Can S'pore be an icon for service productivity?

OVER the last months, I have been puzzled by some of the macro-economic statistics for Singapore for 2015. First, we learned that gross domestic product (GDP) grew by about 2 per cent. Manufacturing output declined by 4.8 per cent, but services GDP grew by 3.6 per cent. These levels of growth have been with us for several quarters and anchor us firmly in the group of the traditional industrialised countries with relatively low growth. Compare, for example, GDP growth for 2015 of 1.7 per cent in Germany and 2.2 per cent in the United Kingdom.

Second, I saw the recent statistics on the growth of the median gross income from work. I was, of course, very happy that we are better off and that our median income grew in 2015 by 7 per cent in real terms. But that is where I am puzzled: how can we be paid more if we really don't produce that much more? It must be that we all work much harder and thus create more value per worker? But that is not the case either.

The annual growth in value added per worker is almost zero. We don't produce more but we get better paid for it. I am not naïve and I know that the relations between these different statistics are quite complex. But I do know that rising salary costs combined with little growth in value added per worker is not sustainable over the medium to long term. We need to create more value per worker and stimulate growth. Assuming we do not add more people to the workforce, there are, for all practical purposes, only two ways to do this: innovate or become more productive.