More jobs, higher wages for Singaporeans

Foreign employment growth also falls to its weakest since late 2009
By Amelia Tan, The Straits Times, 16 Sep 2014

THE tight labour market has helped drive up wages and employment for locals while foreign employment growth fell to its weakest level since late 2009.

Latest data from the Ministry of Manpower (MOM) released yesterday also showed that retrenchments fell while job vacancies hit a record high.

But while the numbers are glowing, the ministry warned of further company closures as the economy continues to restructure.

Employment grew by 27,700 in the three months to June, down from the 33,700 jobs created in the same period last year.

Of the jobs created in the second quarter, just 3,800 jobs went to foreigners, the slowest pace of foreign employment growth since the third quarter of 2009.

The bulk of the jobs created went to locals, supported by a "confluence of foreign workforce constraints, higher wages and employers' adoption of flexible work arrangements to attract more women and older workers", said MOM.

The citizen unemployment rate fell to 2.9 per cent in the second quarter from 3 per cent in the first three months of the year.

The real median gross monthly income of fully employed citizens increased by 4.6 per cent last year, said the ministry.

Economists said that the strong wage and employment growth for locals will continue to hold, with firms looking to expand in the region.

But companies with expansion plans may face difficulty in recruiting as there is already a record 63,900 job vacancies as of June.

OCBC economist Selena Ling said the pick-up in wages should continue to help low-wage workers. "If the wage increase is passed on by businesses to consumers, then the real income growth will be muted," she said.

For higher wages to be sustained over the long term, MOM said that productivity must improve further.

"More needs to be done to raise productivity, most critically in the construction sector, as well as the more manpower-intensive industries within the services sector," it said.

MOM noted that productivity of the construction industry was negative in the first half of the year.

As a result, overall labour productivity in the second quarter was dragged down and fell by 1.3 per cent.

The ministry added that the firms in the service sector, such as restaurants, retail shops and hotels, will feel the pressure to raise wages as many are expanding and need more staff.

"The manpower-lean environment will continue to be a feature of the Singapore economy," said MOM.

"As the economy restructures, some consolidation and exit of less productive businesses is expected."

Bank of America Merrill Lynch economist Chua Hak Bin agreed.

"We have not seen the full brunt of the foreign manpower curbs yet. There will be further tightening, so firms can expect the pain to continue," he said.

The report also said that 2,410 workers were laid off in the second quarter of this year, lower than the 3,110 workers who were retrenched in the previous quarter.

More firms expected to shut due to labour crunch
By Amelia Tan, The Straits Times, 16 Sep 2014

MORE firms are likely to shut down or downsize as foreign manpower curbs continue, said employers and economists.

This is because productivity has not grown fast enough to make up for the labour crunch.

"If you cannot find enough workers to do the jobs, there is no choice but to consolidate," said Bank of America Merrill Lynch economist Chua Hak Bin.

The experts were reacting to new figures from the Manpower Ministry which show that foreign employment has slowed down significantly, inching up 3,800 in the three months to June.

The last time it grew this slowly was back in the third quarter of 2009, during the global financial crisis, when expansion was just 700 in three months.

The experts said the authorities tightened foreign worker hiring policies with the aim of forcing firms to work more efficiently.

But the reverse has happened in some companies.

Singapore Business Federation's chief operating officer Victor Tay said a lack of workers has pushed some firms to focus on day-to-day operations instead of planning ahead to raise productivity.

"There are pockets of firms which have raised productivity through innovation and technology," he added.

"But you need manpower to use this equipment and to drive productivity projects."

Curbs on the renewal of Employment Passes are also curtailing productivity gains, said Mr Victor Mills, chief executive of the Singapore International Chamber of Commerce.

"(These EP holders) are talented, committed and productive employees... All too often, they are rejected," he said.

For things to improve, sectors which are perennially unproductive such as construction must do better, say experts.

"But the effects will not be seen immediately. The construction workers need time to be trained," said Dr Chua.

Mr Tay suggested that the pace of foreign manpower curbs be slowed down to allow firms to recover.

"Policy formulation is like a medicinal prescription," he said.

"We ought to monitor the patient's response, in this case, the companies. Sometimes, after detecting adverse reaction, dosage of medicine should be moderated."

Shortage of skilled staff in some sectors
Record 63,900 vacancies in June; construction, manufacturing hard hit
By Joanna Seow, The Straits Times, 16 Sep 2014

SOME parts of the economy are facing a shortage of skilled workers which, if the posts are left unfilled, could result in rising costs, project delays and a slowing down of business.

And the problem is growing, according to latest official data.

