarter.
A National Productivity Council and a National Productivity Board were formed. The drive worked.
The productivity of Singapore's labour force averaged 4.7 per cent a year from 1981 to 1988, contributing 77 per cent to gross domestic product (GDP) growth.
This was greatly aided by new technology, which saw output grow rapidly. The workforce grew by just 1.4 per cent a year.
But the high-wage policy was partly to blame when the economy went into recession in 1985, prompting the formation of the Economic Committee.
The committee noted that productivity growth in other developed economies, Japan aside, had stagnated.
There was therefore a need to keep raising awareness of productivity as well as take a broader approach to it - by looking at improving training, management skills, and work attitudes.
In 1990, the productivity board - the forerunner of today's Spring Singapore - issued a report on the productivity challenge over the next 10 years.
It identified five broad areas where improvements would help lift efficiency: work attitudes, skills upgrading, labour-management cooperation, progressive management practices, and effective use of manpower.
The labour movement helped to raise awareness of these issues, and productivity gains were chalked up - albeit at a much slower 3 per cent a year in the 1990s.
These gains were, however, questioned by several pundits including American Nobel Prize-winning economist Paul Krugman.
In a 1994 article in Foreign Affairs magazine, he argued that Asia's economic miracle was a 'myth', and said that Singapore's stunning growth of 8.5 per cent a year over 25 years was unsustainable: It was the result of increased investment and labour, not added efficiency.
He was criticised for overstating his case, but his point on total factor productivity - intangible productivity gains not accounted for by increased labour or investment - was noted.
Singapore Management University economist Hoon Hian Teck and Nanyang Technological University (NTU) economist Ho Kong Weng, however, found that from 1970 to 2004, total factor productivity growth contributed to over 60 per cent of the growth in the standard of living.
'Singapore's growth in standard of living benefited from the adoption of technology from abroad through our liberal policy towards multinational corporations that brought with them managerial expertise, technologies, and markets,' Professor Hoon tells Insight.
Grow, grow, grow
THE rapid growth of Asian economies over the past decade saw Singapore going for a policy of maximising growth to ride on this rising tide.
Labour MP Josephine Teo feels the difficult start to the decade - the 1998 Asian financial crisis, the 2001 recession and the 2003 Sars crisis which set back the economy - resulted in a great sense of urgency to make up for lost time, and to grab every growth opportunity.
'It was the right thing to do after the series of crises and in hindsight, we might have pulled the brakes after a few years. But then came the opportunity to develop the integrated resorts and we went ahead,' she says.
But in the last decade, productivity growth slipped to just 1 per cent.
What caused this slide? Did Singapore lose its focus on productivity?
NTU economist Choy Keen Meng believes policymakers and the people made a mistake in losing sight of the issue during the long boom years.
'When the economy was prospering and wages were rising year after year, policymakers and the public became complacent over time,' he says.
At the same time, productivity gains from information technology diffused into work processes, masking slow improvement in other areas, he adds.
Another key factor, observers note, is the rising flow of foreign workers into Singapore as there was a shortage of local workers ready to fill the new jobs that were rapidly being created as a result of the Government's strategy to achieve growth at all costs.
The labour inflow grew faster than did capital stock, skills or technology - factors which determine productivity gains, or the rise in output per worker.
No doubt, GDP rose significantly, but problems lay beneath the surface.
Labour MP Halimah Yacob says that this focus on growing the economy 'prevented us from delving deeper and asking searching questions much earlier about whether a labour input- based growth model was indeed sustainable'.
The deputy secretary-general of the National Trades Union Congress (NTUC) feels the changing scope of agencies dealing with productivity and competing interests of economic agencies may also have hampered efforts to keep watch on productivity gains.
She noted that in the 1980s, the National Productivity Board was an agency everyone could relate to almost immediately, but this was subsequently changed to the Productivity and Standards Board in 1996, following a merger with the Singapore Institute of Standards and Industrial Research.
In 2002, another name change was effected, to Spring Singapore. 'Spring' stands for standards, productivity and innovation for growth - and the change was to reflect the new focus on innovation-driven development.
'After a while, it became quite confusing as we are not quite sure which agency is really driving productivity growth in Singapore,' says Madam Halimah.
'For example, who is keeping a watching brief on issues like foreign workers and whether the huge influx will have a bearing on productivity? Different agencies may have different needs,' she adds.
'One agency may want more foreign workers for foreign investors while another dealing with small and medium-sized enterprises may also face pressures from their clients.
'But which agency will holistically assess these needs and balance them against the impact on other policies or on our long-term growth strategy?'
Acknowledging such concerns, the ESC this week called for a high-level national council to lead, coordinate and drive efforts to boost productivity and expand continuing education and training.
The council would make sure productivity remains at the forefront of the national agenda and work closely with unions and industry.
Prof Hoon, however, sees the decline in productivity in the last decade, especially in the past five years, as having to do with adjustments Singapore must make as it transits to a more services-based economy.
The hiring of workers in anticipation of the boom in tourist numbers with the opening of the two integrated resorts may also have dampened productivity growth figures, he notes.
In a 2008 paper exploring Singapore's declining productivity growth, Professor Neo Boon Siong and Ms Susan Chung of the Lee Kuan Yew School of Public Policy say overhiring during boom years, the shift towards more knowledge-based work and the lagging effect of technological investment could have contributed to this dip.
