Singapore and the Productivity Gap

Singapore and the Productivity Gap

In 2013, the GDP in Germany per hour worked was 57.36 USD, making Germany the 7th most productive country in the OECD. At the same time, Singapore’s productivity was at 41.46 USD[1]. On the other side, Singapore has had the highest average total GDP growth rate among all the developed countries. Between 2007 and 2011, the average annual real GDP growth in Singapore was 4.9% – compared to Germany, which only had an average annual real GDP growth of 0.6%. [2]

How could Singapore achieve such phenomenal growth, yet still have very low productivity? The answer is in 3 areas:

  1. Low wages
  2. Long working hours
  3. Foreign workers

Low wages

Even though wages have been rising in Singapore, compared to other developed countries the cost of labour is still relatively low. In 2011, based on information provided by the US Bureau of Labor Statistics, the hourly cost for manufacturing in Singapore was 22.60 USD,  not even half of Germany (47.38 USD).

Countries GDP Graph

[1] Source: Wikipedia, Ranking of countries  by GDP per hour worked (PPP)

[2] Source: US Bureau of Labor Statistics, 2012

Long working hours

Asian countries in general are well known for long working hours (compared to their western counterparts), and Singapore makes no exception.  According to the same study, employees in Singapore worked an average of 2409 hours per year, which is significantly longer then the amount their German counterparts work (1411 hours).

Cost for manufacturing in Singapore

Growth of foreign labor

Partly due to a relaxed immigration and foreign worker policy in Singapore, partly because there has been only a very slow population growth, and partly due to continuous foreign investments requiring a larger pool of workers, the percentage of non-residents in Singapore has risen from 23% in 2000 to 33% in 2013[1].

Singapore Demographics

With the introduction of the Singapore Fair Consideration Framework and the tightening of the rules for employing foreign talent, Singaporean companies will have to shift their focus on improving productivity moving forward.  With rental cost of industrial properties already increasing at 10.2% in average annually over the last 4 years, rising wages will only add to the overall cost of business in Singapore.

In order to increase productivity, Singaporean SME’s need to look at IT, and specifically at integrated ERP solutions to eliminate redundant business activities, align business processes with global best practices, and automate business processes in as much as possible.

 [1] Source: Wikipedia, Singapore Demographics


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