Few years back, a white paper was released in Singapore that spoke of policy maker plan to bring Singapore population to approximately 6.5M. The white paper created huge uproar. The reasons for the up-roar were extremely valid and logical. The property prices were going through the roof becoming unaffordable for middle aged income to afford a small house. The cost of living was going up where as there was a general stagnation of wages. There was virtually a free flow of foreign talent as a result locals had to compete really hard for typical white collar jobs. It was easier for companies to simply import talents from overseas rather than restructure their internal HR process and invest in re-skilling. The logic was simple, when approximately 5M people are struggling for parity, inequality is increasing and streets and MRT were starting to look super crowded, how would Singapore handle 6.5M population.
Fast forward a decade and there are some startling population facts on Singapore. In the last 10 years, Singapore population growth slowed to 1.1% in the last 10 years. This is half of how it grew in the decade before. The median age of resident population has increased to 41.5 years vs 37.4 a decade back. Those above 65 years now constitute 15% of Singapore. In other words, people are living longer and average age of working class is increasing. Growth rate of 1.1% means population growth is below the reproduction rate and therefore very soon, the overall population will decline. Think Japan when you think of such a growth rate. If you compare 2020 population vs 2019, the overall population has dropped by 4% with non-resident population down by 10%.
Now look at the average GDP growth of Singapore between 2001-2010. The average growth rate was around 3-5%. At one quarter, it had reached 14%. However between 2010- 2020, the average growth has been 1-3%. Average growth rate had dropped from 6.5% in 2011 to 1.35% in 2019(before covid). Is there a connection between population growth and GDP growth?
Turns out there are two drivers of economic growth for any country. It is either productivity increase or growth in workforce participation. In the last 6 decade post world war, history has taught us that in this war, workforce participation(population) has always won. If workforce participation is decreasing or remains the same(due to declining population or stagnation), then productivity has to increase significantly to counter. The average productivity growth for Singapore for last decade has been 2.8%. so to merely sustain average GDP growth of 2-5%, either productivity has to sharply increase or population has to come back on track. Why GDP is important? Jobless growth is a myth. All metrics suggests that if GDP grows, jobs are created and therefore to keep generating jobs and particularly good jobs, GDP has to constantly grow along with productivity rise( that can happen with technology and right skills).
One could argue that increasing workforce participation is another way to provide momentum to GDP growth. One sees policy makers encouraging and incentivising older workers; technology makes it easier to employ mothers and home workers who can’t work full time. However what is the wriggle room Singapore has? Singapore has a labor participation rate of 68%, one of the highest in the world for a developed country. Singapore could aim to increase to 84% like Switzerland. That however would be a long term move and also in absolute numbers, it is only a small numbers.
All in all, there are two key questions for policymakers. One is what is a satisfactory GDP growth if population does not change. Likely that figure will be around 1%. If that is not satisfactory, then what do policy makers need to do to increase population.
Author: Vikas Srivastava
Vikas is the Country Manager, leading businesses across Workforce Management with Quess Corp Singapore. His portfolio includes General & IT Staff Augmentation, Selection & Services, Training & Skill Development, and Planning and Operations. With over 17 years of experience in various leadership roles, his expertise lies across Strategy, Business Development and Operations. Vikas is a National University of Singapore (NUS) alumnus and has also received a Post Graduate Diploma in Digital Business in collaboration with the MIT Sloan School of Management and Columbia Business School in 2019.
His last stint was with ManpowerGroup as Regional Director APAC, responsible for Global Clients and Operations for Experis.
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