Tuesday 14 May 2013

Ensuring a higher degree of pay-off

By Sandra Davie, The Straits Times, 13 May 2013

LAST year when the Government announced a generous expansion of university places, it assured Singaporeans that this will not undermine the value of a degree or lead to a glut of graduates.

The Ministry of Education (MOE) said the increase will be through more places and courses at the Singapore Institute of Technology and SIM University, giving 40 per cent of Singaporeans a shot at a local university education. It will also support the part-time degree route, enabling another 10 per cent of Singaporeans to get a degree.

Parents and students cheered the move, and the promise of better wages.

Figures released by the US-based Pew Research Centre showed that in the United States, those with a degree earn, on average, in excess of US$1 million (S$1.23 million) more over their lifespan than those without one.

A 2007 Ministry of Manpower (MOM) study also showed that every extra year of schooling increases a worker's earnings by 13.7 per cent. The rate is higher for tertiary education.

But some in Singapore were concerned about increasing the number of graduates here, asking if the economy can support so many of them.

Recruitment experts also pointed out that in 1990, only 15 per cent of students in the same age group went to university.

The new 50 per cent rate, they said, will put the country ahead of other Asian economies such as Hong Kong and South Korea. It will also bring it close to the level in Britain, where degree holders are finding it hard to land jobs.

But Mr Lawrence Wong, then Senior Minister of State for Education who led a review of the university sector, pointed out that the Singapore economy is already able to support a fairly large number of degree holders.

Quoting MOM figures, he said close to half of Singapore residents aged 25 to 29 hold degrees. And 44 per cent of those in this age group earn at least $3,000 a month, which indicates how many graduate-level jobs were available.

He also noted that the demand for graduates is rising as Singapore needs a highly-skilled workforce to drive its future economy.

Professional, managerial and executive type jobs are the fastest-growing segments of the workforce, going from 27 per cent in 2001 to 32 per cent last year.

"Going forward, clearly we can accommodate more university graduates," he said at a press conference last August announcing details of the plan to increase the number of university places.

But what happens in a recession? When the Singapore economy slowed four years ago, diploma holders fared better than graduates. MOM figures for the third quarter of 2009 showed that among those unemployed, about 6 per cent were diploma holders while 22 per cent were degree holders. It was the same with redundancies, with fewer polytechnic graduates laid off than their university peers.

Recruiters explained that diploma holders cost less and possess more practical skills that employers value, especially in a downturn. When retrenched, poly graduates were also more willing to take lower-paying jobs.

But in the subsequent upswing, the university graduates did better. Job prospects and salaries of degree holders recovered and even overtook those of diploma holders.

A 2010 MOM labour force report showed that unemployment was 3.7 per cent for degree holders compared to 3.9 per cent for those with diplomas.

Still, some labour economists warn that what happened in the past may not accurately reflect what may happen in the future.

The opening up of university places may lead to a glut of graduates, especially during times when the job market is unable to absorb them all.

Degree hopefuls should also note that not all degrees are created equal. Returns on degrees in accountancy and law, as well as the sciences and engineering, are higher compared to those in social work, psychology and English.

Employers, including the civil service, also make a distinction between graduates from the publicly-funded universities and those who attain their degrees through the private schools such as the Management Development Institute of Singapore and Singapore Institute of Management. Employment surveys carried out by the more established private schools show that while its graduates land jobs, they are each paid several hundred dollars less than graduates from the publicly-funded universities such as the National University of Singapore and Nanyang Technological University.

This means quality is as important as quantity. As the number of graduates goes up, universities should pay equal attention to innovation and cultivating in students an X factor.

Take, for example, the Singapore Management University (SMU), which models itself after American colleges. After its first batch of students graduated in 2004, employers noted the "SMU difference", and found its graduates were confident, mature and had good communication skills.

Turning out graduates who are adaptable, with premium skills relevant to industry, is a must, to ensure a university degree continues to pay off for Singaporeans.

United States: Degree holders hired but not always for grad-level jobs
By Sandra Davie, The Straits Times, 13 May 2013

US COLLEGE graduates are finding jobs, but these may not be the right jobs.

According to official figures released last month, the unemployment rate was 3.9 per cent for graduates, compared with 7.5 per cent for the entire workforce.

Even when the jobless rate for graduates was at its highest back in November 2010, it was still just 5.1 per cent. That is close to the jobless rate the rest of the workforce experiences in a good economy. But the jobs that college graduates have may not be at graduate level.

About 48 per cent of employed college graduates are in jobs that the Bureau of Labour Statistics suggests need less than a four-year degree education - 11 per cent are in jobs requiring more than a high school diploma but less than a bachelor's, and 37 per cent are in jobs requiring no more than a high school diploma.

The proportion of over-educated workers appears to have grown substantially. In 1970, less than 1 per cent of taxi drivers and 2 per cent of firefighters had college degrees. Now, more than 15 per cent in both jobs hold a degree.

Some bosses are requiring four-year degrees for jobs that previously did not need them since companies realise that, in a relatively poor job market, college graduates will take whatever they can find.

