LABOUR productivity will likely improve slightly this year - the first rise since 2011 - as the economy strengthens and more firms implement steps to lift output, according to the Ministry of Trade and Industry (MTI).

Productivity fell by 0.3 per cent in the second quarter against the same period a year ago, after a 3.8 per cent contraction in the first quarter. But a pickup in the overall economy in this half will help to raise the full-year productivity figure, said MTI permanent secretary Ow Foong Pheng at a briefing yesterday on second- quarter economic growth.
The ministry expects economic expansion to continue improving slightly throughout the rest of the year as global conditions stabilise.
While higher growth would in itself help raise labour productivity, the Government will also take steps to ensure companies are continuing to adopt better practices to keep up with the economy's restructuring, said Mrs Ow.
"Productivity per worker is very much driven by the economic performance, so for this year we expect a slight improvement in the productivity figure," she said.
"But it's more important for us to look at what's happening on the ground for each of the different sectors that we work on."
Mrs Ow said it is heartening that more firms have been signing up for the Government's productivity schemes.
Some advances have been made. The MTI noted that unit labour costs in manufacturing rose by 5.1 per cent in the second quarter from a year ago, slower than the 13 per cent rise in the first quarter. This was due to "an improvement in the productivity performance of the manufacturing sector", said the ministry.
In a worrying sign, however, labour productivity gains are not being made across all sectors.
Productivity for finance and insurance firms soared 10 per cent in the second quarter over a year ago, while that for the wholesale and retail trade sector rose 3.5 per cent. But productivity declined in all other sectors, especially construction, MTI data showed.
The ministry also said yesterday that between 2003 and 2008, when the foreign worker policy was liberalised, many manufacturing companies cut investments in machinery and automation in favour of ramping up the hiring of low-skilled - and relatively cheaper - foreign labour.
"This implies that continued access to cheap, low-skilled foreign workers could deter firms from investing in machinery," an MTI special report said. "This would, in turn, have likely depressed the productivity of the firms."
The study also found that other factors could have led to the decline in machinery intensity. For example, some companies may have moved into less production- intensive activities.
This suggests that aside from tightening firms' access to low- skilled foreign labour in order to encourage them to invest in automation, other measures to help improve productivity through innovation or research and development are also needed, MTI said.

LABOUR productivity will likely improve slightly this year - the first rise since 2011 - as the economy strengthens and more firms implement steps to lift output, according to the Ministry of Trade and Industry (MTI).

Productivity fell by 0.3 per cent in the second quarter against the same period a year ago, after a 3.8 per cent contraction in the first quarter. But a pickup in the overall economy in this half will help to raise the full-year productivity figure, said MTI permanent secretary Ow Foong Pheng at a briefing yesterday on second- quarter economic growth.

The ministry expects economic expansion to continue improving slightly throughout the rest of the year as global conditions stabilise.

While higher growth would in itself help raise labour productivity, the Government will also take steps to ensure companies are continuing to adopt better practices to keep up with the economy's restructuring, said Mrs Ow.

"Productivity per worker is very much driven by the economic performance, so for this year we expect a slight improvement in the productivity figure," she said.

"But it's more important for us to look at what's happening on the ground for each of the different sectors that we work on."

Mrs Ow said it is heartening that more firms have been signing up for the Government's productivity schemes.

Some advances have been made. The MTI noted that unit labour costs in manufacturing rose by 5.1 per cent in the second quarter from a year ago, slower than the 13 per cent rise in the first quarter. This was due to "an improvement in the productivity performance of the manufacturing sector", said the ministry.

In a worrying sign, however, labour productivity gains are not being made across all sectors.

Productivity for finance and insurance firms soared 10 per cent in the second quarter over a year ago, while that for the wholesale and retail trade sector rose 3.5 per cent. But productivity declined in all other sectors, especially construction, MTI data showed.

The ministry also said yesterday that between 2003 and 2008, when the foreign worker policy was liberalised, many manufacturing companies cut investments in machinery and automation in favour of ramping up the hiring of low-skilled - and relatively cheaper - foreign labour.

"This implies that continued access to cheap, low-skilled foreign workers could deter firms from investing in machinery," an MTI special report said. "This would, in turn, have likely depressed the productivity of the firms."

The study also found that other factors could have led to the decline in machinery intensity. For example, some companies may have moved into less production- intensive activities.

This suggests that aside from tightening firms' access to low- skilled foreign labour in order to encourage them to invest in automation, other measures to help improve productivity through innovation or research and development are also needed, MTI said.