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Singapore in data - Workforce Productivity


As a nation with no natural resources save for its strategic geographic location along major shipping routes, Singapore has had to create its own competitive advantage.  This includes, but is not limited to superior infrastructure, political & economic stability, efficient & fair public governance, and of course a productive workforce. 

The combination of these factors makes Singapore’s a popular destination for businesses; but in the end, it comes back to business fundamentals.  Can companies make a profit in Singapore?

Economic growth has progressively slowed naturally due in part to being a mature economy but also influenced by global economic headwinds.  At the same time, the Singapore workforce has seen consistent wage increases over several decades, at 4% CAGR between 1991 to 2023.  When caught between these two opposing factors and the rise of technology, is Singapore’s workforce still competitive?

Identifying data to understand the problem

In order to explore this topic, we would first need to identify the data that best represent workforce productivity and competitiveness in Singapore’s context.

Workforce Productivity

With regard to workforce productivity, there is good news.  The field of Economics have well established metrics and measures; specifically, Value Added per Worker. Value added per worker is a metric used to assess the productivity and efficiency of labour within an economy or business. It measures the amount of goods and services produced by each worker after accounting for the costs of materials and services. This figure is calculated by subtracting intermediate consumption from gross output, providing a clearer picture of the economic contribution made by labour above the basic costs of production. It helps in understanding which sectors or companies are more efficient in adding value through their workforce. This metric is particularly useful for economic analysis, policy-making, and investment decisions, offering insights into labour productivity across different sectors or regions.

Workforce Competitiveness

Companies are in the business of making a profit.  While Value Added per worker provides a quantitative measure of the workforce productivity, it does not account for the cost of each worker.  If the cost of labour is too high, it makes no business sense to operate in the market or sector, regardless of the amount of value added by the worker.  There is a case to be made to use value added per employee dollar paid as a measure of workforce competitiveness.  A value added per employee dollar of $1 suggest that companies only cover the cost of labour and make no profit; a value of less than $1 suggest that employing any labour makes no business sense.  Ideally, the higher the figure the more competitive the workforce. 

Unlike value added per worker which is widely available, this is not a metric that is commonly used and may require the acquisition and processing of data from different sources. 

What the Data says...

Data from Singapore’s department of statistics, suggest that value added per employee has been growing steadily at about 2.7% CAGR over the last 40 years and at 2.1% CAGR over the last 15 years in real terms (chained 2015 Singapore dollars).

This is just the aggregate; it clearly varies across industries.  Finance & Insurance, Real Estate and Manufacturing have showed significant increases in workforce productivity, followed by Wholesale & Retail Trade and Information & Communication; while Construction and Accommodation & Food Services remain the least productive. 

Manufacturing, Wholesale & Retail Trade and Construction sectors form the bulk of employment in Singapore.  But on a per worker basis, Finance & insurance, Information & Communication and Professional Service command the highest pay on average for the sector.  Other notable observations include:

  • Employment and total compensation as a sector grew in tandem for the sectors with the largest employment; except for Construction where despite having one of the largest employed workers, they had a significantly lower total compensation and as a result, the lowest average compensation per worker.

  • In fact, data suggests that the Real Estate, Administrative Support, Construction and Accommodation & Food Services command the lowest average salaries by sector.

These insights are insightful by themselves, but a little extra effort could reveal much more.  If we were to combine Value Added per Worker with the Average Annual Compensation per worker, we would be able to quantify the Value Added per Employee Dollar for each sector in Singapore. 

Data suggests that while Value Added per Employee had grown by 2.2 times over the last 2 years or grown at 4% CAGR over the same period based current Singapore dollar value, Value Added per Employee Dollar had remained largely the same at about $2.40-$2.50 over the last 20 years.  The key observation is that not that it did not grow, but rather it is the fact that value added per employee dollar is above $1.00.  In other words, for each dollar paid out to a worker in Singapore, companies is able to generate $1.50 in value added.  Depending on the company or sector you may in, this could be quite attractive or not attractive enough.

But these figures represent the average, clearly it varies by sector with some diverging observations.

  • The Finance & Insurance sector had the highest Value Added per employee by sector; but on a Value Added per Employee Dollar basis, they were close to the national average.

  • It turns out Real Estate, Transportation & Storage, Wholesale & Retail Trade, and Manufacturing had the highest Value Added per Employee dollar of between $4.80 and $5.50. 

  • While the lowest Value Added per Employee Dollar was in Construction, Accommodation & Food Services, Professional Services, and Information & Communication of between $1.30 to $1.50.

Connecting the dots and Interpreting outcomes

The Finance & Insurance sector has the highest average salary among the sectors, and the data suggests that the salary is commensurate with their workforce productivity.  With a Value Added per Employee Dollar of $2.42 presents a decent margin for the companies in this sector. 

Real Estate, Transportation & Storage, Wholesale & Retail Trade, and Manufacturing appear to have the most productive workforce in terms of value added per employee dollar.  This could potentially stem from the fact that the workers in these sectors are paid wages lower than the value that they create through their work.

Finally, workers in sectors facing the lowest Value Added per Employee Dollar are likely to face market adjustment soon if not already.  At such low levels of productivity, companies will need to reconsider if and how to improve workforce productivity, such as automation, process improvement, workforce retraining/reskilling etc. 

  • The low levels of workforce productivity in the Construction, Accommodation & Food Services sector is not new.  Both face a market who is unwilling to pay more as well as labour shortages.  While automation is clearly an option, the issue has been addressed through cheaper foreign labour instead to keep costs low, but it remains to be seen how long and how well companies in this sector can operate under such conditions.

  • The Professional Services and Information & Communication sectors have commanded premium wages for a long time, especially the Information & Communication sectors of late.  However, it would appear that their premium wages far exceed the value that they create; and are thus ripe for some market correction which we may already be seeing the technology sector and increased adoption of automation in the professional services sector.

Key Takeaways

For fair disclosure, I am not a trained economist; but I have been an employee before and am now an employer.  These experiences have granted me the ability to look at the data from different perspectives.  While I do not have all the answers, but I hope that the analysis is able to illustrate how the right questions can lead to informed decisions and insights with data. 


Click on any of the charts to access the interactive data visualizations. If you are keen to learn how to conduct similar analyses, check out our upcoming workshops here.

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