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by Assoc Prof Shandre M. T. and Tan Zhen Li. - PowerPoint PPT Presentation
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The Twin-Engines of Growth in Singapore: Employment Linkages and Structural
Changes in Manufacturing and ServicesPrepared for
“2006 International Symposium on Contemporary Labour Economics
Labour Markets Mobilization and Economic Development in a Harmonious Society, with a Focus on Chinese Labour
Markets"
(December 16-18, 2006)
by
Assoc Prof Shandre M. T. and Tan Zhen Li
2
Introduction and ScopeIntroduction and Scope• Emergence of the Services Sector Globally
• Structure of Sectors in Singapore’s Economy
Increasing GDP from services and manufacturing
Increasing importance of services in employment
• Linkages Between Manufacturing and Services: Twin Engines of Growth (ERC’s Recommendations)
• Identification of Key Sectors and Employment Effects: Input-Output Tables
• Policy Conclusion
3
Evolving M&S Sector Globally
• Globalization – Open world market• Progress of manufacturing and services sector through promotion of export services•Expansion of service sector role as intermediate inputs
4
Global trends in ServicesGlobal trends in Services
GVA trends
AAG rate of Svc in 1990s
Share of Svcs in late 90s
Developed countries
Australia 6.0% 66.7%
Germany 4.1% 61.1%
Japan 3.2% 57.6%
US 6.5% 62.9%
Developing countries
Singapore 10.2% 56.3%
Ireland 10.5% 56.0%
Korea 13.6% 45.4%
Mexico 22.0% 62.8%
Gross Value-Added of ServicesGross Value-Added of Services
Share of Services in Total Gross Value-Added in 1990s
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
Australia Germany Ireland Japan Korea Mexico NewZealand
Singapore UK US
Early 90s Mid 90s Late 90s
5
Global trends in ServicesGlobal trends in Services
Employment trends
AAG rate of Svcs in 1990s
Share of Svcs in late 90s
Developed countries
Australia 2.0% 68.0%
Germany 1.9% 58.9%
Japan 1.5% 57.4%
US 2.3% 67.6%
Developing countries
Singapore 3.8% 53.1%
Ireland (95-95) 7.1% 58.0%
Korea 3.6% 56.0%
Mexico 2.9% 49.1%
Employment in ServicesEmployment in Services
Share of Services in Total Employment in 1990s
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
Austra
lia
German
y
Irelan
d (9
5-98
)
Japa
n
Korea
Mexico
New Z
ealan
d (9
7-99
)
Singap
ore
UK US
Early 90s Mid 90s Late 90s
6
Global trends in ServicesGlobal trends in Services
Employment growth in Developing countriesEmployment growth in Developing countries
Korea in 1990s
020,000
40,00060,000
80,000100,000
Who
lesa
le &
Ret
ail
Hot
els
and
Res
taur
ants
Tra
nspo
rt,
Com
mun
icat
ions
and
Logi
stic
s
Fin
anci
alS
ervi
ces
Rea
l Est
ate,
Bus
ines
sS
ervi
ces
& IT
Edu
catio
n
Hea
lth &
Soc
ial,
Com
mun
ity &
Per
sona
lS
ervi
ces
Pub
licad
min
istr
atio
nan
d de
fenc
e
0.0%2.0%
4.0%6.0%
8.0%10.0%
AAG (Abs) AAG (Rate)
Singapore in 1990s
0
2000
4000
6000
8000
10000
12000
Whole
sale
&
Reta
il
Hote
ls a
nd
Resta
ura
nts
Tra
nsport
,
Com
munic
atio
ns
and L
ogis
tics
Fin
ancia
l
Serv
ices
Real E
sta
te,
Busin
ess
Serv
ices &
IT
Educatio
n
Health
& S
ocia
l,
Com
munity
&
Pers
onal
Public
adm
inis
tratio
n
and d
efe
nce 0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%
