WAGE-PRODUCTIVITY GAP

Mr Robert Chua Teck Chew asked the Minister for Trade and Industry, as the 1992 basic wage increases continue to outstrip productivity growth for the fifth consecutive year, what measures have been taken to narrow this wage-productivity gap to ensure that the Singapore economy remains internationally competitive.

The Second Minister for Trade and Industry (Mr Lim Boon Heng): Sir, Mr Chua is right that real basic wage growth has outstripped productivity growth for five years, based on figures released by the National Wages Council (NWC). The picture painted by the Ministry of Trade and Industry's more general measure of wage growth (which includes non-bargainable employees, unlike the NWC figures) is similar to real wage growth has outstripped productivity growth in the last four years. Please refer to Chart 1 (Cols. 373 - 374) which has been circulated by the Clerk of Parliament. Chart 1 - REAL WAGE GROWTH AND PRODUCTIVITY GROWTH (Cols. 373 - 374)

Since the second half of last year, the wage-productivity gap has narrowed as economic growth picked up. For the first quarter of this year, productivity growth was 4.7% and real wage growth 3.7%

In the short term, it is not possible to manage growth such that real wage growth and productivity growth are always in line. With cyclical changes in demand and restructuring, over- and under-shooting are to be expected. For example, real wage growth was below productivity growth during the period 1986-88.

Over the longer-term, the only sure way of maintaining competitiveness is to improve productivity and ensure that labour cost increases do not exceed productivity increases. Government's measures have concentrated on the supply-side to improve the quality of our human resources.

Each cohort of students entering the labour market is better educated than its predecessors. For example, 24% of the labour force now have post-secondary and university education, compared with 14% in 1982. The improvement will continue as the education system has been restructured to give every student at least 10 years of basic education.

For workers already in employment, the Government has already set up various programmes to help them acquire skills and upgrade themselves, eg, BEST, MOST, WISE, FAST FORWARD and TIME programmes.

The Government has also encouraged restructuring of the economy towards higher value-added and knowledge-intensive activities, including research and development. These efforts have borne fruit, as evidenced by the higher skill and knowledge content of new investments in the manufacturing sector. In 1992, 16% of workers in the manufacturing sector were professional and technical workers, compared with 6% in 1982.

At the same time, the Government has encouraged the private sector to distribute their more labour-intensive activities to other regions.

The Government can only ensure that the education system and worker training programmes are relevant and sufficient for the needs of industry. But productivity improvements in the workplace must primarily be the responsibility of employers. Employers must invest in training for their own needs. In 1992, the Government set a target for companies to double their training investment from 2% of payroll to 4% of payroll by 1995. This is the amount that world-class companies spend on training. In Singapore, while larger companies (ie, those employing 500 or more workers) exceeded the 4% target, smaller companies were still some way behind. This is seen in Table 1 (Cols. 375 - 376). Table 1 - TRAINING INVESTMENT AS PROPORTION OF PAYROLL, 1992 (Cols. 375 - 376)

Singapore can retain its position as the most competitive NIE if all groups continue to concentrate on the fundamentals.