Monday 16 March 2015

Could manpower squeeze stall Singapore economy?

Local employment growth set to slide: MOM
By Joanna Seow, The Straits Times, 14 Mar 2015

THERE are limits to how much more Singapore can tap the local workforce to grow the economy.

This is because more than eight in 10 residents between the ages of 20 and 64 who are willing and able to work are already doing so, a rate that is one of the highest in the world.

The strong labour force participation rate helped drive local employment growth to a record high of 96,000 last year.

This is almost twice the average increase of 50,900 per year from 2010 to 2012, the Ministry of Manpower (MOM) said yesterday.

Efforts to re-employ older workers and bring housewives back to work have paid off, and the country's labour force participation rate is ahead of other developed countries such as the United States and Denmark.

At the 65 and over age group, the rate is even ahead of fast-greying Japan - the Singapore figure last year stood at 25.2 per cent to Japan's 20.5 per cent in 2013.

But it is unlikely this figure can climb much higher. So, as society ages, employment growth will drop off a cliff by the end of the decade, MOM said. "The demographic effect will fade as the growth in the local working-age population starts to stagnate... further improvement in (the labour force participation rate) is likely to be muted," the ministry said.

Fewer people will reach working age each year, while more baby boomers will hit retirement. The ministry estimates that in 2020, for every one local exiting working age, only 1.1 locals will enter, down from 1.6 last year.

Taken together with slower foreign workforce growth, economists said Singapore's competitiveness is likely to be hit, unless there is a surge in productivity.

"There are fears that Singapore's economy could mimic Japan's stagnation and lose its shine," said Bank of America Merrill Lynch economist Chua Hak Bin.

But the extent of the impact depends on where the shortfall in manpower is.

"If the labour crunch is more severe in certain sectors where demand is slowing down too, then it won't affect (growth) that badly," said OCBC economist Selena Ling.

Jobs lost and found in a hurry amid labour market churn
Local employment rises, but so do vacancies; productivity stalls
By Joanna Seow, The Straits Times, 14 Mar 2015

THE number of workers who lost their jobs last year was the highest since the 2009 recession, as businesses adjusted to difficult economic conditions.

But retrenched workers were also able to find jobs quickly amid a labour crunch.

"It paints a picture of an economy still very much in transition," said Credit Suisse economist Michael Wan. "The rise in redundancies is probably due to less efficient companies being weeded out in the process."

The number of retrenchments has been climbing steadily since 2010, reaching 10,910 last year, up from 10,540 the year before, data from the Manpower Ministry showed yesterday.

More than four in 10 of Singaporeans and permanent residents laid off last year were degree holders.

The good news for those who lost their jobs is that the majority managed to find a new one.

Some 59 per cent of workers managed to find employment within six months of being laid off, the highest rate since June 2012.

Local employment also grew by 96,000 last year, the highest on record, as companies continued to tap local workers to compensate for slower foreign manpower growth.

But foreign employment growth, excluding maids, slowed to 26,000, the lowest level since the 2009 recession.

The seasonally adjusted number of job vacancies also shot to a record high of 65,600 as at December last year, up from 60,700 a year earlier.

It is a sign of churn in the labour market, which is forcing some businesses out but opening up opportunities for some firms to expand, said Nanyang Technological University economist Walter Theseira. "In the tight labour market, bosses may not be able to find locals to take up certain jobs at current wages," he said.

Unemployment remained low last year at 2 per cent overall and 2.9 per cent for Singaporeans.

But even as businesses felt the squeeze, real median income of full-time employed Singaporeans rose by 1.4 per cent.

This is lower than the 4.7 per cent of 2013.

"However, these wage increases can only be sustained in the long term through productivity growth," the ministry said.

Productivity fell into negative territory, contracting 0.8 per cent last year, as less productive sectors such as construction took up a bigger share of the workers.

Manufacturing was the only sector which saw productivity rise, and it could do well this year.

Barclays economist Leong Wai Ho said: "The weaker Singapore dollar... will help export-oriented manufacturers, who may perform better in the second half of the year when the oil dividend comes through from the G-3 economies."

Could manpower squeeze stall S'pore economy?
Dramatically fewer local workers coming on stream for jobs; productivity growth sputtering, despite efforts to rev it up. This, even as the Government makes it clear it won't turn the foreign worker tap back on. Insight examines a sobering scenario for businesses and ordinary Singaporeans.
By Toh Yong Chuan, Amelia Tan, Joanna Seow And Aw Cheng Wei, The Straits Times, 14 Mar 2015

FOR the better part of the last 50 years, Singapore's economy has been racing ahead.