AAG (Abs) AAG (Rate)
Ireland (1995 to 1998)
-2,0000
2,0004,0006,0008,000
10,00012,00014,00016,00018,000
Who
lesa
le &
Ret
ail
Hot
els
and
Res
taur
ants
Tra
nspo
rt,
Com
mun
icat
ions
and
Logi
stic
s
Fin
anci
alS
ervi
ces
Rea
l Est
ate,
Bus
ines
sS
ervi
ces
& IT
Edu
catio
n
Hea
lth &
Soc
ial,
Com
mun
ity &
Per
sona
lS
ervi
ces
Pub
licad
min
istr
atio
nan
d de
fenc
e
-2.0%0.0%2.0%4.0%6.0%8.0%10.0%12.0%14.0%16.0%18.0%
AAG (Abs) AAG (Rate)
Mexico in 1990s
-200000
20000400006000080000
100000120000
Who
lesa
le &
Ret
ail
Hot
els
and
Res
taur
ants
Tra
nspo
rt,
Com
mun
icat
ions
and
Logi
stic
s
Fin
anci
alS
ervi
ces
Rea
l Est
ate,
Bus
ines
sS
ervi
ces
& IT
Edu
catio
n
Hea
lth &
Soc
ial,
Com
mun
ity &
Per
sona
lS
ervi
ces
Pub
licad
min
istr
atio
nan
d de
fenc
e -2.0%-1.0%0.0%1.0%2.0%3.0%4.0%5.0%6.0%
AAG (Abs) AAG (Rate)
7
Importance of services sector for sustained growth of the Asian countries
Demand for services is highly income elastic that is the demand for services increases concurrently as the income for Asian countries rises Demand for services such as education, health care,
telecommunication services, and travel services are expected to expand faster than the demand for manufactured and agricultural goods
Services activities are becoming an importance source of export growth for the Asian countries. Services activities are becoming the faster growing cross-border and FDI activities in East and South-East Asia for the past decade
8
Key Trends in Singapore EconomyTable 1: Key Macroeconomic Indicators: 1999-2005
1999 2000 2001 2002 2003 2004 2005
Real GDP (2000 market price & % change)
7.2 10.0 -2.3 4.0 2.9 8.7 6.4
Manufacturing 13.6 15.3 -12.8 8.4 3.0 13.9 9.3
Services 6.0 9.0 1.9 4.0 3.3 7.6 6.0
Construction -8.8 -1.7 -1.2 -14.0 -9.0 -6.1 -1.1
Share of Gross Value Added (%)
Manufacturing 23.1 26.8 23.7 25.8 26.3 27.7 27.3
Services 63.6 61.9 64.5 63.5 63.4 63.0 63.8
Construction 7.9 6.3 6.1 5.4 5.0 4.3 3.7
Others 5.1 5.0 5.7 5.3 5.3 5.0 5.2
Employment Share (%)
Manufacturing 21.0 20.8 18.8 18.2 17.9 17.3 21.4
Services 71.1 65.5 74.2 75.0 75.6 76.3 69.6
Construction 6.9 13.1 6.1 5.9 5.6 5.5 8.1
Others 1.0 0.6 0.9 0.9 0.9 0.9 0.9
Unemployment rate (average)
3.5 3.1 3.3 3.6 4.0 3.4 3.2
Source: Thangavelu and Toh (2005)Services sector includes: Wholesale and Retail trade, Hotels and Restaurants, Transport and Communication, Financial Services, Business Services, other services
9
Structure of Sectors in the Singapore Economy
Increasing GDP from Manufacturing and Services Sector – potential areas of growth
0
20000
40000
60000
80000
100000
120000
in Millions
Manufacturing Construction Services Others
Nominal GDP by Industry
2000
2001
2002
2003
2004
Source: SingStat, 2005
10
Share of Electronics to Manufacturing Sector in Singapore: 1990-2004
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Output
Manu Exports
Manu Emply
11
Increasing Importance of Services in Employment
Increasing Share of Services in Employment, Decrease in Manufacturing
0
10
20
30
40
50
60
70
Share of Employment
Ma
nu
fac
turin
g
Co
ns
tru
cti
on
Se
rv
ice
s
Oth
er
1995
2000
2004
Are there linkages between the two to account for such trends?
