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31 January 2012

From Rabbit to Dragon – What Lies Ahead for the Labour Market 2012?

31 January 2012

A strong finish in the Year of the Rabbit

In spite of the Eurozone debt crisis and the uncertain U.S. growth trajectory in 2011, we have managed to keep Singapore’s economy in good shape. This has allowed us to ensure strong employment prospects for Singaporeans. Our unemployment rate in 2011 declined to a 14-year low, averaging at about 2.0% overall, 2.9% for residents and 3.0% for Singapore citizens. Employment growth also remained strong at 121,300 in 2011, a slight increase over the 115,900 in 2010. The median income from work of full-time employed Singapore citizens also rose amid tight labour market in real terms by 13% or 2.5% p.a. over the last 5 years.


As we usher in the Year of the Dragon, there are some perspectives we should consider as we try to navigate our way through the uncertainties that cloud the year ahead.

Firstly, and it has been apparent for awhile now, that the growth of Singapore’s local workforce is slowing down. In 2011, our local employment grew by 36,600, compared to 56,200 in 2010. While our companies are still seeing healthy growth and expansion prospects, the tight local labor market can limit our ability to capture these opportunities. This is being addressed through improving productivity as well as economic restructuring, which will enable us to further optimize our manpower resources. Economic restructuring in particular will free up human capital from less efficient uses into more productive ones. In the longer term, this will also help us create better jobs with higher wages for Singaporeans.

Meanwhile, businesses have continued to rely on foreign employment to supplement and meet overall manpower needs. We have thus seen foreign employment (excluding foreign domestic workers or FDWs) grow by 79,800 last year. A significant portion of this demand was from the construction sector, where overall employment rose by 22,200 in 2011 as compared to 3,400 in 2010 – an almost six-fold increase, as we increased the pace of public infrastructure projects, in particular for housing and transport.

We had begun taking steps to manage foreign manpower growth as early as 2009. However, despite these measures, the strong performance of our companies here continued to see considerable increases in foreign manpower. Our demand for labour clearly exceeds the growth of our local workforce hence the need for productivity improvements and restructuring to take place. However, this takes time while the demand is immediate. The positive to draw from this is that job creation in Singapore continues to remain strong, unlike other countries still facing high unemployment. The downside lies with the externalities that come with the increasing numbers and its strain on infrastructure.

We need to make some hard calls in order to manage our foreign workforce growth. We will have to accept lower economic growth in order to moderate labour demand, as we have reached a stage where we are now beginning to be constrained by our infrastructure. We have progressively put in place measures to moderate our foreign manpower growth, especially for unskilled workers, to more sustainable levels by tightening demand through various means, such as raising levies, tightening Employment Pass (EP) and S Pass Criteria as well as revising qualifying salaries for EP and S Pass holders.

Many of these measures have been or are in the process of being implemented, with levy increases continuing to be phased in over the next two years. We will not see the full impact of the measures overnight – we will need time for the changes to yield results. We can also expect to see continued growth in foreign workers in the Construction sector, given the urgency of increasing infrastructural capacity.

We have always been very careful in calibrating our foreign manpower policies, as we have to balance businesses’ needs as well as manage the size of our foreign workforce. It is a delicate balance. We meet with the businesses regularly and we hear their concerns as they face the tightening labour market. Our message remains that we should take the opportunity to fundamentally shift towards productivity-led growth. While we continue to remain open and diverse, and to ensure a Singaporean core, we should not depend on access to foreign labour as an easy way to support growth.

What can we expect in 2012

The global outlook remains uncertain and the possibility of economic slow-down is very real. This may well be a good opportunity for us to make some of these structural adjustments and position ourselves when the economy recovers. We have put aside considerable resources to help companies continue with the necessary but understandably painful restructuring and consolidation for the longer term.

As companies adjust, our Singaporean workers may also be adversely affected. We will need to focus on helping them transit into new sectors. For those who have regularly upgraded themselves, the transition will be smoother. For others, they may require some re-training. This is where our Continuing Education and Training (CET) system will play a critical role. For Singaporeans who require employment assistance, we have career consultants in the Community Development Councils’ (CDCs) career centres to advise on the most relevant training and updated employment opportunities. All these efforts will be stepped up.

While the global economy is uncertain, our fundamentals remain stable. We will continue to better manage the growth of our foreign workforce to ensure sustainable growth for the long term, to provide good jobs and opportunities for our people and to continue to build an inclusive society which leaves no one behind. 

Minister of State Tan Chuan-Jin 
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