The labour market is likely to remain tight until 2020 because of current manpower policy, said labour chief Lim Swee Say yesterday.

And companies that do not promote productivity and skills upgrading to boost worker wages will lose their workers to others that are able to, he warned.

Mr Lim was dangling the productivity carrot and brandishing the labour shortage stick at employers yesterday after a visit to four companies that successfully boosted low-wage worker incomes.

He said the government will have better success promoting the benefits of productivity now compared with 10 years ago, when employers could get extra manpower easily.

"Sometimes, mindset shifts can come about only when the bottleneck is severe enough, when the pain is felt strongly enough," he said.

For the next five to eight years, he "firmly believes that the labour market will remain tight under present manpower policy".

In 2010, the government announced its aim to raise real incomes by 30 per cent by 2020 through productivity growth of 2 to 3 per cent a year.

Unemployment in Singapore was at a 14-year low of 2 per cent last year.

At the same time, the government is tightening foreign-worker quotas and continuing with levy increases to slow down the influx of low-skilled foreigners and promote productivity growth, despite complaints from companies unable to find local workers to do the job.

Mr Lim said skills institute e2i will help companies which are committed to productivity improvements through its job-matching schemes and the $40 million Inclusive Growth Programme (IGP).

"E2i is very happy to keep channelling job-seekers to those companies and sectors that believe in productivity, skills upgrading, and innovation," Mr Lim said.

"Because our obligation is to the workers. If I can help you get a better job, I will help you get a better job," he added.

E2i, otherwise known as the Employment and Employability Institute, found jobs for 19,000 workers last year.

It also runs the IGP, which gives grants of up to 50 per cent for investments in equipment and the redesign of jobs. In return, companies have to pay their low-wage workers more.

Yesterday, Mr Lim visited four companies that tapped the IGP to achieve wage gains and better working conditions for their low- wage workers - security provider Pedro Investigations and Security Services, soya bean chain Mr Bean, rice vermicelli manufacturer People Bee Hoon, and hotel chain Park Hotel Group.

For example, Park Hotel Group cross-trained workers in front-office, housekeeping and food and beverage job roles to better meet the labour crunch.

Those whose skills were upgraded saw their monthly earnings go up from $1,200 to $1,800.

The IGP has funded 540 projects so far at a cost of $30 million, said Mr Lim.

Some 33,000 workers benefited, with more than half getting pay increments of more than 10 per cent.

Mr Lim said he hopes the IGP will get funding to do more projects.

He also said the company visits yesterday were not meant to be another rebuttal of Professor Lim Chong Yah, who mooted the idea last week to increase the monthly wages of those who earn below $1,500 by 50 per cent over three years. Singapore's focus should remain firmly on the productivity drive, he added.

"I asked for this session because...many people are asking whether it is possible to improve productivity for low-wage workers to boost their wages," he said.

"Here, we see for ourselves that it can be done for every job. But if we don't adopt the mindset, we'll be searching for a lost key at the wrong place."