atans1

Not bull: FT policy is bad for productivity and innovation

In Economy on 22/10/2013 at 5:40 am

The govt complains that productivity is poor and is worried, introducing measures to “improve” it. At the same time, we all know that the working population here has increased due to the flood of FTs. At the same time, S’pore’s attempt to be a global centre of innovation, is stuck on the runway. Contrast this with Estonia.

Some S’poreans have pointed to the influx of FTs as a probable reason (not the only one) for the low productivity. The local media and the govt ignore these views. The implication being that cutting back on FTs will help productivity.

Well these views have some validity as research in the West proves. (Note emphasis added is mine.)

Is it possible, really, that low productivity growth was a consequence of rapid labour-force growth? Once upon a time Paul Romer speculated that it might be:

One interpretation…is that there is a negative exernality associated with labor. this could arise if there is a form of innovation that economizes on labor, if investment in this kind of innovation is sensitive to movements in wages, an dif this innovation has positive external effects because of spillovers of knowledge. in this case, an increase in the rate of growth of the labor force, with the implied decrease in the rate of grwoth of wages, could case a decrease in innovation, and hence a decrease in knowledge spillovers from innovation. The net effect that an increase in labor supply has on output would then be the combination of the positive direct effect of more workers and the negative indirect effect of less innovation.

The suggestion that this kind of effective could be present is not new. This kind of interaction between wages and innovation has been invoked repeatedly in the comparative analysis of productivity growth in the United States and Britain during the nineteenth and early twentieth centuries.

More recently, Daron Acemoglu has done extensive work noting that innovation responds to factor scarcity or abundance. If there’s rapid growth in labour supply then one should expect lots of innovation in technologies that complement labour and very little in labour-saving innovation. Whether that should net out to a slowdown in overall productivity growth is unclear, but the story isn’t something to write off out of hand.

(http://www.economist.com/blogs/freeexchange/2013/09/generations)

If you’ve read this far, you will have noticed that innovation suffers when there there are too many bodies available. So govt saboing its policy of trying to make S’pore a centre of innovation?

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  1. Yes,it is,I have suggested before that PAP Ministers be the “Under-Cover-Boss’ to find this out,and sure to find out,a simple way I suggested was to call personally as an ordinary customer and gauge personally the service standard being offered in Singapore,obviously with their very high I.Q.either they do not bother or do not believe there is a problem,obviously not due to shortage of good feedback by big army of running dogs.

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