The pendulum swings back
THE shift of focus back to productivity gains, Prof Hoon believes, lies in the realisation that as an economy matures technologically, and more new jobs created are to be found in the services sector, it is simply far harder to increase productivity growth.
He points out that the experience of developed economies like Japan and the United States suggests the pace of productivity growth through automation and skills upgrading tends to be higher in manufacturing than in services.
For instance, using robots on the factory floor can expand output per worker in manufacturing considerably but a hairdresser in the services sector can serve only a limited number of customers in a day no matter how skilful she is.
The reality, however, is that ramping up productivity may well be the only way forward for growth.
As Mrs Josephine Teo, who co-chaired the ESC's sub-committee on inclusive growth, puts it: Only productivity growth can create the conditions for sustained and broad-based wage growth.
Mature economies have relied mostly, if not almost exclusively, on productivity increases to grow in the long run.
Some feel Singapore has postponed this transition by importing cheap foreign labour from abroad.
'Now it cannot continue to do this because the physical, social and political limits have been breached,' says Dr Choy, referring to unhappiness over new migrants who are seen as competing with locals for jobs and housing.
How, then, can workers and businesses be more efficient?
Working smarter
THE ESC, in its report, called for a rise in productivity growth to 2 per cent to 3 per cent over the next 10 years.
It also wants improvements in productivity to account for two-thirds of GDP growth, up from the current one-fifth share.
This week, Senior Minister Goh Chok Tong suggested that businesses work on higher-end goods and services that are less dependent on low-end labour.
He noted that this strategy was similar to the high-wage policy in the late 1970s and early 1980s, but this time around, the ESC recommended raising the foreign worker levy to prod businesses into raising productivity.
But Mr Goh cautioned that Singapore should not move too hard on the levy lest a mild recession erupt and companies find themselves unable to cope.
The ESC has called for a national productivity fund to support investments in training and innovation, as well as a resource centre businesses can tap on.
What more can companies do?
The Asia Competitiveness Institute at the Lee Kuan Yew School of Public Policy, in a report last November, said companies have to change the way they do business.
They have to redesign work processes and provide products and services with higher value to customers to tackle the productivity conundrum.
The ESC says Singapore's productivity in manufacturing and services is 55 per cent to 65 per cent of that in the US and Japan. In retail, it is 75 per cent of that in Hong Kong and one-third that of the US. In construction, productivity is half that of the US and one-third that of Japan.
Mrs Teo believes that a more efficient services sector can contribute significantly to overall productivity growth, as the sector accounts for 70 per cent of GDP.
She also sees huge potential for Singapore to learn from countries like Japan, which has high productivity levels in construction with almost no foreign workers, as a result of better work processes.
She thinks a makeover in the sector, and other areas, could draw Singaporeans to jobs they now shun.
But what of the workers themselves - how can they be more efficient, skills upgrading aside?
Many have the misconception that productivity means having to do more tasks but with less pay and longer hours, even though higher productivity means doing more in the same span of time.
Madam Halimah says it is important for companies to engage workers on the matter, as was done two decades ago, and convince them that better productivity will translate to better wages.
'A highly skilled worker who is de-motivated and disengaged will not be a productive worker,' she cautions.
She also feels an industry-by-industry analysis of productivity growth and the issues and obstacles they face will help tailor customised solutions to improve efficiency.
One thing is certain. At the end of the day, the focus on productivity must improve the quality of new jobs - not just any job but jobs that create decent wages and working conditions.
The circumstances have changed, but the core principles remain the same.
To cite the Economic Committee's report of 24 years ago: The country has no other option but to ensure future economic growth is based on high productivity improvements each year.
Feb 6, 2010
Train, but reward effort as well
Teamy the bee was the mascot of Singapore's productivity drive in the 1980s. Calls have recently been made to ramp up productivity again in Singapore. -- ST FILE PHOTO
WHETHER you are a manager, supervisor or worker, training sessions to boost your productivity could well be on your plate.
Such sessions to show people how they can do more in the same time and with less resources were prevalent at the height of the productivity movement in the 1980s and 1990s.
This week, the Economic Strategies Committee (ESC) recommended such training as a way of enhancing efficiency.
What would this involve?
What is needed, according to Singapore Management University professor Hoon Hian Teck, are a broad-based effort from every level of employment and an innovative culture across the board.
Take the cue from reports on past productivity drives. Almost 30 years ago in 1981, the Committee on Productivity suggested learning how the Japanese system fostered a highly efficient workforce.
A key factor was that workers in large companies felt motivated and inspired to give of their best when there was a free flow of information and extensive consultation at all levels before crucial decisions were taken.
There was, of course, continual training, in addition to a good welfare net - including medical and dental benefits and funding for children's education.
Significantly, there were also prospects for job rotation for employees and an element of a seniority-based wage system to reward loyal workers.
In 1990, the Productivity 2000 report said companies could create opportunities for workers to enhance their personal development.
Employers should also consider various flexible work arrangements - including part-time work and the sharing of jobs.
This week, Straits Times Forum contributor Han Tau Kwang suggested that Singaporeans could develop an instinct for lifelong learning, innovation and professional pride, which he said was lacking.
Training could focus on inspiring workers to take greater pride in their work.
But employers could also take a leaf from a point unionist Cyrille Tan made in 1991 on influencing attitude change.
He said: 'There must be a link between efforts and rewards. Workers want to know what benefits lie ahead if they take part in productivity programmes.'
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