Labor, Productivity And Singapore'S Development Model

This paper discusses how Singapore's labor market policies since independence have been molded by the state-driven, foreign investment-led, export-oriented, manufacturing-focused development model the country has followed over the past fifty years. The literature we review shows that high GDP growth has been achieved through factor accumulation rather than productivity increase, a strategy of extensive growth that has now run into diminishing returns as well as political, social and resource constraints. Prolonged heavy dependence on imports of foreign labor and skills to attract foreign investment has contributed to low, declining and even negative productivity growth, with low real GDP growth in recent years. In response, the government is pursuing renewed economic restructuring, limiting foreign labor inflows, targeting investments more selectively, and promoting productivity and innovation, so far with uncertain results. This paper suggests that Singapore should let market forces propel the economy toward services, domestic consumption and regional trade, led by domestic private enterprise. But the retreat from established state industrial and social policies will be difficult.