Rising from Third World to First, Singapore managed to beat many countries in the global economic stakes. But in recent years, the economy has started to sputter. Growth in the five years to 2010 averaged a robust 6.9 per cent a year but since then, average growth a year has fallen to about 4.2 per cent.

One of the main reasons: manpower resources, which help power the economy, are starting to dry up quickly.

On Monday, Manpower Minister Tan Chuan-Jin warned that local employment growth will drop to about 20,000 per year in the last part of this decade - less than a quarter of the 95,000 growth figure last year.

The number of local job entrants will plateau and, in the worst scenario, more may eventually exit the workforce than those entering.

The other source of manpower, foreign workers, has also slowed considerably, the result of a deliberate policy decision to wean companies off cheap foreign labour.

Last year, foreign employment excluding maids grew by 26,000, down from 80,000 in 2011.

"Taken together with the slowdown in our local workforce growth in these coming years, companies must note that we will experience a very significant tightening of the labour market going forward," said Mr Tan in Parliament, during the debate over the Manpower Ministry's budget.

The drag on the economy from the shrinking labour force will be so bad that one analyst, Bank of America Merrill Lynch economist Chua Hak Bin, warns that the Singapore economy will "grind to a virtual standstill".

Whether that dire outcome is on the cards remains to be seen, but one thing is clear: the tightening will affect both companies and individuals.

Already, construction projects, such as roads and buildings, are taking longer, while many restaurants and shops, without enough workers, are reducing levels of service or even closing down.

However, incentives to increase productivity in innovative ways were unveiled in the Budget, and automation is gaining a hold in replacing some jobs, even as economists warn that things may get a lot worse if nothing is done to avert a grim scenario.

Too fast, too furious

ECONOMIC restructuring and the tightening of the foreign manpower flow has been gathering pace since it began in 2010.

But the speed at which it is now moving is what alarms Mr Kurt Wee, president of the Association of Small and Medium Enterprises.

The local labour force grew 1.9 per cent per annum in the last five years, down from 3.2 per cent per annum from 2004 to 2009, as foreign worker hiring rules were tightened.

The Government tightened the flow of foreign workers here, in a bid to restructure the economy and get companies to adopt more productive means of doing business.

To help offset the declining numbers of foreign workers, a range of incentives were rolled out to encourage companies to hire from untapped pools of workers, namely women and older workers.

As a result, participation rates for women workers rose from 51.3 per cent in 2004 to 58.6 per cent last year while that for workers aged between 65 and 69 grew from 18.9 per cent in 2004 to 41.2 per cent last year.

But these are at its limits.

Labour participation rates for women and the elderly are among the highest in the world, which means that the growth of the local workforce in the next few years will start to slow significantly.

This means that local employment growth of 20,000 in 2019 will be just half of the average rate over the past ten years.

The adjustment will be even more painful given that the years between 2004 and 2008, and leading up to the restructuring, saw a sharp increase in manpower.

The total labour force swelled by 600,000 workers from 2.34 million in 2004 to 2.94 million in 2008. More than 400,000 of the increase came from foreign workers.

For the supply of workers to drop off in just a matter of years is simply "too fast and too furious" for firms to handle, says Mr Wee.

The impact has already been felt. Many multinationals have thrown in the towel - closing down and looking for greener pastures outside of Singapore.

In January, the National Trades Union Congress said eight firms, which were not named, shut down their manufacturing operations last year and moved to Malaysia, China and Thailand.

Big names such as American hard-disk maker HGST and Japanese chemicals company ISK have already moved and more could be expected to follow, warn business leaders.

"As an economy, Singapore's growth will slow, businesses may uproot, with competitiveness impeded," says Singapore Business Federation chief operating officer Victor Tay.

For local firms, many continue to struggle with the lack of manpower, even as they start to adjust and adopt more productive ways of doing business.

Mr Mun Kok Woh, managing director of automation equipment provider ASTech, says he has given up 10 projects in the past year and has postponed overseas expansion plans because he does not have workers.

"Singaporeans don't want to do the job of engineers. I also do not have the quota to hire foreigners," he says.

Productivity has gone up 13 per cent since 2009 although the gains have been patchy, a point highlighted by Deputy Prime Minister Tharman Shanmugaratnam during his Budget speech last month. "All of this gain was achieved in 2010 (11.6 per cent) and 2011 (2.3 per cent) as we recovered from the recession, and growth has been negligible in the three years since then," he said.

Mr Tharman, who is also Finance Minister, noted that those competing internationally, such as those in the manufacturing sector, are doing much better than domestic-oriented industries like retail and food and beverage.

Technology is a game changer for the economy and some big companies such as banks and hospitals are using supercomputers to help their human workers make better decisions about anything from investments to medicine.

