Speech by Mr Tharman Shanmugaratnam, Deputy Prime Minister and Minister for Finance, at the May Day Dinner29 Apr 2015
Sister Diana Chia, President of NTUC,
Brother Lim Swee Say, Secretary-General of NTUC,
Brother Tan Chuan Jin, Minister for Manpower,
Brother Robert Yap, President of SNEF,
Brother Teo Chee Hean, Deputy Prime Minister and Coordinating Minister for National Security and Minister for Home Affairs,
Brother Goh Chok Tong, Emeritus Senior Minister,
Brother Chan Chun Sing, Deputy Secretary-General of NTUC,
Brother Heng Chee How, Deputy Secretary-General of NTUC,
Leaders and members of the Labour Movement,
Ladies and gentlemen,
1. It is my privilege to be here with all of you at this May Day Dinner.
Tripartism: How Everyone Has Moved Up
2. This year’s May Day Dinner, and the May Day Rally that we will have in two days’ time, is special because we mark 50 years of independence this year – 50 years of nation-building, which has made us a united people, and 50 years of transformation of living standards for all Singaporeans.
3. This year’s May Day is also of special significance with the passing of Mr Lee Kuan Yew, who dedicated his life to make all this a reality for Singaporeans, and to make sure especially that Singapore’s progress was about continually improving the lives of our workers.
4. The Labour Movement, and Singapore’s unique model of tripartism that that the Labour Movement has been at the centre of, has been at the heart of how we have progressed together, decade after decade. It has been a winning partnership between Government, the Labour Movement, and Employers. It has enabled not just economic growth, but growth which has benefited all Singaporeans.
5. Everyone has moved up. The average worker’s pay is about six times what it used to be in 1965, after adjusting for inflation. Our nurses are an example (the pay of the average nurse has always been around the median for the workforce or slightly higher). Our registered nurses earn about $3,700 on average today. Their jobs too have changed. With greater education, nurses today have more responsibilities entrusted to them, including tasks that only doctors used to do.
6. Likewise, workers at the lower end of the income ladder today earn much more – five times more, after adjusting for the cost of living. That’s a five-fold improvement in their standard of living.
7. Tripartism is today stronger than ever before. Major strides have been taken in the last five years alone, and the most important initiatives have in fact been led by the Labour Movement. Like the Inclusive Growth Programme and the Progressive Wage Model, aimed at uplifting the wages and quality of jobs for our lowest-paid Singaporeans, and initiatives to match displaced workers quickly to job opportunities, through e2i.
8. The Labour Movement has also been actively involved in pushing for collective representation of PMEs under the amended Industrial Relations Act and the introduction of the Fair Consideration Framework. Together with our strategies to develop new competitive strengths in our economy, these initiatives will help ensure that our Singaporean PMEs have good career opportunities, and that we retain a strong Singaporean core in our workforce.
9. I know I speak on behalf of everyone here in giving special credit to Brother Lim Swee Say, who as Secretary-General of NTUC led these initiatives, and indeed led the broader transformation of the Labour Movement over the last eight years. Thank you Swee Say!
10. I would also like to congratulate the award winners, all of whom have made significant contributions to the Labour Movement. In particular, I would like to congratulate Brother Stephen Lee, the Immediate Past President of SNEF, on being awarded the pinnacle Distinguished Comrade of Labour Award. He has contributed greatly over the years, especially in his 26 years as President of SNEF, and now joins the very distinguished past winners of this award, who include Brother Lim Boon Heng and Brother Goh Chok Tong. Thank you Stephen.
Economic Growth in the Next Five Years
11. Our dinner comes at a time of continued slow growth and risk in the global economy. This has not been a normal recovery in the world economy. Six years after the Global Financial Crisis, major economies in Europe and Japan have yet to see solid recovery. The US has done better, but there too the recovery has recently slowed. And China is also slowing, with ripple effects throughout Asia.
12. This global economic climate will affect us in Singapore. No one knows exactly how this will play out, but it is not just a temporary challenge. We may see prolonged sluggish growth in the advanced world. We should therefore not count on any significant pick-up in global demand over the next few years.
