Productivity, not trade, explains shift from manufacturing to services

28 December, 2018

Photo: The Straits Times

Is trade imbalance solely responsible for the decline in manufacturing jobs?

Assistant Professor Chen Chaoran (NUS Department of Economics) opined that trade imbalance is not a massive contributor to the loss of manufacturing jobs, rather it is the increase in labour productivity of manufacturing, as pointed out by Dr Rachel Ngai and Dr Christopher Pissarides, that leads to the decrease in demands for such employment.

A comparison was made between cell phones manufacturing and the haircut service. Across the years, the number of workers needed to produce the same number of cell phones has been decreasing, thus accounting for the decline in manufacturing employment. On the other hand, the labour production of services has remained relatively consistent. Therefore, rather than dwelling on the decline of manufacturing, a suggestion was made to embrace the rise of the service economy. For Singapore, this can be achieved by promoting growth and advancements of trade in services, which seeks to attract and cater to the consumption of foreign audiences.

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