Economic growth is measured by changes in the Gross Domestic Product, or GDP.
Here’s a simple explanation. Let’s say you’ve baked a loaf of bread. If you gave it to your neighbour at no cost, you don’t contribute to GDP. But if you were to sell the same loaf to your neighbour, you are actually contributing to Singapore’s GDP, because there is a monetary value and transaction involved. Think of all the goods and services that are produced and sold in Singapore in a given year –adding up the monetary value of all of these gives you the GDP for that year.
So, back to economic growth. When we say that Singapore’s economy grew by 2.1% in 2015, it means that our GDP (the value of goods and services transacted in Singapore in 2015) is 2.1% higher than a year ago.
If you are feeling particularly nerdy about it, you can see the full details on how to calculate Singapore’s GDP here.
Now that we’ve gotten the technicalities out of the way, let’s talk about how growth affects you and me:
Higher economic growth means higher wages and living standards. How?
Companies that set up shop in Singapore, be it global players like Google or home-grown enterprises like Sheng Siong, generate employment as they tend to hire people who are here. As these companies expand over time, this means increased wages and spending power. More people will be able to spend on goods and services like a nice makan out with the family; good news for retail and F&B. The companies themselves also spend more – on equipment, support services and the like. Overall, the positive effects of spending spreads throughout the system, and voila, more business, job creation, and economic growth! This positive cycle repeats.
Of course, real life is a whole lot more complicated, but countries generally want to be in a cycle of positive GDP growth, to avoid the much-dreaded alternative, negative GDP growth. With negative growth, companies don’t do well and may close down, and potential newcomers may choose to set up elsewhere. Less people get employed and some may even lose their jobs. With the poor business and employment outlook, spending goes down. It’s a negative cycle and everyone is made worse off.
So the impact of economic growth is not so elusive - it improves our employment, wages and living standards.
But this is not all. How we sustain economic growth and who it benefits is also important.
Raising productivity is the only lasting way to sustain our economic growth. This means using less manpower, time, capital and machinery, and yet producing more! Productivity works because the additional value is created through innovation and better ways of doing things.
Take cooking spaghetti for example. A home cook and a chef start out with the same main ingredients, but it’s the skilful balance of the flavours, the quality of ingredients, and the perfect timing, that differentiates a quick-fix meal from a Michelin-starred main.
The same goes for economic restructuring. We need finesse to build an ecosystem with the right mix of high value-added sectors, and a strong and quality local workforce with the right skills and experiences.
How are we restructuring the economy? First, encouraging businesses to move towards smarter and better ways of getting the job done, by careful tightening of foreign workforce policies. Businesses have to evolve over time to become less reliant on foreign workers.
At the same time, measures such as Productivity and Innovation Credit (PIC) give an extra nudge for businesses to innovate and invest in raising productivity, and grants and assistance schemes help our companies to dream big and expand overseas. People are still at the heart of it, and this is where SkillsFuture comes in to help our local workforce achieve their dreams, and keep levelling-up their skills throughout their lives.
Restructuring affects us in many ways. Some businesses that cannot remain competitive might close. Some workers might be laid off in the process. This is part of the difficult transition towards a higher-value economy.
But if we press on, we will see the fruits of restructuring. Workers will be more skilled, confident and gainfully employed. Businesses will be more productive and sell higher-value goods and services. This means higher wages for Singaporeans and jobs that match our higher aspirations, and improvements in the lives of Singaporeans.
So far, we’ve covered how growth is great, and that restructuring seems like a reasonable way to sustain it. But we also need inclusive growth.
Inclusiveness can be a lofty-sounding concept, but is actually something basic and important to all of us. It means a fair society where everyone benefits from growth; and that even with different starting points, we can all chase our dreams, and finish well if we put our minds to it. Inclusiveness is the social glue that brings us together, so that everyone feels that they belong, and our society as a whole becomes more resilient.
In short, inclusive growth ensures no one gets left behind. How are we doing this?
By supporting Singaporeans across different stages of their lives – education, housing, work, healthcare and retirement.
Being inclusive means we have to start early on in life, and with every child. Through our public education system and targeted assistance such as MOE Edusave and the Financial Assistance Scheme, our children have support to explore, grow and develop their full potential. We make homes affordable for low- and middle-income families. In the workplace, lower-wage workers get an extra boost through Workfare, and are able to keep building their skills and progressing through the Progressive Wage Model for certain occupations. For our seniors, we have the Pioneer Generation Package and Silver Support Scheme. We also have Medifund to support needy Singaporeans who cannot afford hospital bills.
Phew, that’s a lot of schemes! But the bottomline is that it’s a system of policies that work together comprehensively, and truth be told, we wouldn’t be able to afford all this spending without economic growth.
Taken together, economic growth, restructuring and inclusive growth actually benefit us in very real and immediate ways! The end point isn’t the dollars and cents, but good jobs and vibrant companies, better standards of living, and the means to improve the lives of all Singaporeans for many more years to come.