Performance of the Singapore Labour Market

Transcription

1 Performance of the Singapore Labour Market Employment, Wages and Productivity Randolph Tan School of Business, SIM University (UniSIM) October 25, 2012 Labour- 1

2 Preamble: Enviable Labour Market Experience Singapore s largely export-oriented economy usually susceptible to global weakness. Employment ultimately reacts to economic conditions, but Singapore employment still growing close to one percent each quarter. Has the Singapore labour market become recession-proofed (from a Labour- 2

3 Introduction Change is good but the process/implementation of change is accompanied by Costs of Dislocation Adjustment Re-distribution (to those disadvantaged) Labour- 3

4 Related Literature Adjustment costs Lucas, Robert (1967), "Adjustment Cost and the Theory of Supply," Journal of Political Economy, 75: Eisner, R. and Strotz, R Determinants of business investment. In Commission on Money and Credit, Impacts of Monetary Policy. Englewood Cliffs, NJ, Prentice Hall. Gertler, M. and Leahy, J A Phillips curve with an Ss foundation. Working Paper No Cambridge. MA: NBER. Learning-by-doing Lucas, Robert E., Jr On the Mechanics of Economic Development. Journal of Monetary Economics, 22(1): Middleton, K.A Wartime Productivity Changes in the Airframe Industry. Monthly Labor Review, 61(2): Labour- 4

5 Uncertainty Tremendous changes in the Singapore labour market in the last few years Changes set to continue Uncertainty affects business sentiment Arguably less extreme for Singapore than the uncertainty holding back US jobs growth Labour- 5

6 Profiling the Labour Market Examine statistical evidence of the impact of the changes on the macroeconomic profile Employment Unemployment Incomes Labour- 6

7 Impact of Uncertainty on Labour Productivity Cross-country analysis: 147 countries from WDI-GDF database Proxy uncertainty (1)- average employment growth rates Significant negative correlation Other statistics derived from employment growth data should yield the same picture Proxy uncertainty (2) std dev of Labour- 7

8 Industrialising and Industrialised Economies Category Economies 1 Australia, Hong Kong SAR (China), Canada, Malaysia, Singapore, S Korea, Bangladesh, Cambodia, China, India, New Zealand, Thailand, Philippines, Vietnam, United States, Peru 2 Norway, Finland 3 Denmark, Germany, United Kingdom, France, Japan 4 Italy, Luxembourg, Netherlands, Belgium, Austria, Greece Labour- 8

9 Phillips-Curve Dependent Variable: AVG(LAB PR GR) Variable Coefficient Std. Error t-statistic p-value CAT CAT CAT CAT AVG(UNEMP RATE) R-sq 0.40 S.E.E Log Adj R-sq 0.30 likelihood Included observations: 29 Labour- 9

10 Uncertainty in employment Dependent Variable: AVG(LAB PR GR) Variable Coefficient Std. Error t-statistic p-value CAT CAT CAT CAT S. D. (UNEMP RATE) R-sq S.E.E Adj R-sq Log likelihood Included observations: 29 Labour- 10

11 Dependent Variable: AVG(LAB PR GR) Fluctuating employment growth rates Variable Coefficient Std. Error t-statistic p-value CAT CAT CAT CAT S. D.(EMP GR) R-sq S.E.E Adj R-sq Log likelihood Included observations: 29 Labour- 11

12 A V G ( L A B P R G R ) ( %, A n n u a l) Avg Lab Prodvty Affected By Fluctuating Emp Gr WDI Database: Annual Data China Vietnam India Korea, Rep. Peru Bangladesh Cambodia Malaysia Singapore Thailand Hong Kong SAR, China United Kingdom Finland United States Philippines Australia Greece Austria Norway Denmark Japan Germany France Canada Belgium Netherlands New Zealand Italy Luxembourg S.D. (EMP GR) (%, Annual) Labour- 12

13 Corroboration If uncertainty is the reason for poor productivity performance, then the same results should be obtainable using other measures of uncertainty. Other measures (1): unemployment rate Other measures (2): capacity utilisation and TFP Labour- 13

14 Bosworth and Collins (2003) Covers 88 economies from Contains data on: Capital Stock based on Nehru and Dhareshwar (1993). H7: Index of Human Capital, 1960=1, Bosworth-Collins calculations based on Barro and Lee (1994). Total labour force, based on OECD employment or ILO labour force measures. Labour- 14

15 Avg of Lab Prod Gr Avg Labour Productivity Growth vs S.D. Capital Gr Summa ry Cros s-country Compa ri s on: Bosworth and Collins (2003) MLT CYP TWN KOR CHN IRL MYS ESP GRC ITAPRT TUR IDN AUT FIN BEL NOR FRA ISR EGY DEU IND ISL MUS PAK NLD DNK GBR SWE LKA TUN AUS CHL ECU PAN KEN MAR BRA CIV DOM PRY CANCOL MMR CMR CHE NZL MLI CRI MEX ARG BOL TTO JOR USA TZA URY GTM PHL MOZ ZWE ZAF HND SLV ETH PER UGA DZA SLE SEN BGD JAM SDN MDG GUY THA VEN ZAR RWA HTI ZMB NIC JPN SGP MWI NGA GHA IRN Std Dev of Cap Stk Gr Labour- 15

