Looming silver tsunami threatens to devour Singapore’s productivity

Working-age population is deteriorating at an alarming rate.

Given the trajectory of Singapore’s manpower, the city-state may have to deal with a catastrophic manpower crunch soon, as its underrated ageing population threaten to exhibit drastic effects in the coming years.

According to analysts from Nomura, unless policymakers reverse their foreign labour tightening, the dwindling labour supply would continue to strangle Singapore’s productivity by the neck.

“Assuming no relaxation in foreign labour policy, a higher share of older workers in the workforce has contributed to the lack of improvement in aggregate productivity growth in the last few years, and that share is likely to rise over the medium term,” Nomura said.

Meanwhile, Singapore’s ageing population burden is double-edged, as it also requires more fiscal resources to be set aside for healthcare and related spending, choking the expansion of the restructuring agenda.

“As older workers tend to have been less educated and thus are already more likely to be working in lower-paid jobs, ageing exacerbates the economic inequality,” Nomura said.

“Due perhaps to a recognition that older workers are less likely to have sufficient retirement savings because of their lower wages, the government has announced a number of measures such as the Silver Support Scheme and the Silver Housing Bonus,” Nomura added.

To reduce healthcare costs for the elderly, the government has also set aside $8b in 2014 to fund its new Pioneer Generation Package which provides subsidies for healthcare and health insurance.

“Tharman Shanmugaratnam, the deputy prime minister and then-minister of finance, noted in his Budget 2015 speech that government spending on healthcare would rise to over SGD13bn in 2020 from some SGD9bn in 2015,” Nomura said.