13. So we cannot count on global demand to pull ourselves along. What this means is that we have to focus even more sharply on restructuring our economy, and being more innovative in everything we do, so that we can raise productivity and raise incomes of Singaporeans.
14. That is the only way we can do well in a slow-growth world. It is also the only way we can overcome the constraints of a tight labour market. Increasingly in the years to come, we will have to grow by raising productivity.
15. The Government is setting a lower range for the GDP growth we expect over the next five years, taking into account both the global environment and our labour force constraints.
16. We had envisaged growth of 3 – 5% per year for the decade as a whole, following the Economic Strategies Committee’s recommendations. Over the first five years, we exceeded this range – our annual growth rate was 6.4% per year over 2010 to 2014. However, most of this growth was in 2010 and 2011, as we recovered strongly from the global financial crisis. Economic growth has since then averaged slightly above 3%.
17. For the remainder of the decade, i.e. growth this year and until 2020, the Government expects to see GDP growth of 2 – 4% per year. This means growth of about 3% on average, which reflects a new normal in our economy. It is good growth given our stage of development, in fact slightly higher than growth in most advanced economies.
18. However, achieving even 3% growth on average will be an increasing challenge, as our labour force slows down in the years to come.
19. Let me elaborate briefly. We moved in 2010 to tighten the inflow of foreign labour, so as to bring it down to more sustainable levels and support the long term restructuring of our economy. The result has been a reduction of foreign workforce inflows from about 80,000 in 2011 to about a third of that, 26,000, in 2014.
20. However, for the first half of this decade, this tightening in foreign worker inflows has been offset by significant increases in local employment. We cannot expect this to continue. Our baby boomers will gradually start retiring, and the younger cohorts entering the workforce are smaller than before.
21. We are making it possible for Singaporeans to be reemployed when they reach 62, and to stay active in the workforce for as long as they feel fit. But the higher participation rates of older workers will not offset the larger slowdown in our labour force growth. Resident labour force growth is likely to slow significantly in the coming years. In fact beyond 2020, our resident labour force growth rate is expected to be negligible.
Staying the Course on the Productivity Journey
22. We therefore have to focus our efforts on raising productivity and finding every way to do business more innovatively. It is the only way we can sustain increases in Singaporeans’ incomes. And it will by the end of the decade be the main way that we can grow in the face of a tight labour market, and without ever-increasing dependence on foreign workers.
23. At the start of the decade in 2010, we set an ambitious target of growing productivity by an average of 2 – 3% per year over the decade. It was an aspirational target, but it focuses us all on the critical task of raising productivity, and avoiding a continuous increase in our dependence on foreign workers.
24. Over the first five years, we achieved 2.5% growth in productivity on average. However all of this gain was achieved in 2010 and 2011, and growth has been negligible since then.
25. There is no other option for Singapore but to persevere in this effort, so as to raise productivity and incomes. It requires full and sustained commitment from everyone – employers, top management and supervisors, the Labour Movement, and all of us as individuals, working with Government. We have to push ahead together and build momentum in our productivity journey.
26. A key challenge is to restructure the domestic sector of our economy. Our domestically-oriented sectors – like construction, retail and F&B – have had relatively low levels of productivity as well as lower rates of productivity growth. Our externally-oriented sectors on the other hand have had strong productivity growth on average. We cannot continue with this two-track economy indefinitely. It will otherwise mean that businesses in the domestic sector get squeezed, year by year, as costs go up faster than productivity. Or that wages get squeezed – in a sector that in total still employs 60% of our workers. We must avoid this.
27. We therefore have to upgrade the domestic sector, bring in new ideas that have worked elsewhere, and encourage local innovations.
28. Changes are in fact happening on the ground. Business mindsets have shifted significantly, compared to 2010 when we embarked on the restructuring journey. Most companies are now looking for ways to raise productivity. Many are tapping on Government assistance to do so, including in the domestic sector.
29. The Government will extend its assistance to businesses for every form of upgrading, and to help workers pick up new skills. In the last two Budgets, we have significantly enhanced these supports, and made our schemes more accessible to SMEs especially.
