THE RELATIONSHIP BETWEEN EMPLOYMENT AND EARNINGS IN SINGAPORE: 1991–2012

Abstract

Since its formation in 1972 under the leadership of its founding chairman, Professor Lim Chong Yah, the NWC has been a major force in ensuring the stability of the labor market. A key recommendation which the NWC pushed for as a means of saving jobs in the recessions has been the reduction of the cost of labor to employers. The underlying assumption was that the reaction of demand to reduced labor costs would be large enough to justify such an approach. The main aim of this paper is to derive estimates of the elasticity of demand for labor using a suitable time-series econometric approach. The estimates imply that the elasticity of demand for labor in Singapore is less than but close to being unitary in magnitude.