31 January 2013

Balancing a Tight Labour Market in 2013

31 January 2013

A month into 2013 and economists over the world have started to revise their projections for the year ahead. Most reports paint an uncertain global economic outlook. The International Labour Organization (ILO) warned of worsening unemployment. In Singapore, economists and analysts surveyed by the Monetary Authority of Singapore (MAS) expect GDP growth to be 2.7% (median forecast) in 2013 while MTI forecasts growth of 1-3%.

What will the impact be on Singaporeans?

The latest seasonally adjusted unemployment rate of Singapore citizens is estimated at 2.9%p in Dec 2012, down from 3.0% a quarter ago. This is a good sign, as it means that most jobseekers are able to find jobs. While these are very encouraging figures, I am mindful that for the unemployed, some of whom I am in correspondence with, it is emotionally trying to remain out of job. However, we should not expect such low levels of unemployment rate to be the norm. As restructuring picks up pace in 2013 and the years ahead, we may see more unemployment as a natural outcome of jobseekers moving across jobs and industries. MOM continues to work closely with WDA and the CDCs, putting in more resources to assist workers affected to find new employment and minimise the pain of transition.

We will continue to pay attention to the quality of jobs. Real median income[1] of full-time employed Singaporeans rose over the year by 1.2%[2] in 2012, after taking into account inflation[3], compared with 1.0% in 2011. If we exclude imputed rentals on owner-occupied accommodation (which do not involve actual expenditure) in adjusting for inflation, the real median income growth was 2.1%. At the same time, we will need to do more to uplift income not just at the middle, but at the bottom as well. We have taken measures such as the Inclusive Growth Programme, the Workfare Income Supplement and the Workfare Training Scheme and various other transfers and subsidies (e.g. housing, education, medical) to help our low-wage workers in a sustainable way.

Local employment in 2012 saw a significant growth at 59,200p, compared to 37,900 in 2011. This reflects multiple factors at play, such as the tightening of foreign worker controls, the Special Employment Credit which encourages hiring of older workers, re-employment legislation which just kicked in last year, and tripartite efforts to encourage flexi-work arrangements. I am personally heartened as this shows that employers are now more motivated to hire locals, including those who have been economically inactive, such as back-to-work women. The numbers speak for themselves – the employment rate of women aged 25-54 is up (from 73.0% to 74.0%) and so is the employment rate for older residents aged 55-64 (from 61.2% to 64.0%). These are pools of manpower which astute employers can tap on with the forward-looking HR practices or job redesign. I hope more employers follow suit.

On the foreign manpower front, the inflow of foreign workers has slightly eased compared to the growth in 2011. The demand for foreign workers in the construction sector is still high, as we ramp up major public infrastructural works; Construction makes up 26% (31% excluding foreign domestic workers) of all foreign workers here. If we exclude construction and foreign domestic workers, foreign employment growth has slowed substantially to 32,200p in 2012, around half the 60,200 in 2011. 

But if we look at the total pool of Employment Pass (EP) holders, who hold the higher-skilled jobs, that group had in fact declined by 1,600 in 2012. This is the first time the EP numbers had fallen since the recovery from the economic downturn in 2003[4]. This is likely in part due to the tighter EP framework from Jan 2012. We also saw an increase in S Pass numbers to 142,400p over the year, compared to 113,900 in 2011. While some are workers who were downgraded from EP to S pass, the overall growth in S pass numbers is cause for concern, and therefore we are reviewing the S Pass framework to ensure it continues to remain to our restructuring and productivity efforts.

Our policies to moderate foreign worker inflows have yielded some results but we will need to continue to slow the growth – thus, we continue to tread a fine balance here. We cannot overdo it lest we tip over balance and lead to a vicious downward cycle which will eventually affect locals. The tightening will continue to be targeted and calibrated. For all employers, the reality is that they will have to get used to operating in an environment less reliant on workforce growth, and where more emphasis is placed on productivity-driven growth, and thus leading to sustainable real wage gains for Singaporeans.

Today, while there is a good spread of vacancies across both PMET and non-PMET jobs, about a quarter of vacancies required only primary education or below[5]. These will only become harder to fill over time as the education profile of Singaporeans improves. It is not easy but businesses will need to think about how they can adjust their business model to reduce their demand for this level of workers, and instead offer fewer but higher-skilled jobs. As detailed in the Population White Paper, while the growth of the Singaporean workforce slows, more will go into PMET jobs. These are jobs that will be more highly-skilled and knowledge-based. Therefore, we will need fewer but better jobs. I understand the concerns of businesses today, especially as they face global uncertainties, but the changes to our citizen demographics are also inevitable. Businesses must rethink and restructure their businesses, together with a mindset change from employees and even consumers.

As we look ahead to 2013 and beyond, we will continue to keep our sights on maintaining a tight labour market with good job opportunities for Singaporeans, keep unemployment at a low and manageable level and help Singaporeans achieve their aspirations.

Here’s wishing everyone a Happy New Year of the Snake ahead! 

Acting Manpower Minister
Tan Chuan-Jin

P: preliminary
[1] Including employer CPF contributions
[2] The nominal median income growth in 2012 was 5.8%.
[3] Source: “Employment Situation, 2012” report released by MOM on 31 Jan 2013
[4] Refers to EP excluding Q2 pass which were subsumed under S pass when the latter was introduced in 2004
[5] Source: “Job Vacancies, 2012” report released by MOM on 28 Jan 2013
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