SINGAPORE — Would the newly announced Government wage subsidies via the Wage Credit Scheme help improve productivity? How can small and medium companies here transform themselves from price-takers to price-setters? Should employers here be educated on management practices to boost workers’ productivity?

These questions were raised at an Economic Society of Singapore forum yesterday on Budget 2013. Higher foreign worker levies, the Wage Credit Scheme and enhancements to the Productivity and Innovation Credit scheme are key initiatives in this year’s Budget for the Republic’s ongoing productivity push.

The panellists — five economists and a tax expert, with Economic Society Vice-President Donald Low moderating — said the Wage Credit Scheme was a good strategy to help companies raise wages and share productivity gains with their employees. These aims were stated by Deputy Prime Minister Tharman Shanmugaratnam in his Budget speech on Monday.

But some panellists said it was unclear if the scheme would spur productivity growth, in response to audience member and Non-Constituency Member of Parliament Gerald Giam’s question.

Given Singapore is nearly at full employment, and companies are facing tighter foreign labour regulations, employers may have to increase wages to retain workers even if they are not more productive, said OCBC Head of Treasury Research and Strategy Selena Ling. A situation could result where “everybody competes with (wage) increase but productivity does not go up”, she said. “To a certain extent, we could be putting the cart before the horse, because your assumption is, you give the increase, the worker will be more productive.”

Ms Ling added that aside from productivity, companies here must also innovate to drive growth.

UOB economist Francis Tan said firms may not hop on the wage-increase bandwagon “immediately”, and could still demand higher work performance before justifying any wage increase. Workers could be asked to work longer hours to justify the increase, making productivity —the value added per worker — appear higher.

But Ernst and Young transaction tax partner Russell Aubrey said employees could be incentivised through variable bonuses for increased productivity instead of “permanent increases”.

On how SMEs could become price-setters, Ferrell Asset Management Group director David Lee said education and research and development were key in the long term.

But many businesses are “firefighting” daily with manpower and other concerns, such that few have time to think. Diversity of thought is also required, and a larger population is needed for that, Dr Lee felt.

An audience member also pointed to what he felt was a missing piece of the puzzle in nurturing more productive workers — good employers. Studies have found happy employees to be the most productive, he said.

Agreeing, moderator Mr Low said: “I think it has to do not with anything inherently wrong with the Singapore worker, but with employer practices and norms and I think that one deserves a lot more government attention, rather than just looking at wages.

“The other thing we are obsessed about in policy is that it’s as if the only thing that improves worker productivity is technology, and again, that’s misguided. A lot of it has to do with management practices, company practices, how they treat workers.”