Raising Productivity will not Result in Higher Incomes – What have we been taken for?

Prime Minister Lee had said that the solution by the government to increase incomes of Singaporeans is by raising the productivity of workers, so as to be able to increase our incomes down the road. The Ministry of Manpower had just released statistics of the labour market in the first quarter of 2012 yesterday [1]. Let’s take a look at how feasible the government’s proposal is.

According to The Straits Times Saturday, June 16, 2012, “the current method of measuring labour productivity is to divide the country’s GDP by the total number of workers. [2]”

Thus simply by looking at this formula, the government’s recommendation for increasing our incomes through raising productivity can only be achieved through the following:

  1. Sustained increase in GDP over the next few years and beyond
  2. Reduction in the total number of workers

However, these are both unlikely scenarios, as explained below:

  1. PM Lee had said at the Economic Society of Singapore’s annual dinner that, “Singapore cannot avoid slower growth in the next decade and beyond.” According the statistics that he had released at the dinner, Singapore’s GDP growth rate has slowed gradually from 8.9% in the 1970s to 5.6% in the 2000s. Thus Singapore’s GDP is expected to grow at a much slower rate than before [3].
  2. Our labour force has been constantly increasing, from 2.3 million in 2001 to 3.1 million in 2010 [3], and this trend is unlikely to change in the near future. The total number of workers will continue to rise.

According to the government’s proposal, if we were to aim to raise productivity, so as to increase our incomes, then our incomes will continue to fluctuate or remain at a constant level in the foreseeable future.

The question, then is, if the government knows that our productivity is unlikely to increase dramatically in the near future, and might remain at a constant level or fall during some years, when did the government propose to increase incomes through the recommendation of tying it with increases in productivity? Of course, PM Lee has also acknowledged that, “for Singapore, slow growth will mean that new investments will be fewer, good jobs will be scarcer, and unemployment will be higher. [3]” So, the government is committed to GDP growth but can they change the situation?

How will GDP growth be increased, or sustained, if PM Lee had also said that it “is natural (that our GDP growth rate slows down) because we are now more developed.” How does the government intend to go against the “natural” flow of economic development for economically advanced countries?

Moreover, there are other questions – is productivity best calculated through this formula? The government has recommended that workers “learn new skills and contribute ideas to improve performance [4]” to raise productivity. However, how is this qualitative improvement in our skills likely to contribute into a quantitative improvement in the GDP, according to how this formula is calculated, as it does not take into qualitative improvements by workers? Are we to assume that qualitative improvements by each worker will definitely result in a quantitative increase in GDP somewhere? We know that even with skills upgrade, this does not necessarily translate to financial growth. Is there a disjoint then in the government’s proposal to increase productivity to increase incomes, if productivity is measured using this formula?

Our political leaders in Singapore obviously are not well trained in economics, even with the high salaries we pay to them. According to Prof Christopher Bruce, a Professor of Economics at the University of Calgary, “not only does economic theory predict that the connection between industry productivity and wages in that industry will be tenuous at best; empirical evidence reveals that there has been virtually no connection whatsoever between industry wages and industry productivity. [5]” You can read his article for a more accurate link, or lack thereof between raising productivity and increase in incomes.

There is also the question that even if higher productivity does indeed result in higher revenues for companies, how would we know how to measure which increase in revenue is the result of higher productivity? We can’t. There’s no way to do this. An analysis done by Nikhil Sachdev shows that, “(the) wage productivity gap might be explained by the fact that firms have been reaping the benefits of increased productivity by keeping the costs of labor in line and maximizing corporate profits. [6]” Does the government know that this can happen? You bet. Thus companies will not be convinced to pass on the increase in revenue to their workers as higher wages. In the end, who benefits? The government – the increased in revenue will result in higher corporate taxes that benefits their coffers. Will they then increase our wages? No, they have shown that they would be very unwilling to do so.

Then the question is, is the government taking us for a joy ride, by claiming that they will increase our incomes through increasing productivity, knowing full well the challenges and near impossibilities in their proposal?

Has the government created the idea of increasing-productivity-for-increased-incomes as a diversion tool to buy enough time for them, before they finally decide to address our real concerns? Question then is, do we not deserve enough respect as the people who voted them into power to ensure that our interests and needs are met? Question is, like most Singaporeans are saying, are we being taken for granted?