Still, a degree is worth obtaining. An analysis from the Hamilton Project at the Brookings Institution estimated that a four-year degree was equivalent to an investment that returns 15.2 per cent a year.

"This is more than double the average return to stock market investments since 1950," the report said, "and more than five times the returns to corporate bonds, gold, long-term government bonds, or home ownership."

Britain: Graduate job market steady, more starting own businesses
By Sandra Davie, The Straits Times, 13 May 2013

DESPITE a rising number of degree holders and a struggling economy, the graduate job market has remained relatively resilient in Britain.

UK Higher Education Careers Service Unit figures released last October showed that 62 per cent of graduates get jobs six months after university. Just 9 per cent remain unemployed.

Another 14 per cent continue on to further studies, and the remainder are involved in other activities, such as training while working.

The weak economy also seems to have pushed more students into starting their own businesses. The proportion of graduates who are self-employed is steadily increasing. It is now 5 per cent, up from 3 per cent in the middle of the last decade.

In terms of salaries, the range was between £18,000 (S$34,400) and £24,000 for graduates who had jobs six months after leaving university.

But as in the United States, there is under-employment.

More than a third of young British graduates are in jobs that do not require degrees, statistics show. This figure has soared in the last decade, rising by a third since 2001.

The Office for National Statistics (ONS) found that the proportion of university leavers in non-graduate jobs had increased from 26.7 per cent in 2001 to 35.9 per cent in 2011. The ONS analysed the jobs that graduates were holding two years after leaving university.

Still, graduates typically have higher employment rates than those without higher education, it said.

Studies in Britain also show that in the long term, graduates are likely to earn higher incomes than non-graduates and are less likely to face unemployment.

PMETs most vulnerable as restructuring intensifies
By Sandra Davie, The Straits Times, 13 May 2013

THE latest Ministry of Manpower (MOM) report released last month should give Singaporeans some food for thought.

The report said more workers are being laid off as Singapore's effort to restructure the economy intensifies.

Last year, 11,010 workers lost their jobs, a 10 per cent increase from 9,990 workers the year before.

But what degree hopefuls should note is that a disproportionately high number of those asked to go are professionals, managers, executives and technicians (PMETs).

Last year, 5,960 PMETs were laid off, or 7.4 out of every 1,000.

This is the first time in a decade that PMETs formed the most vulnerable group.

MOM said this might reflect "the growing vulnerability of mid-level white-collar workers due to globalisation and technological innovations".

Some PMETs with savings may also prefer to take a longer time to find jobs that match their skills, qualifications and salary expectations, MOM said.

Residents laid off from PMET positions were mostly in their 30s and 40s, and a majority of 69 per cent were displaced from services jobs.

Experts also pointed to the struggling banking sector.

More than one-fifth of the PMET lay-offs were in the financial services.

However, recruitment experts say bank lay-offs are unlikely to rise further this year.

Labour economists also noted the job trends from the previous year which show that educated workers are able to ride business cycles better than unskilled workers.

This is the seventh of 12 primers on various current affairs issues, which will be published in the run-up to The Straits Times-Ministry of Education National Current Affairs Quiz.

How many PMET jobs can S'pore support?
Two in three Singaporeans are expected to hold jobs that require brains over brawn. But can the economy cope with such a high number of PMET workers? A fundamental shift in the way we define success has to be part of the new landscape.
By Aaron Low, The Straits Times, 14 May 2013

THE traditional route to success in Singapore has always been to do well in school and snag a scholarship to study in a prestigious overseas university.

Even if the grades do not merit a scholarship, most parents still want their children in university at least. After all, a degree opens doors to an office job, preferably one that pays well.

This expectation is likely to intensify, according to the Population White Paper released in January, which said that most workers will be in a position that requires more brains than brawn.

"Overall, two-thirds of Singaporeans will hold (jobs as professionals, managers, executives or technicians) in 2030, compared to about half today," it stated.

But is this an unrealistic expectation? Will there be enough of what are called PMET jobs for this growing group of Singaporeans?

Great expectations

THE problem with setting out estimates so clearly is that it anchors people's expectations.

The two-thirds estimate can be easily read in this way by many people: The majority of citizens here will have a cushy job in 20 years' time that pays well.

But a check with the Manpower (MOM) and Trade and Industry (MTI) ministries showed that the two-thirds figure was not a projection but rather an estimate based on the expected rise in the levels of education and the kinds of jobs such graduates are now working in.

"It was a supply-side estimate based on the projected educational profile of Singaporean workers in 2030 and historical education to occupation trends," said the ministries in a reply to The Straits Times.

"The actual number of PMET jobs available will depend on companies' demand."

In other words, the two-thirds figure is an indication of Singapore's aspirations rather than a projection of how many of us will be in such jobs.

This changes things dramatically. It essentially means that the country could well be on course for a fundamental mismatch in aspirations and what the economy can meaningfully deliver.

Growing vulnerabilities

IT IS not surprising why many Singaporeans prefer to be on the paper-chasing career path. Degree holders tend to get higher starting salaries and have better promotion prospects.

Bachelor of Arts graduates from the National University of Singapore commanded gross median starting salaries of $2,825 a month last year.