16 Fluctuating Input Growth Rates Affect Manpower Performance AVG(Lab Pr Gr) = SD(Cap Gr) AVG(Cap Gr) (.38) (.09) (.05) Gr) 0.06 SD(Lab Gr) 0.81 AVG(Lab (.18) (.10) Gr) SD(H7 Gr) AVG(H7 (.36) (.42) Labour- 16

17 Capacity Utilisation and TFP: Singapore Mfg Poor average TFP performance High variance in CU Significant correlation between variation in CU and TFP across 3-digit industries Improved average TFP performance Lowered variance in CU No correlation between variation in CU and TFP across 3-digit industries Source: Database from Koh, Rahman, Tan (2002, 2004). Labour- 17

18 Employment Labour- 18

19 Employment Growth (% Chg ) Em ploy m ent Growth (% Chg ) Employment Growth (% Chg ) Growth Rates in Types of Manpower: Sectoral Manufacturing Construction Foreign Local Foreign Local Year Services Year Foreign Local Foreign (Excl FDW) Year Labour- 19

20 C hg (%, annual) C hg (%, annual) C hg (%, annual) Compare Performance Output and Manpower Growth Rates: Manufacturing Output and Manpower Growth Rates: Construction Real GDP Gr Emp Gr: Foreign Emp Gr: Local Real GDP Gr Emp Gr: Foreign Emp Gr: Local Year Output and Manpower Growth Rates: Services Year Real GDP Gr Emp Gr: Foreign Emp Gr: Local Emp Gr: Foreign (Excl FDW) One way to assess performance of foreign vs local manpower: analyse relationship between growth rates Year Labour- 20

21 Reduced Impact In Last Downturn 3 Total Employment Growth (% Chg, q/q) Labour- 21

22 Comparison of Sectors 10 Employment Growth (% Chg, q/q) 8 Mfg Cstrn Svcs Labour- 22

23 Manufacturing Employment 4 Mfg Employment Growth (% Chg, q/q) Labour- 23

24 Paradigm Shift q2 Mean Med Max Min Std. Dev. Mean Med Max Min Std. Dev. Mfg Const Svcs All Increased volatility beginning Implications for productivity performance. Labour- 24

25 D e n sity D e n sity Den sity Den sity Employment by Sectors: Before Employment Growth Rates (q/q, %): Smoothed Distributions (Kernal Density) Overall Construction Manufacturing.6 Services Labour- 25

26 D ensity D ensity D ens ity D ens ity Employment by Sectors: After Employment Growth Rates (q/q, %): Q2 Smooth Distributions (Kernel Density) Overall Construction Manufacturing.6 Services Labour- 26

27 D e n si ty D e n si ty D e n si ty D e n si ty D e n si ty D e n si ty Employment Growth by Manpower Type Actual Employment Growth Rates (%, annual) Mfg: Foreign Construction: Foreign Services: Foreign Mfg: Local Construction: Local Services Local Labour- 27

28 Unemployment Labour- 28

29 Unemployment Distinction between experiences at the individual and macroeconomic levels; very different implications Individual always unwelcomed, sometimes tragic Macroeconomic Unemployed pool for renewed employment Eliminate unemployment mechanism to reallocate workers; moved away from less productive roles, esp during ec downturns Labour- 29

30 Addressing Unemployment in Downturns Three possible solutions to unemployment: Unemployment insurance Mandate tenure Re-employment The only viable solution to unemployment is re-employment. Re-employment depends on: vacancies Labour- 30

31 Sources of Manpower Labour- 31

32 140.0 Unemployed Pool NA NA Note: Vertical axis gives number of workers in thousands. Labour- 32

33 Redundancies 14,000 12,000 10,000 8,000 6,000 4,000 2, Q1 09Q2 09Q3 09Q4 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 Note: Vertical axis gives Number of Workers. Labour- 33

34 60 Job Vacancy Q1 08Q2 08Q3 08Q4 09Q1 09Q2 09Q3 09Q4 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 Note: Vertical axis gives number of vacancies in thousands. Labour- 34

35 LFPR: Essential Role of Foreign Labour NA NA Note: Vertical axis gives proportions as ratios of respective populations. Labour- 35

36 Future Demand for Manpower Short-term needs Long-term consequences Labour- 36

37 Short-Term Outlook Manpower demand remains buoyant, despite the slowing economy Visible sources of demand for the near-future Strength an after-effect of robust performance of last few years Labour- 37

38 Sectors Driving Manpower Demand 4.5 Recruitment Rate TOTAL CONSTRUCTION MANUFACTURING SERVICES Source: Figures are average monthly rates for SSIC2010, published by MRSD. Labour- 38

39 6.0 Sectors Driving Manpower Demand Recruitment Rates: Sub-Sectors Food, Beverages & Tobacco WHOLESALE AND RETAIL TRADE INFORMATION AND COMMUNICATIONS Transport Equipment ACCOMMODATION AND FOOD SERVICES REAL ESTATE SERVICES Source: Figures are average monthly rates for SSIC2010, published by MRSD. Labour- 39

40 Long-Term Issues Short term imperatives have dominated In longer term, decisions made for the short-term could have longer-term effects How swiftly can businesses adjust? appeared to have opted for manpower increases instead of investing in capital upgrading may take time to adapt to alternative supplies Labour- 40

41 Performance Issues Can businesses operate under the tightened policy restrictions on labour supply? Productivity drive Labour crunch in niche areas Labour- 41

42 End Labour- 42