Is Singapore’s Economy Growth a Myth? : A New Productivity Analysis

Abstract

This paper studies the effects of the changing age composition and education of the labor force on labor productivity growth in Singapore. A quality index was constructed to estimate the effects of different age and educational groups on the labor productivity growth. The results indicate that young workers with university degrees contribute significantly to the labor productivity growth of the economy. However, older workers between the ages of 40 and 49 have tended to increase their contribution to labor productivity growth over time. In particular, the labor productivity growth tended to peak between the ages of 30 and 39 in 1984-89, but between the ages of 40 and 44 in 1990-99. This result suggests that older workers have become more productive as the economy moved towards more skilled and knowledge-intensive production. However, the results also suggest that productivity of older workers is lower in sectors undergoing rapid structural change such as the manufacturing sector, as opposed to the less structurally vulnerable sector such as the service sectors. It is a vital question, therefore, how Singapore reallocated types of labor among industries to optimize economic growth.