Singapore’s economy is growing — why aren’t all workers feeling it?

Singapore's economy is experiencing growth, with GDP expected to increase by 4.5 to 5.5 percent this year. However, the benefits of this growth are not evenly distributed across all sectors. Those industries related to artificial intelligence and technology, such as electronics manufacturing, precision engineering, wholesale trade, and finance, are thriving.

In contrast, domestic and consumer-facing sectors like retail, food and beverage, and hospitality are lagging behind. This uneven growth is known as "K-shaped growth," where different parts of the economy are growing at different rates or even in opposite directions. Khoon Goh, head of Asia research at ANZ, notes that electronic exports have surged by 112 percent, while non-electronic exports have declined by 2.3 percent.

This uneven performance is evident in the labor market as well, with retail and hospitality employing around half of the workforce, yet these sectors are struggling with high rental and labor costs, and consumers are cautious with spending due to inflation. Despite these challenges, the overall labor market remains resilient, and economists are cautious about labeling Singapore's economic growth as "K-shaped."

Instead, they describe it as "strong but relatively narrow and uneven." The concern is that if the weakness in consumer-facing sectors continues to impact employment and wages, it could lead to a "dual economy" with two distinct segments: one consisting of knowledge workers benefiting from technological advancements and rising productivity, and the other comprising low-skilled workers facing weaker wage growth and the risk of job displacement.

This growing gap between the two segments could potentially result in increased wealth inequality, as those with more resources are better positioned to harness the benefits of AI and translate it into productivity, influence, and income.