Chart of the Day: Construction, accommodation services to weigh down Singapore productivity

They’re struggling to generate value-add while expanding workforce.

Though Singapore’s labour productivity growth is forecast to improve gradually, it is likely that negative productivity growth in low-value-added sectors will keep weighing down near-term productivity growth.

According to a report by Standard Chartered, productivity and value-add have exhibited a positive correlation since 2012. This indicates that the more productive sectors have achieved higher productivity growth.

This has not always been the case, though. In 2010, the construction sector outperformed all sectors on productivity growth over a five-year period, despite registering the lowest value-add.

Meanwhile, demand for Singapore’s output has been weak while labour input has grown. Most sectors have struggled to generate additional value-add as they expanded their workforces.

The report further asserts that poor productivity growth in labour-intensive sectors, in particular, will likely continue to hamper Singapore’s future productivity.

The financial services sector, categorised as a high-value add sector with high productivity, employs only 5.5% of the labour force.

On the other hand, low value-add sectors with falling productivity—such as construction, accommodation and food services and other services sub-sectors—employ 41%.

Moreover, labour-intensive sectors have also been adding more workers than other sectors since 2012. 

“We believe that for Singapore to improve productivity growth, its labour-intensive sectors will need to catch up through increased automation, capital investment and other initiatives to boost labour productivity,” the report notes.