Source: MSRD, MOM
12
Product Composition of Singapore’s Exports (%), 1994 - 2005
Exports
1994 1999 2003 2005
Electrical & Electronic components and Machinery
45.6 55.3 50.8 58.8
Manufactured Goods 6.0 4.3 3.7 4.6
Chemicals & Pharmaceutical 5.7 8.0 11.8 11.4
Fuels and Petroleum Products 9.5 7.9 11.1 15.0
Textiles & Clothing 1.4 2.0 1.0 1.0
Transport Equipment 18.3 11.0 10.3 1.6
Food, Beverages, Crude Materials 4.4 3.3 1.9 2.2
Miscellaneous Manufactures 9.1 8.2 9.4 5.4
Export of Goods (values S$) $145,079m $196,004m $281,699m $386,919m
Export of Services (values S$) $55,474m $40,158m $63,157m $85,435m
Transportation 53.2 40.5 38.4 34.9
Travel 19.8 19.3 13.0 11.1
Financial & Insurance 0.7 5.9 8.7 9.4
Other Services 26.3 34.3 39.9 44.4
Source: Ministry of Trade and Industry, Economic Survey of Singapore, various issues; Yearbook of Statistics, Singapore, various issues
13
Importance of Linkage between M&S – Twin Engines of GrowthERC’s Recommendation for twin engines of growth:
“A strong manufacturing engine contributes to growth of services, and likewise, a strong services sector makes
factories in Singapore more competitive...Manufacturing will become more knowledge and research
intensive...Services will become more exportable and its quality will be
raised…”
14
Relationship between M&SUsage of intermediate services
Demand for service/manufacturing inputs
Eg. to complement manufacturing production or service implementation
Splintering”: outsourcing of business-related services
Eg. R&D, finance, logistics
Change in Employment Structure
Decline in manufacturing employment, shift to service sector
“between effect”
Increase in non-production employment or indirect labour within manufacturing itself
“within effect”
15
Relationship Between M&S
Demand Shares of Services and Manufacturing Outputs – 2000 (In per cent of total output per sector, data from I-O Tables 2000)
Intermediate Input
Services Manufacturing
Domestic Final Demand
Exports Other Sectors
Domestic Final Demand
Exports
31.8%
35.2% 15.1%
7.0%
11.2%
6.2%18.9% 69.1%
Manufacturing is highly export-oriented
Services allocates more of its intermediate outputs back into its own industry
Linkage between services and manufacturing is evident in intermediate inputs used reciprocally by both sectors
16
Input-output analysisProvides a complete picture of the flows of products
and services in the economy for a given year
Illustrate the flows between various industries and also between industries and the final demand sector
These linkages allow estimates to be made of the extent to which industries contribute directly and indirectly to the various final demand sectors within a country
• Greenhalugh and Gregory (2001) – UK
• Franke and Kalmbach (2005) – Germany
• Cho, Shon and Geoffrey (2000) – Korea
• Paolo and Maliciani (2005)
17
Methodology and data sources
Classify data from 1995 and 2000 input-output tables into 18 aggregated industrial sectors (over 150 industries)
Compute output multipliers
Compute employment multipliers for 1995 and 2000 using the output multipliers and employment data from Labour Force Survey data
18
Framework from Annex BComputation of output multipliers
Expressing in matrix form, we have:
X = AX + F
X (1-A) = F
X = (I–A)-1F
Where I denotes the 4X4 identity matrix and
(I–A)-1 is the Leontief output multiplier matrix
Computation of employment multipliers
Compute the total output figures, (I–A)-1final demand
Compute the employment to output ratio, ei