30. But we also have to allow market forces to work – in other words, for businesses with new techniques, or more efficient ways to sell a product, to gain market share while others lose out. That is ultimately the most important way in which productivity increases in any economy.
31. We know it takes time for this market restructuring to happen, and for overall productivity to increase as a result. It takes time to reengineer a business, or to switch out of an unprofitable line to a new one. It takes time to train up people, and for the skills learnt to be applied usefully on the job. And it takes time for customers to switch to the more innovative and competitive firms.
32. The fact that it takes time is all the more reason why we must persevere on this journey. We have to keep up the pressure on firms to upgrade, give them maximum support for every innovation that can raise productivity, and let market forces take their course, so that the more innovative players are rewarded. It takes time, but we have to stay on course.
SkillsFuture: Investing in Our People, Through Deeper Tripartite Efforts
33. Ultimately, however, we will only succeed if we invest in our people. Every employer must look for the potential in their people, work with our unions, and invest time and effort into developing this potential with them.
34. With SkillsFuture, we have embarked on a major new phase of investment in our people, to develop every Singaporean to the fullest, not just in school but throughout life.
35. We will help Singaporeans learn at every age. No one can honestly tell what they will be doing a decade or two after leaving school. We must each develop through life, adapting to changes in the job market and the new opportunities that will come up. But whichever the field we are in or the job that we do, we must, as Singaporeans, aim to develop expertise and flair in what we do.
36. Through SkillsFuture, we will develop a whole array of learning options for individuals to choose as they go through their journey of life. We will support this through SkillsFuture Credits for Singaporeans, higher subsidies especially for those aged above 40, and a range of awards and fellowships for those pursuing mastery in their fields.
37. But SkillsFuture is not merely an economic programme. It changes how we think about learning. As individuals, we have to view the education that we get when we are young as but the starting point of a journey of personal learning, and self-renewal throughout our lives. Everyone has a strength, although we will often not figure it out during our schooling years. It is never too late in life to identify a strength, or to find new interests. It is never too late to learn. We have to keep discovering that potential in ourselves, and renew ourselves through life.
Formation of Sectoral Tripartite Committees
38. Tripartism is critical to how we will achieve SkillsFuture. Government, Unions, and Businesses must come together to collaborate in a new way, to identify the skills needed for the future, work with our tertiary educational institutions and training providers to design courses to equip Singaporeans with these skills, and make it convenient and fulfilling for everyone to learn at any age.
39. SkillsFuture is indeed an opportunity for us to deepen tripartism in Singapore. In particular, we have to develop tripartite relationships at the sectoral level – between unions, employers and our trade associations and chambers (TACs) and government agencies – in order to make SkillsFuture relevant to the specialised needs of employers and workers in each industry. Within Government, a few agencies may be involved in each sector. But we will assign one agency to take the lead. For example, the Air Transport sector will be led by CAAS and the Hotels sector will be led by STB.
40. Both our unions and TACs will I am sure find this a valuable opportunity to add further value to their members. At the national level, Government, NTUC and SNEF will actively support these sectoral initiatives. We do not have the long tradition of collaboration between firms that exists in countries like Germany and Switzerland. We have to develop our own tradition, and find practical means to deepen collaboration, industry by industry. It will be especially critical to developing capabilities among our SMEs, who on their own often lack the capacity to attract and train people.
41. We must therefore make sectoral tripartism a pervasive mode of engagement, consultation, and cooperation.
42. We will form Sectoral Tripartite Committees in all key sectors to co-own and co-drive sector-specific imperatives, especially the development of Sectoral Manpower Plans under SkillsFuture. These will involve senior representatives from sectoral unions, employers and TACs, and Government sector champion agencies. Let me illustrate this with two examples.
43. Together with NTUC, MAS will work with unions and businesses to ensure that the financial sector workforce is well-equipped with the skillsets needed as the financial sector landscape continues to evolve. A Financial Sector Tripartite Committee will be formed from September this year, and will bring in participation from industry associations such as the Association of Banks in Singapore (ABS) for a start, as well as NTUC’s Financial and Business Services Cluster of unions. It will be co-chaired by MAS and NTUC.
