Restructure towards more productive sectors: MTI study

[SINGAPORE] A Ministry of Trade and Industry (MTI) study of Singapore's labour productivity suggests that it is important not only to drive sectoral productivity gains, but also restructure the economy towards more productive sectors.

Conducted by MTI economist Goh Tee Wei, the study analyses whether Singapore's recent productivity trends - described by some economists as "lacklustre" - have been the result of sectors becoming more/less productive; or the result of more/less productive sectors taking a larger employment share of the economy.

Findings show that even though overall productivity growth in the last five years was supported by within-sector improvements in productivity, this was dragged down by a shift in employment towards less-productive sectors.

In particular, the electronics, biomedical manufacturing, precision engineering, transport engineering, and finance & insurance sectors saw the highest average annual productivity growth between 2008 and 2013.

However, over the same period, employment grew faster in most of the less-productive sectors, relative to the more-productive sectors - thereby pulling down overall productivity performance.

Indeed, Mr Goh found that the employment shares of several sectors with above-average productivity levels like electronics, transportation & storage, and wholesale & retail trade, declined in the last five years.

Only two of such sectors - information & communications and finance & insurance - saw an increase in their employment shares over this period.

Conversely, a number of sectors with below-average productivity levels - such as construction, business services, and accommodation & food services - saw their employment shares rise.

Mr Goh singled out the construction sector as the main drag on overall productivity growth - especially with the recent rise in building and infrastructure projects, which has in turn resulted in a "substantial expansion" of the sector.

Said Mr Goh: "If we exclude the construction sector from our analysis, the negative (impact on productivity growth) would have been much smaller ... Specifically, about 0.3 percentage-points of productivity growth was lost each year on average in the last five years, as a result of the increase in employment share of the construction sector," said Mr Goh in his report, released yesterday.