What is producivity? Why low productivity?

The PAP administration KPKBing that low productivity means wages cannot rise (Btw, skip to the end if u want to read something that disses the PAP administration). And low productivity is a global probem, not unique to S’pore.

But what is productivity?

Until 10 years ago, productivity was the motor that drove economic growth. Its definition is nothing more complicated than the amount we produce per worker (or per hour).

If you’re a coffee shop worker, it’s the amount of coffees, tea and food each worker sells. On a pie-making production line, it’s how many pies you turn out. If you’re a lorry driver, it’s how much you deliver.

Now think of that lorry driver stuck in a traffic jam. With too little investment in new roads and too many cars and lorries using them, his trips are slower. However hard he works, he can’t keep delivering more than before. His productivity stalls.

One reason is weak business investment. A company trying to meet an expanding order book can try one of two methods: hire a few more people, or make its existing workforce more productive by investing in new, more efficient technology. As long as its cheaper and less risky to hire cheap labour, the business may hold off investment.

But weaker private investment – and private investment has in any case been growing recently – can’t account for the whole effect.

Another attempted explanation is weak training and poor infrastructure, another is weak spending on research and development – all of which play a role but none of which can explain in full the breakdown of what is normally the engine of economic growth.


Reasons for low productivity

One of the great economic puzzles of recent years has been the slowdown in productivity growth across Western nations. There are many potential explanations for this: the continued survival of zombie companies in a low-rate era; mismeasurement of the gains from technology; new tech being less significant than older innovations (the Robert Gordon thesis); a preference among businesses to use extra labour when wages are low. And so on.


Re “a preference among businesses to use extra labour when wages are low”, taz what is happening here. Despite the recent restrictions, FTs still coming in. Only by the A380 cargo load, not the cattle truck load, as before. Remember that official productivity figures account for the cash value of output produced, divided by the number of workers.


Cynical Investor

Cynical Investor blogs at Thoughts of a Cynical Investor.




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9 Responses to “What is producivity? Why low productivity?”

  • Real Productivity:

    CI, if you want to talk about “poor productivity” Why not compare HK Govt. to Singapore’s. 1 CEO vs 82 clowns with 1 being the highest paid in the world. Yet their MRT still more efficient than our SMRT.

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  • Bapak:

    Don’t scold the Government CI, their productivity in importing FTs and capability in rasing indirect and direct taxes and fines have increased collectively and constantly. They give themselves high marks and high pays for this. Whereas the citizens & jobless PMET you die your business. Aren’t you proud of yourself for voting them?

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  • JacobAbraham:

    The main drivers of Productivity is Management, Capital and innovation. It has nothing to do with labour!

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  • opposition dude:

    Simple terms, productivity means do more with less resources. At least that is how I see it.

    Of course the PAP has never been productive, it’s just a nice buzzword to throw around every now and then. Just like how “holistic” consideration was given when the number of PRs ballooned to half a million or “stringent and robust measures” in place when the failed AGO audits were made public.

    If the PAP wants to show it is productive then start by reducing the number of its monkeys in parliament. The number always goes up between 1 to 3 seats in every GE leading to over 80 seats for a small little island. How productive can you get when you have 80+ of your gang in parliament?

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  • HarderTruths:

    I would like to draw to the good people on this site what happens when the economy crashes. This is a real possibility of $G in the near future,


    Once a country’s currency devalues drastically there is nothing to stop a snowballing effect of escalating prices and financial ruin. This is directly related to actual production and not magic money creation from the MAS or banks issuing debt to the population.

    Panic selling of the SG dollar and other $G investments will not be far behind a loss of confidence in $G’s economy to grow. It has already happened and will continue to happen in countries that print money to survive without real economic activity.

    China is smart. By refusing $G a stake in the OBOR initiative a major avenue of real production / growth for at least the next decade has bypassed $G. China knows USA will not help $G but will demand repayment of all debts owing to US corporations. So much for LHL’s big mouth.

    The $G iPad and quiche-eating generation will not be able to survive. Ironically the FT will – they have more fortitude than the Ion Orchard crowd.