44. The financial sector globally is undergoing change. Weaker growth, more stringent regulatory requirements, and new technologies are transforming financial institutions and markets. It is likely to mean a very different job landscape in the next 10 years. New roles are being created, existing roles will require new skillsets, and some roles will be automated and made redundant.
45. We have already seen some key shifts, with the reduction of traditional FX spot trading and sales jobs, as activity migrates to electronic trading platforms. In the US, and increasingly in Singapore, bank teller roles are being geared towards providing financial advisory services, as opposed to just helping customers make banking transactions. Insurance companies are making greater use of analytics and using new data such as on individuals’ medical histories, exercise and diet patterns, to get for more accurate pricing of insurance policies.
46. Closer to our day-to-day lives, innovations in payments will allow us to pay each other in real time, any time of the day. While these innovations are good for customers and consumers, employees working in these sectors will need to reskill themselves, keep up to date with the new technologies and processes, so that they stay relevant to the future.
47. We have to prepare for this new job landscape. It is not a bleak landscape if we prepare for it, and indeed there is significant opportunity in this for Singapore. The continued growth of Asian finance is an advantage for us. If we make early investments to adopt new technologies and innovations, and help individuals acquire new skillsets we can ensure quality jobs for Singaporeans.
48. A second example is the maritime sector. Within Government, MPA takes the lead in this sector. We have formed two tripartite task forces – called Task-Force Sea and Task-Force Shore – that will take SkillsFuture forward and ensure that Maritime Singapore remains competitive. The task forces bring together all the key players: the sectoral unions such as the Singapore Maritime Officers’ Union and the Singapore Organisation of Seamen, industry associations such as the Singapore Shipping Association, government agencies like MPA and WDA , as well as leading training providers.
49. The task-forces are operating well. The task-forces are operating well. In the shore-based sectors, MPA and NTUC unions from the Transport & Logistics Cluster are working closely with PSA Corporation and Jurong Port to begin with, as well as WDA’s skills Development team to develop skills-based career progression pathways and competency frameworks.
50. Let me conclude with an example. One of the tripartite collaborations in the seafaring sector is the Tripartite Nautical Training Award (TNTA) scheme. This TNTA programme is the result of good work between the Singapore Maritime Officer’s Union, e2i, MPA, WDA, and employers such as APL Co Ltd.
a. The TNTA has benefitted Singaporeans like Nurisham Bin Hussin, who I recently met when I dropped in on the Certificate in Nautical Studies course at the Wavelink Maritime Institute housed at the Devan Nair Institute for Employment and Employability. Unlike most of his course-mates who had poly diplomas, he had dropped out before completing his poly course. However, Nurisham had served his NS with the Singapore Police Coast Guard, become a certified steersman, and in his own words had fallen in love with the sea. So after NS he enrolled in the TNTA. He is just about to finish the classroom training phase of the TNTA and will soon go on to 18 months of on-the-job training on a ship.
b. I was impressed by Nurisham’s passion and the confidence with which he was handling the helm in a state-of-the art ship simulator. His ambition is to eventually command his own ship, and I wish him all the best.
c. Mind you, after the three year TNTA programme, graduates become Class 3 deck officers – these are very good jobs, in fact earning an average salary of $3,800 per month. Over time, you can progress to become a Sea Captain and earn up to $10,000 per month.
51. Our tripartite efforts are hence about opportunities – opportunities for Singaporeans like Nurisham to develop their talents, and opportunities for businesses to meet critical manpower needs.
52. The longstanding trust and understanding between the tripartite partners is a real advantage as we go forward. Let us build on this trust, and work together to strengthen opportunities for all Singaporeans, keep a strong Singaporean core, and to strengthen the values that have made Singapore successful.
 MOF estimates from Occupation Wage Survey 2013, and including employer CPF contributions.
 This refers to growth from 2009-2014, i.e. starting with growth in 2010. 2009 is the base year, as adopted by the ESC in 2010.
 We saw 0.8% pa productivity growth in the domestically-oriented sectors, compared with 5.3% for the export-oriented sectors, from 2009 – 2014.