Progress in upgrading productivity has been slow.

Prime Minister Lee Hsien Loong admitted on Wednesday that some small and medium enterprises will not survive without the influx of foreign workers, but reiterated that the country must not lapse into overdependence on foreign labor.

In his speech at the opening of National Productivity Month, PM Lee said that the government’s efforts at curbing the influx of foreign labor are bearing fruit, with foreign worker growth hitting a five-year low in 2014.

Although curbs on foreign labor inflows have pressured firms to upgrade their workers “rather than simply hiring extra bodies”, PM Lee stressed that companies still need to have enough access to foreign workers.

“But we still give companies enough access to foreign workers to complement your Singaporean workforce, because if we allow in too few foreign workers, or freeze their numbers, some businesses will not survive, especially SMEs, and many Singaporean jobs will also disappear,” PM Lee said.

He also noted that some sectors continue to struggle with productivity growth as the labor market continues to tighten.

“In several sectors, progress in upgrading productivity has been slow, for example in construction and also in some service industry. Construction continues to heavily rely on foreign workers – who make up close to one-third of our foreign workforce in Singapore. In F&B and retail, our service skills and efficiency are still significantly lower still than say in the US,” he said.

Here’s more from PM Lee’s speech:The latest manpower numbers show that our efforts are bearing fruit. Foreign worker growth has slowed significantly – it is the lowest since five years ago.

Now it is now at a more sustainable level, and about where we want it to be. Real wages are rising – median wages are going up and more importantly wages at the lower end are going up too.

As I said last week, I do not expect any further major measures to tighten our foreign worker numbers. We will give companies time to adjust to the measures and to re-tool themselves.

At the same time we will continue to monitor this closely, to ensure that we stay on track in avoiding any over-dependence on foreign workers.

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