There were a record 63,900 vacancies logged in June, nearly 12,000 more than a year earlier, according to Manpower Ministry statistics released yesterday.

Financial services and health and social services saw at least 1,000 more vacancies each, although the lack of skilled workers is most acute in the construction and manufacturing sectors.

Recruiters and employers flagged mid-level skilled staff such as engineers, nurses and crane operators as highly sought after but difficult to find.

Previously, such positions could be filled by foreigners with relevant skills. But increasingly, with the tighter rules on foreign manpower, companies find that they have to turn to local workers instead, said Ms Linda Teo, country manager of recruitment firm ManpowerGroup Singapore.

However, employers are finding it hard to hire local workers as many do not have the technical skills required, said Mr David Leong, managing director of recruitment firm PeopleWorldwide.

"Not enough people are taking up courses in applied skills, despite there being enough training capacity in education faculties," he said.

The crane industry, for example, is in dire need of fresh blood. Seven in 10 crane operators are aged 40 and above, and few young Singaporeans are interested, said Singapore Cranes Association (SCA) chairman Alan Chan.

"As locals get more educated, the majority don't want to be in this trade where you don't wear long-sleeved shirts and a tie," he said. This is despite salaries of up to $7,000 a month.

Even engineering has lost its shine, with people choosing the finance and service industries instead, said Mr Leong. "A lot of good engineers end up selling property or insurance," he said.

To make career pathways clearer and more accessible, Deputy Prime Minister Tharman Shanmugaratnam will be chairing a tripartite committee for the development of an integrated system of education and training for all Singaporeans.

In the meantime, however, bosses like Mr Chan said that if the skills shortage continues, construction projects are likely to take longer to complete.

Another consequence across industries is that wages are being pushed up as employers strive to attract locals and grapple with higher minimum salaries for foreign work pass holders.

While this may be good for employees, it raises costs for firms.

Industry associations also warn that the lack of skilled workers may force companies that cannot compete to scale down, shut down or move out.

"Business costs are getting higher and productivity has not grown at the same pace as the foreign manpower curbs and wage increment," said Singapore Business Federation chief operating officer Victor Tay.

And in certain industries, higher wages do not seem to make a difference. Mr Sam Chee Wah, general manager of precision engineering firm Feinmetall Singapore, said the starting pay for machinists has gone up by $500 but they are still hard to hire.

"So we're trying to become less labour-dependent - the process has to adjust to people."

Construction sector the main drag on labour productivity
By Marissa Lee, The Straits Times, 16 Sep 2014

MORE needs to be done to boost productivity in the construction sector, which is still lagging behind other industrial sectors in efficiency.

In the first half of the year, construction was the main drag on total labour productivity, which fell 0.3 per cent from a year ago. Labour productivity for construction fell 1.3 per cent in the same period, according to figures released by the Ministry of Manpower (MOM) yesterday.

This despite efforts to incentivise firms to invest in more skilled workers and better equipment, through training programmes and grants.

The nature of the industry makes restructuring difficult, say observers.

"It's not as straightforward as manufacturing, you can't just automate the whole system," said Mr Gilbert Chuah, operations manager of pile testing expert Allnamics.

And while standardisation of building designs has expedited work on Housing Board sites, it is less useful for private residential projects, where the same design may not be replicated throughout.

Noted Mr Dominic Choy, director of projects at Hexacon Construction: "Developers need to place more priority on optimising land use, so repeatability and modularity would be (used) less, and this leads to lower productivity."

Mr Kenneth Loo, executive director of Straits Construction, added that contractors are limited in the initiatives they can take, since they are "at the end of the value chain".

"When we receive plans, more often than not it is too late to make changes to make it more buildable. Initiatives to drive productivity should start upstream when concept design is conceived," he said.

But others in the industry are more optimistic.

Singapore Contractors Association president Ho Nyok Yong, for one, said that big contractors were already on board to buy more equipment, because labour had become more expensive.

Dr Ho was confident that these gains would be reflected in time.

CIMB bank research economist Song Seng Wun agreed, but warned that "some consolidations and exits" would come, as smaller contractors fail to make the cut.

Dr Randolph Tan, an economist at SIM University, believes more communication is needed to assure firms that productivity investments are the right risk to take.

"Businesses are ultimately driven by bottom lines and that's where we need more than a carrot-and-stick approach," he said.

In a move to curb contractors from hiring unskilled foreign workers beyond their quota, a $950 monthly levy was imposed on contractors in July, leading to a cost squeeze.

But Mr Song said: "You need a painful stick, but the carrot will still be there," pointing to the current construction boom here.

Last year, construction demand reached a high of $35.8 billion, he said, and that figure is expected to climb this year.