For this particular scenario, what do I want the government to do? Be honest to us. If you do not want to increase our incomes, tell us why. Do not tie it up with some grand-looking proposal of increasing productivity when that would amount to nothing, or to increase wages of low wage workers by $60 and make a big deal out of it. If you do not want to increase it, let us know why honestly, and perhaps we will buy the argument. And if you do, and we still don’t buy it, then perhaps this begs the question, are you treating us with respect? Are you taking us for granted?

Do you know why Singaporeans are concerned over their incomes, and often, upset? I think Singaporeans know the value of their incomes and what it can afford them. We are grateful for that. What they are resentful about is, why are the income differences so wide? Why do the rich earn so much more than those at the bottom? Why are our leaders earning such a high salary, when we are earning many times less than they are? Why is it that we have huge financial reserves that this does not translate to higher incomes, that we have to continue to foot our own medical bills, education costs etc? Why is the system so complicated that for me to see a doctor and to be subsidized, I have to go through such a complicated process to apply for Medifund? Why is it that if I need financial assistance, I have to maneuver the systems simply to receive a $400 monthly allowance? Why are we paying low wage workers $500, or $800 every month for household expenditures that exceed their monthly incomes?

Why am I working so hard so that I can increase the wealth of those at the very top?

Is this fair? Is this equal? For a country that prides itself based on equality, is this right? What is a government’s role? To solely increase profits for the country? Or to ensure equal distribution of wealth to its people? The answer is – both, but right now, the government’s focus largely rests on the former than the latter. To start with, let’s begin with the very poor. They shouldn’t need to worry day in, day out, on whether they will have enough to eat, or to worry for their children. If we so want to enforce the principle of “meritocracy”, for them to find a job so that they should then feed themselves, do we think they are actually able to concentrate on doing so, when what is topmost in their minds is the empty stomachs or themselves and of their children, and how to make ends meet for each day that passes? Or do we actually care about meritocracy, unless it’s for those who matter financially?

All I am asking for is this – can you be honest to us about why you make decisions? We know it’s for the economy. We know you treat us like workers in your company. What we want you to do is tell us that you are doing it, so that we can tell you – we do not want to be workers in your company. We want to be humans treated with dignity and respect, who happen to want to work with you in our country to grow together.

*****

Eventually then, the question would be, if the government is honest in its decision-making, how responsible and critically measured would we be to respond as socially careful decision makers?

Can the government be honest with us, instead of mask some things, in a bid to keep themselves in power? Did we pay you high salaries to work for us, or to be masters of disguise?

Can we see beyond ourselves and our own needs to the needs of others, so that what decisions we make, is not just for ourselves, but for others in our society as well?

I had originally posted this article on my Facebook page: https://www.facebook.com/notes/roy-yi-ling-sexiespider/raising-productivity-will-not-result-in-higher-incomes-what-have-we-been-taken-f/10151810416835251

I had also sent this to The Online Citizen for publication: http://theonlinecitizen.com/2012/06/raising-productivity-will-not-result-in-higher-incomes-what-have-we-been-taken-for/

References:

[1] Singapore Yearbook of Manpower Statistics, 2011 http://www.mom.gov.sg/Documents/statistics-publications/yearbook11/mrsd_2011YearBook.pdf

[2] “Labour productivity continues to slide, experts divided”, The Straits Times, Saturday 16 June, 2012 (Source: http://www.mom.gov.sg/statistics-publications/national-labour-market-information/Data%20Visualisation/Pages/videographics.aspx)

[3] “Singapore’s Future Among the Leading Global Cities” – Speech by PM Lee at Economic Society of Singapore Annual Dinner, 8 Jun 12  https://www.facebook.com/notes/lee-hsien-loong/singapores-future-among-the-leading-global-cities-speech-by-pm-lee-at-economic-s/372760369453342

[4] ntuc thisweek 4 May 2012 http://www.ntuc.org.sg/wps/wcm/connect/81f28a004b92cac0b27ffefc7fc7dcdb/4+May.pdf?MOD=AJPERES&CACHEID=81f28a004b92cac0b27ffefc7fc7dcdb

[5] The Connection between Labour Productivity and Wages http://www.economica.ca/ew07_2p1.htm

[6] An Examination of the Wage Productivity Gap http://economics.stanford.edu/files/Theses/Theses_2007/Sachdev2007.pdf

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s