Economists weigh in on impact of economic restructuring
This year's Budget was focused on addressing concerns over the widening income gap.
File photo of Singapore workers at Raffles Place.
SINGAPORE : This year's Budget was focused on addressing concerns over the widening income gap.
The government sees raising productivity as key to boosting wages for low-income Singaporeans.
But some economists have said the economic restructuring could be painful - for both employers and workers.
Singapore's open external economy attracts global capital and workers of all stripes.
That has the effect of pushing up asset prices while depressing wages for low-income workers.
To counter this, the government has set aside S$3.6 billion to co-fund wage increases for Singaporean workers. Another S$500 million will be available to help businesses pay for productivity initiatives.
Hoon Hian Teck, professor at the School of Economics at Singapore Management University, said: "If you take advantage of the enhancement of PIC, or the Productivity and Innovation Credit scheme, and say you invest in automation that will boost the productivity of your workers, then if your workers become more productive, you will be willing to bid up your wages to hold them.
"Now the government with the Wage Credit Scheme comes in and says 'I'm going to bear 40 per cent of the wage increases'."
Economists said the schemes may induce firms to bring forward their investments in productivity.
For instance, a firm could increase productivity through automation, and hire one trained local to do a job that would have required two unskilled foreign workers.
For now, the funding is capped at three years.
Beyond that, companies that cannot compete for pricier labour, or cannot substitute labour with machinery, may have to move.
Sundaram Janakiramanan, professor at SIM University's Finance Programme, said: "It is very difficult for the small companies to go for productivity improvement, for example, training. If I have only five workers, I cannot send all the five workers for training and do nothing.
"So there should be some distinction made, and for each type of organisation, they should come up with some initiative, rather than an overall initiative, because these will only benefit bigger organisations."
For individual workers, their incomes will go up as their firms invest in productivity enhancements and enhance their skills.
But some could face job losses if over time, their firms have not achieved productivity growth that can justify the higher wages .