Multiply every entry in the (I–A)-1 matrix by ei will yield the corresponding employment multiplier
19
Methodology and data sources
Use of the closed model
• Treats private consumption expenditure in final demand as an endogenous variable as data on personal disposable income is not available
• Includes the Keynesian multiplier effect and Leontief multiplier effect
• Results in larger employment multipliers
• Enables us to determine the total multiplier effect on output and employment
20
Share of Intra and inter-industry jobs created arising from a change in final demand in each industry (95, 00 & 04)
Food 40.84 59.16 39.92 60.08 42.19 57.81Textiles 69.45 30.55 55.87 44.13 52.3 47.70Paper 59.29 40.71 54.65 45.35 47.96 52.04Petrochem 38.74 61.26 22.06 77.94 23.46 76.54Fab Metal 43.76 56.24 36.74 63.26 34.22 65.78Mach 58.42 41.58 53.28 46.72 52.21 47.79Electric 49.54 50.46 38.88 61.12 32.05 67.95Electronic 53.79 46.21 35.66 64.34 31.34 68.66Medical 62.26 37.74 49.9 50.1 49.86 50.14Trans 54.47 45.53 49.93 50.07 54.77 45.23Other Mfg 54.96 45.04 52.74 47.26 49.08 50.92Commerce 54.72 45.28 45.21 54.79 44.48 55.52Comms 51.77 48.23 41.48 58.52 40.63 59.37Finance 44.15 55.85 36.55 63.45 36.64 63.36RE & Biz 51.76 48.24 54 46 55.55 44.45CSPS 57.44 42.56 51.95 48.05 53.46 46.54Construct 68.03 31.97 68.46 31.54 60.6 39.40Others 66.84 33.16 63.99 36.01 64.65 35.35
Intra-industry jobs created(%)
in 2004
Inter-industry jobs created(%) in
2000
Inter-industry jobs created(%)
in 2004
Increase in final demand in
Intra-industry jobs created(%)
in 1995
Inter-industry jobs created(%)
in 1995
Intra-industry jobs created(%)
in 2000
21
Intra & inter-industry effects
Inter-industry jobs created are higher for manufacturing and services industries as compared to industries like construction and others
E.g. Increase in final demand
in
Intra-industry jobs created(%)
in 2004
Inter-industry jobs created(%)
in 2004 Electronics 31.34 68.66 Finance 36.64 63.36 Construction 60.60 39.40 Others 64.65 35.35
22
Intra & inter-industry effects
The employment spill-over effects from individual mfg industries to the services sector as a whole is stronger than that from the services industries to the mfg sector
Share of total jobs (%) created in 2004 in
Intra-industry Inter-industry
Increase in final demand in
Own industry
Manufacturing sector
Services sector
Petrochem 23.46 10.96 51.83 Electric 32.05 10.08 47.62 Electronic 31.34 8.88 50.21 Commerce 44.48 5.08 43.15 Comms 40.63 9.30 42.31 Finance 36.64 4.24 50.52
23
Intra & inter-industry effects
The employment spill-over effect within the services sector is higher as compared to that within the manufacturing sector
Share of total jobs (%) created in 2004 in
Intra-industry Inter-industry
Increase in final demand in
Own industry
Manufacturing sector
Services sector
Petrochem 23.46 10.96 51.83 Electric 32.05 10.08 47.62 Electronic 31.34 8.88 50.21 Commerce 44.48 5.08 43.15 Comms 40.63 9.30 42.31 Finance 36.64 4.24 50.52
24
Structural changes in employment creation For the period from 1995 to 2000 and 2000 to 2004, there was a
decrease in the share of jobs created within the same industry for most of the mfg industries
This could reflect the move to higher VA industries and Outsourcing / production fragmentation
(4) Change in share of total jobs created in (1995 and 2000)
(5) Change in share of total jobs created in (2000 and 2004) Increase
in final demand in
Own industry
Manufactur-ing sector
Services sector
Own industry
Manufactur-ing sector
Services sector