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  • It’s F Trash problem:

    Foreigners created riot then Singaporean cannot drink beer at coffee shop after 10pm.

    Foreigners drag down productivity then Singaporean wages cannot increase because of poor productivity.

    Foreigners maximizing HDB and public infra such as children playgrounds intentsively then Singaporeans pay more maintenance fee.


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  • Productivity is "anti-PAP":

    CI is trying to justify the dismal record of PAP on productivity by claiming Western nations have the same problem. He is playing fast-and-loose with the facts. Whilst productivity growth in these nations might have slowed down (for various reason) it is a fact they are still a lot more productive than Singapore. They are really 1st World in terms of wages, productivity and standard of living. Singapore is only a 1st World wannabe. It only has 1st World COST of living with low wages.

    The main reason for poor productivity in Singapore is education. Western nation (real 1st world) have a better-educated workforce than Singapore. Why? Because LKY limited the number of Singaporeans that can go to university. Only 20% (recently raised to around 30+%) of each cohort is allowed to go to local universities. Why? Because LKY believed that graduates are a threat to PAP political dominance. His main (and sole) objective is for PAP stay in power. LKY’s (and PAP’s) solution is to keep the majority of Singaporeans “stupid” (aka daft) so they will not oppose PAP and/or so they can be easily “terrorized” into silence, i.e., make Singaporeans “spineless”.

    The low wages policy of the PAP has also contributed to low productivity in Singapore. The construction industry is notorious for hiring cheap, unskilled workers. That is why the quality of construction work which includes MRT system is shoddy. This explains the frequent breakdowns of the MRT. PAP believes in the fairy tale of “cheap and good”. The fact is: “cheap labour isn’t skilled and skilled workers aren’t cheap.”

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  • Rabble-rouser:

    As usual, CI is barking up a wrong tree! Global growth has slowed down to a crawl simply because the developed economies have all matured & the demographics were clearly ageing. Productivity has declined because consumption had declined due to simple reasons like job displacement due to globalization; weaker (part-time, casual) & poorer (service sector) job creation replacing manufacturing jobs (full shift, higher paid jobs) which had been outsourced & concentrated to China & increasingly, Vietnam & of course, the negative demographic profile where the general population are ageing (Baby boomers either retired or near retirement; weaker consumption) – ALL POINTING TO SLOWER OR STAGNANT GROWTH GOING FORWARD.
    Business investments itself has declined because if one looks at the world today; much of the global activity had concentrated on finance instead of the bread-&=butter manufacturing/trade/consumption. And why finance? it is simply due to all the QEs from the developed economies (USA, China, Japan & EU) which had driven global asset bubbles (bond, equities, derivatives & recently crypto-currencies) & real estate to ridiculous heights. Of course, the counterpart of all these were prodigious amounts of debt! And if you look at S’pore debt situation; there is a very high debt ratio vs S’pore GDP! A very unsustainable situation!
    And for S’pore, the danger is that developed & leaking economies shutting down the wealth & capital flows which had helped & propelled S’pore’s status as a wealthy nation. Yes, much of S’pore’s wealth is parked! Virtually all these wealth flows were derived from overseas & parked in S’pore for tax & safety reasons. And the last few years, S’pore growth had stagnated points to (1) China’s President Xi JingPin’s anti-corruption drive (which had affected S’pore casinos) & (2) Indonesian President Jokowi’s Tax Amnesty program (which had drawn back substantial amounts of capital from S’pore’s banking system). Now the worst has happened, USA President Donald Trump’s tax cuts & American First policies which were put into place for 2018. China had already moved to counter Trump’s tax cuts by coming up with tax breaks backdated to 1 January 2017 to prevent the outflow of investment dollars back to the US.
    Don’t forget in 2017, the net increase in population amounted to a measly 5k. And S’pore’s housing rental is distinctly bad with rents falling & a shrinking tenant pool competing against an oversupply of investment properties.

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  • Hal:

    This cannot, that also cannot. Stack of policies, to tedious. All cost $$. How to productivity by talking.

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