Wednesday, October 3, 2012

Manpower realities: Beyond the numbers

by Tan Chuan-Jin

Oct 01, 2012

The recently released data on our population statistics showed that our foreign workforce numbers continue to grow, and some Singaporeans have expressed concern. This is understandable.

On the other hand, companies also remain concerned that the Government is over tightening our foreign manpower policies. Earlier this month in Parliament, we discussed the Work Permit (WP) and S-Pass stock. I explained that while the rate of rejections had increased, foreign-labour numbers were actually still rising, albeit at a slower rate.

I said that it could be seen as a "happy problem" because businesses were doing well enough to demand for more labour, in spite of the tightening.

Two of our Nominated Members of Parliament, both of whom are businessmen, came to speak to me at tea break. Like most of the businessmen we have been speaking to, they were surprised that the stock of S Passes and WP was still increasing. Many of them have been appealing for more foreign workers and feel that we are unreasonably making it difficult for businesses, even though the macro numbers and trends show otherwise.

Our tightening has certainly had an impact and is being felt by companies, but businesses are still expanding or being set up. This demand for foreign manpower is very considerable and many businesses remain prepared to pay the higher costs involved.


Let us take a closer look at the present numbers, and see the trend over the last few years. Our WP stock (excluding foreign domestic workers) grew by 20,600 in the first half of this year. Much of the inflow in the past few months was due to foreign construction workers.

The Housing and Development Board, for example, will need about 30,000 construction workers to meet this year's building programme. The cumulative requirement of construction workers could rise to 50,000 within the next few years.

Our Employment Pass (EP) stock contracted marginally (-700), the first half-yearly reduction since 2009 when the recession hit us. I think our adjustments are beginning to be felt at the Professional-Managerial-Executive (PME) level. However, S Passes registered strong growth of 14,200 in the first half of this year. Because of the tightened EP requirements from January, it is likely that companies are using S Passes to bring in the more junior level PMEs. We are taking a close look at this group.

Overall, the growth in foreign manpower (excluding foreign domestic workers) in the first half of this year has slowed to 34,100, which is lower than that of 36,800 in the first half of last year. The slowdown in growth of foreign manpower in sectors other than construction is more obvious: 18,600 in the first half of this year - about 40 per cent lower than the 31,200 in the first half of last year.

We are on the right track in our efforts to reduce dependency on our foreign labour but this will take time.

How much time exactly will depend on many factors, particularly the extent of our tightening measures and how fast companies restructure and improve productivity. And as you can imagine, this will definitely not be overnight.


Singapore cannot grow our foreign workforce without limits, given our land, infrastructure and social constraints. But to shrink our foreign workforce altogether will also be quite dire as many of our companies may close, relocate and with that a sharp rise in retrenchments and possibly higher unemployment amongst Singaporeans.

We must therefore rein in the pace of foreign workforce growth, but at a pace that businesses can adjust.

Our productivity effort must continue aggressively. We have often said this, and for good measure. Our rate of job creation outstripped gross domestic product (GDP) growth in the last three quarters (from the fourth quarter of last year to the second quarter of this year), resulting in negative productivity growth over the same period. Without good consistent productivity growth, the competitiveness of our companies, and hence wages will be affected.

Productivity growth must be a key driver for sustainable wage growth. One reason for negative productivity is the availability of low-cost foreign labour - which would explain why the number of foreign workers continues to grow rapidly. Low labour costs make it less urgent for companies to invest in technology and innovation.

This is simply not sustainable. I know that we cannot mechanise everything; some jobs do require the human touch. But I am not aware of any country with high productivity levels which has easy access to low-cost labour.


Focusing on numbers tend to gloss over more fundamental concerns. What kind of society do we want? And what would be the look and feel of the economy be to support that? We all agree that there is more to life than GDP growth. It must be so.

However, there are still practical needs to meet. Let me share my top-line objectives and concerns. Firstly, we need to generate enough jobs for Singaporeans - not just the number of jobs, but also quality of jobs, in line with increasing education and expectations. So how do we keep Singapore dynamic enough that we offer a range of possibilities for our people?

Secondly, we need to generate sufficient income to fund the various Government expenditures for Singaporeans. We need to look at what levels of economic growth and what type of growth will help meet these objectives.

As our resident labour force is slowing, we will have to rely more on productivity growth (rather than labour force growth) to fund higher Government expenditures. What percentage of labour and productivity growth do we need to factor in? This underscores why productivity is so important. The higher our productivity, the greater space it affords us to depend less on additional labour inputs.

We are in the process of relooking the structure of our economy and the quality of growth. For example, manufacturing contributes more than 20 per cent of Singapore's GDP, and has led the economy out of recent downturns. It also provides good-skilled jobs for Singaporeans.

As Prime Minister Lee Hsien Loong rightly pointed out over the weekend, this is one sector where businesses can do more to beef up the industry, particularly on the productivity front. So for this sector and the economy as a whole, how can we generate sufficient good jobs to meet the job needs of locals, while keeping Singapore vibrant and avoiding excessive job creation which would have to be filled by foreigners, which in turn will add stresses to our infrastructure and social fabric? This is tricky because the economy is not simply shaped by dials which we can set.

On the Government's part, the National Productivity and Continuing Education Council has developed sector-specific productivity improvement strategies to help 16 priority sectors embark on productivity improvements and provide productivity-related schemes and funding. We have also just launched a new initiative to boost productivity: The Job Flexibility for Productivity (JFP) initiative for the hotel sector.

Local employees will get more opportunities to work across different functions, gain skills and enjoy higher wages. Foreign work-permit holders will be allowed to perform different job functions. Currently, they can only perform the specific job on their work-permit card. With the JFP, hotels can now do more with their current workforce, instead of having to hire additional foreign workers. The industry can then share the productivity gains with workers as well.

Such measures will be useful, but we cannot stop there. I think the balance of driving forces favours recalibration towards even more moderate foreign workforce inflow, to encourage companies to pursue higher productivity business models and processes and away from labour-intensive growth. We will monitor closely over the next few months and take further measures down the road, if needed.

LOOKING AFTER Singapore and Singaporeans

It is important to again emphasise that our priority is to look after the interests of Singaporeans and Singapore, not just for the present but on a sustained basis for our future.

Creating good job opportunities for Singaporeans does not come automatically because companies will come and go based on opportunities available globally. We need to arm local workers with the right skills so that they can enjoy inclusive growth in Singapore with rising real wages and a better quality of life.

At the same time, I am fully aware of the concerns of too large a foreign workforce. We will increase our infrastructural support to ease the congestion, even as we continue to find the right balance for the labour market. If needed, we will tighten foreign workforce controls further. Companies must do their part and transform.

Let us think hard and discuss this constructively with fellow Singaporeans, employers and workers alike - on how we can navigate this path where we can best provide for our people and society, while calibrating our foreign manpower framework in a complementary manner.

It is not just about numbers, it is about finding that delicate balance that will deliver sustainable wage growth for Singaporeans, growth prospects for businesses, and a societal composition that we can accept.

Tan Chuan-Jin is Singapore's Acting Minister for Manpower. This first appeared as a blog post at yesterday.

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