Textile -13.59 2.67 9.03 -3.57 -0.36 3.43 Petrochem -16.67 2.74 11.30 1.40 -0.38 -0.31 Fab Metal -7.02 1.09 4.99 -2.52 -0.47 2.82 Mach -5.15 1.61 3.04 -1.07 -0.25 1.36 Electric -10.66 1.48 7.68 -6.83 0.17 5.82 Electronic -18.12 2.21 13.48 -4.33 -0.28 4.22 Medical -12.35 1.55 8.97 -0.04 -0.39 0.64 Finance -7.60 0.23 7.09 0.09 -0.27 0.57 RE & Biz 2.23 -0.16 -1.49 1.55 -0.52 -0.38 CSPS -5.49 0.97 3.52 1.50 -0.08 -0.73
25
Structural changes in employment creation
Column (4) Change in share of total
jobs created in (1995 & 2000)
Column (5) Change in share of total
jobs created in (2000 & 2004) Increase in
final demand in
Own industry
Mfg sector
Services sector
Own industry
Mfg sector
Services sector
Petrochem -16.67 2.74 11.30 1.40 -0.38 -0.31 Electronic -18.12 2.21 13.48 -4.33 -0.28 4.22 Medical -12.35 1.55 8.97 -0.04 -0.39 0.64 Commerce -9.51 0.91 7.55 -0.73 -0.05 0.97 Comms -10.29 1.80 7.29 -0.85 0.91 0.26
Generally, the effects of the restructuring process on employment seem to be levelling off to a steady state equilibrium
26
Policy Implications & Conclusion• Our findings reveal the presence of strong employment linkages
between different sectors of the economy, especially from the manufacturing to services sectors
• It is suggested that jobs created arising from such employment linkages tend to be of higher skills content
– In this respect, implementation of flexible labour market policy and initiatives to upgrade skills of workers will play a crucial role to create flexibility in the economy
• The aim of Workforce Development Agency (WDA) to enhance the productivity and employability of the workers through training, retraining, and retaining workers in the labour market
27
Policy Implications & Conclusion
Two key areas of concern as the industrial structure matures and companies fragment its components and production line:
•The displacement effect of outsourcing on wage gap (skilled and unskilled wages) and on employment has not been thoroughly investigated in the economy
•Sustainable productive improvements of the Singapore economy is the development of strong small and medium size enterprises (SMEs):
–Formation of a cluster of SMEs that support the activities of the larger conglomerates These enterprises will provide employment to high VA workers providing commodities and services demanded by companies within and beyond Singapore
28
Thank you
29
Percentage change in share of employment in various sectors by occupational classification
[1] Legislators,
Senior Officials
and Managers
[2] Professionals
[3] Technicians
and Associate Professionals
[4] Non-
Production Workers
(Combining [1], [2] and
[3])
[5] Clerical Workers
[6] Service
Workers
[7] Production Craftsmen
and Related Workers
[8] Plant and Machine
Operators and
Assemblers
[9] Cleaners, Labourers
and Related Workers
Overall -2.60 2.26 4.58 1.62 -2.13 -2.04 -8.59 -11.85 11.42
Manufacturing 2.05 8.59 8.66 6.53 0.06 14.22 -6.20 -11.26 24.39 Wholesale and Retail Trade
-0.03 -13.58 -14.76 -6.86 8.07 23.48 2.85 -11.88 18.10
Hotels and Restaurants
1.94 33.19 9.40 6.48 -5.12 -4.46 36.80 -15.47 -0.52
Transport, Storage and
Communications -10.02 61.80 -4.68 -4.75 2.55 -9.09 44.40 43.50 10.16
Financial Intermediation
-1.59 1.61 0.34 -0.09 0.49 -9.31 -35.35 2.18 14.37
Real Estate, Renting and
Business Activities
-15.31 19.78 3.18 2.66 -3.34 -35.46 -85.28 -29.41 -31.14
Community, Social and
Personal Services -1.68 -9.08 -1.74 -4.63 0.36 12.00 29.76 -14.51 17.08
Agriculture, Mining &
Quarrying and Utilities
-11.10 -2.07 7.06 1.51 -2.59 -6.04 -20.58 6.25 3.37