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Singapore needs foreigners – here’s why
Jobs & Economy Articles

Singapore needs foreigners – here’s why

Foreigners on the road

When Mr George Wong, 37, started his own hole-in-the-wall cafe in Toa Payoh five years ago, he wanted to hire foreign workers because Singaporean workers were hard to find.

 

“For jobs like cashiers, service crew, or even dish cleaners, it’s hard to hire local people. The turnover rate is very high, because local people don't like to do this kind of long hours job where you need to serve customers,” says Mr Wong, who also runs a Japanese food business in Bukit Merah.

 

But foreign workers are also difficult to hire because of the manpower quotas mandated by the Ministry of Manpower that he had to stick to.

 

“To be able to hire two Malaysian workers, I had to first hire three Singaporean workers. If one of my Singaporean worker wasn’t happy and quit, and I couldn’t hire a replacement Singaporean worker, my license to hire a foreigner would be gone. It’s a fixed quota with no flexibility, and that’s tough for small restaurants and start-ups,” he adds.


George Wong with a customer at his now-defunct café Moly’s in Toa Payoh. 

George Wong with a customer at his now-defunct café Moly’s in Toa Payoh.

The tightening of foreign worker policies in recent years has been a real challenge for businesses, particularly those in the services sector. Few Singaporeans want to take up those jobs, and bosses say that using more technology to compensate for that can only go so far.

 

Yet, even though regulations require that firms hire Singaporean workers in order to hire foreign workers, and certain sectors experience a shortage of local workers, the foreign workers are often thought of as being here to steal locals’ lunches.

 

Economists and employers explain why this isn’t the case in Singapore.

 

1.    Not enough people

 

Singapore needs foreign workers because locals alone simply aren’t enough to meet the needs of the economy, say experts and employers.

 

“Look at the size of the gap that would be caused by their absence. A loss of one-third of the workforce would cause the economy to grind to a halt,” says labour economist Randolph Tan of the Singapore University of Social Sciences (SUSS). Sustaining the pace of economic growth and the quality of life currently enjoyed would thus be difficult.

 

 

As a mid-sized city, Singapore does not have the quantity and quality of domestic labour needed to drive a modern economy forward, says economist Walter Theseira, also from SUSS.

 

“No economically vibrant mid-sized or even large city throughout the world survives solely based on the domestic labour market. All such cities rely heavily on domestic and international migration. Because we do not have any domestic migration to speak of, we need to rely on international migrant flows,” he says.

 

Singapore’s need for international migration is also fuelled by its low fertility rates and ageing population.

 

The resident birth rate has been declining over the past 20 years. This means fewer residents in each subsequent cohorts entering the labour force.

 

 

As at 2016, the net resident labour supply growth is nearly flat as the number of people leaving the workforce is roughly similar to the number joining it.

 

Projecting forward to 2020, without migration, Singapore’s labour force will start shrinking.

 

There will be fewer workers to support the economy. Businesses may find it difficult to get the manpower they need and decide to locate elsewhere, bringing along the jobs with them.

 

2.    Right time, right skills

 

The growth of new industries is generating demand for workers with specialised skills such as cyber security and artificial intelligence. And while locals are being trained with the relevant skills, it will take some time before the supply of local workers with the right skills can meet the soaring demand.

 

Many of these industries such as info-communication technology are fast-moving and market demand can shift quickly in response to advances in trends and technology.

 

“While we do want Singaporeans to have the skills to take up key jobs, we need to have the flexibility to fill in the gaps in the interim,” says Dr Theseira.

 

3.    Enlarging the pie

 

Skilled foreign workers add to the vibrancy of the economy by bringing new skills and expertise, in turn spurring more growth and growing the economic pie, says National University of Singapore (NUS) economics lecturer Kelvin Seah.

 

He says that while most people think that migration will hurt the wages of natives because migrants take jobs away from locals and compete with them for jobs, empirical research has found little support for such a claim.

 

He cites an Economic Journal paper in 2013 titled “The Labour Market Effects of Immigration and Emigration in OECD Countries" by Frederic Docquier, Caglar Ozden, and Giovanni Peri, which looked at data from OECD countries in the 1990s. The paper found that immigration is likely to boost locals' wages and employment instead of reduce job opportunities.

 

Says Dr Seah: “In the long run, migration of skilled workers could lead to firm and output creation. Locals will stand to benefit from this since their wages will rise with the increased productivity.”

 

Achieving balance

 

At the end of the day, it is about allowing in a correct number and quality of foreign workforce to complement the local workforce – filling gaps in terms of numbers and skills, and growing the pie. It is also about managing the foreign workforce concentrations at more localised levels and ensuring concerns are addressed.

 

Official data in Singapore shows that foreigners take up only 21 per cent of jobs at the Employment Pass (EP) level - jobs that pay more than $3300 require an EP.

 

In revealing those numbers, Manpower Minister Lim Swee Say said in a speech last year (2016) that the resentment against foreigners stems from the pockets of EP concentration in certain companies segments of industries and at some locations.

 

“I think the answer, is what I call “pockets of EP concentration” in some companies, segments of industries, and at some locations. This is highly undesirable because these “pockets of EP concentration” have led to the perception that we have a liberal approach in our intake of EPs. This is not the case. There are also accusations of unfair consideration for locals or discrimination against our local PMETs (professionals, managers, executives and technicians),” he added.

 

Wages are benchmarked to ensure foreign PMETs draw competitive wages as locals. To ensure fair consideration, the Government also monitors employers that rely more on foreign workers, instead of building a strong core of Singaporean workers.

 

These ‘triple weak’ companies - weak in its Singaporean core, weak in its commitment to build a strong base of Singaporeans and weak in its relevance to the national economy - are identified and have their Employment Pass applications more closely scrutinised.

 

As Singapore moves to balance its foreign workforce policy, one thing is clear: It cannot afford to remain closed to the rest of the world, including human talent. Doing so may likely backfire, hurt the economy and the people who depend on it to generate jobs.


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