In contrast, the gross median starting pay of a polytechnic graduate was $2,007.

Data does not exist for how fast a degree holder rises up the ladder, but anecdotally, they tend to advance faster than non-degree holders in the same company.

The gap in pay and prospects has naturally led to the rapidly changing education profile of the labour force, largely reflecting the demand for higher qualifications.

In 2002, just 18.5 per cent of the labour force had a degree. This had gone up to 29.4 per cent last year.

Most degree holders will eventually hold white-collar jobs and join the ranks of PMETs, which formed 52 per cent of the labour force last year.

But while getting a degree is now seen as a must-have, the simple fact is that being a white-collar worker comes with its own set of risks.

Globalisation and technological progress have undermined much of the middle class in advanced economies.

Offshoring and technologies like the Internet have displaced workers in the middle, such as sales and administrative staff.

Sales counter staff are now irrelevant for companies such as Amazon, which sells billions of dollars worth of products through its Web portal.

Salaries of the middle class have stagnated and many have been laid off amid the jobless recovery in the United States and Europe.

Singapore's middle class, or the PMET group, faces similar stresses.

An MOM report on the labour market last year suggested that PMETs are becoming increasingly vulnerable even though they continue to earn good wages.

Last year, 11,010 workers lost their jobs, a 10 per cent rise from 9,990 workers the year before, the MOM said. About 5,960 of them were PMETs, or more than 50 per cent.

This was significantly higher than the 41.7 per cent in 2011. In 1998, just 18.6 per cent of those laid off were PMETs, about a third of last year's figures.

Similarly, the re-entry rate for workers who have been laid off was much worse for the PMET group, with just 48.6 per cent of them finding a job within six months of being laid off.

In contrast, clerical, sales and service workers had a 60.2 per cent rate of re-employment, while production, cleaners and labourers had a 68.6 per cent re-employment rate.

The two-thirds challenge

APART from helping to address the vulnerabilities of the PMET group, the bigger challenge is providing jobs that meet aspirations.

That goes to the question of whether Singapore can continue to attract foreign investment and whether local enterprises will keep expanding.

If the economic restructuring now under way succeeds, productivity will rise and higher-value enterprises can grow and generate worthwhile jobs.

"If we make good progress with economic restructuring into higher-value activities across industries, we should see a broad-based increase in PMET jobs for Singaporeans," said the MOM and MTI.

The second part of the solution is harder to achieve. Many capital-intensive industries require a strong knowledge base and specialised skills that a general university degree may not provide.

A case in point is Dyson, a British manufacturer. It opened a $100 million plant in February that produces four million motors a year.

The motors produced at its Pioneer Crescent facility are used in the production of Dyson's vacuum cleaners and hand dryers.

This points to the dilemma for policymakers, says DBS economist Irvin Seah.

While productivity and high-value enterprises are good for the economy in terms of pure growth numbers, they may not generate the kind of levels of employment required to absorb the growing ranks of degree holders.

Then there is the skills gap. Increasingly, employers demand abilities that go beyond academic content.

Nee Soon GRC MP Patrick Tay, the professional, managers and executives unit director at the National Trades Union Congress, notes that even traditional jobs will require a high degree of skills.

"Increasingly, we can see those with highly specialised and niche skills getting jobs more easily. The challenge for workers is more than just getting a diploma or degree qualification but rather, the type of diploma or degree qualification," he says.

Changing attitudes

BEYOND thinking about skills and industries, a fundamental rethink on what defines success is also essential.

Mr David Leong, managing director of PeopleWorldWide consulting, says the economy as it is now could not support having two-thirds of the workforce in PMET jobs.

"If the Government hopes to achieve having two-thirds of the local workforce to be PMETs, we need to reconfigure job receptacles and industries to accommodate the growth and aspirations of Singaporeans," he says.

Many new graduates harbour ambitions to join the well-paid finance and banking sector, but in the future, the biggest demand is likely to be in the social, health and education services as Singapore ramps up its social infrastructure.

Likewise, transport and physical infrastructure will continue to be essential industries, but these sectors do not attract Singaporeans and remain dominated by foreign workers.

A big issue is pay, says Mr Leong. Pay enough and there will be people lining up to do the job.

But jobs in transport and construction are seen as being of low status and so pay is some way behind traditional PMET sectors such as banking and sales.

But this is not set in stone.

In Australia, electricians, bricklayers and plumbers can earn A$100,000 (S$124,000) or more a year, given shortages in manpower, according to the Master Builders Association in Victoria.

If pay does rise, can Singaporeans rewire themselves to take up the abundance of opportunities in sectors not traditionally seen as providing coveted careers?

Maybe the largest employer here can help take the lead.

While it is justifiable for the civil service to pay and hire people based on their paper qualifications, surely there are some jobs where technical expertise and experience trump educational profile? Is there an over-reliance on paper qualifications?

Parents will also have to adjust their own expectations of their children and recognise that success is not simply linked to degrees and cushy jobs.

These are not easy changes to make. But the sooner society realises that traditional notions of success are less relevant in tomorrow's world, the better prepared the next generation will be for the new economy.

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