Things are changing but bosses say it is not easy to transplant technology into their processes.

Singapore Food Manufacturers' Association president Thomas Pek says that in recent years many of his association's members have invested in manpower-cutting machinery. Automated assembly lines for food packaging manned by eight workers do the work of 30 previously.

Mr Pek says: "However, introducing machinery and training workers need time. Easing up on foreign worker quotas and levies will help firms to cope better in the meantime."

For those which cannot cope or adapt, the result may be one of attrition, with many closing down or shipping out. "Some lower-end businesses such as packaging, moulding in the manufacturing sector and retailers may have to move rather than compete for the manpower," says Mr Tay.

For those that remain, they will have to completely rethink their business model.

Good, bad and the ugly

FOR locals, the tight labour market is a boon, at least for the short term. Median incomes have risen by 16 per cent since 2011 while citizen unemployment rates have dropped to 2.9 per cent, one of the lowest in the world.

For low-income workers, the shortage of workers has benefited them greatly. Those at the bottom 20th percentile have seen real incomes rise by 12 per cent over the past five years.

Graduates also have no shortage of job offers.

The latest graduate employment survey released last month showed that the class of 2014 enjoyed a higher median salary than earlier cohorts, with close to nine in 10 finding jobs within six months of graduation.

Says Ms Femke Hellemons, country manager of Adecco Singapore: "The continuing tight labour market means that most companies will likely continue to face fierce competition in securing talent."

Vacancies stood at more than 65,000 last year, a record high.

But over the longer term, should the productivity push fail, the situation for workers is also likely to turn ugly.

Without productivity paying for the higher wage gains, inflation will kick in.

Inflation over the past few months has been negative, as a result of the sharp drop in oil prices. But core inflation, which excludes private road transport and accommodation, still rose 1 per cent on the back of higher wage costs.

At the same time, Singaporeans are also starting to suffer direct effects of the labour shortage.

Signs are popping up at restaurant cashier counters across the island warning customers of slower and poorer service because of the labour crunch.

The labour shortage also means that services which require high manpower resources will start to cost significantly more in the coming years.

This could lead to stratification in society, as those with the means to pay for these services will be able to get them, says Nanyang Technological University economist Walter Theseira.

"We may see the scenario where only the upper middle class can afford services like renovation and beauty care on a regular basis. Painting your house may have to be done once every 15 years instead of once every five years," he says.

"Any industry which relies a lot on labour to provide a service is a luxury in most developed countries."

The ageing population will exacerbate the problem because the sectors that will grow are those which are, by nature, manpower- intensive.

For instance, there will be a huge demand for healthcare workers such as doctors, nurses and allied healthcare professionals like physiotherapists.

Singapore will need 91,000 healthcare workers in 2030, up from 50,000 in 2011.

Political watchers note that one solution to these woes is to once again tap foreign labour.

But while Singaporeans may accept having some foreigners fill jobs in these sectors, political watchers noted that the bruising public reaction to the 2013 Population White Paper will make it difficult for the Government to sell the idea of allowing a large influx of foreigners again.

That year, the Government put out a road map for Singapore's long-term population strategy, but one figure in the paper became a lightning rod for anti- foreigner sentiments - the 6.9 million population projection by 2030.

"At this stage, my sense is that the population is not receptive to any attempt to increase the foreign manpower numbers at all levels," says Singapore Management University law professor Eugene Tan.

But he adds: "I won't be surprised if pragmatism and economic necessity prevail and the population becomes less wedded to the idea of less foreign manpower."

Member of Parliament Inderjit Singh is hopeful that Singaporeans may accept some increase in the number of foreigners to ease the impact of the local labour shrinkage.

He points out that Singaporeans' biggest grouses are against new citizens, permanent residents (PRs) and those who compete with locals for professional, executive and managerial jobs, not workers in cleaning and construction sectors.

"There is room for the Government to review the Population White Paper to allow more than (the) planned transient workers without possibility for these workers to convert to PRs," he says.

For the next lap of growth, Singapore's emphasis is to last the distance. Winning the race is a bonus. For this to happen, tough choices must be made.

Firms will need to shape up and individuals will need to steel themselves for the difficult path ahead.

This is the only way to ensure that whatever is left in the fuel tank can keep the country going.

Banking on 'Watson' saves time for managers
By Aw Cheng Wei, The Straits Times, 14 Mar 2015

IN THE depths of a DBS data centre, "Watson" goes about his job of remembering an estimated 800 reports of financial information that the bank produced for the year's quarter. Watson can ingest thousands of documents a day, at superhuman speed.

Watson is a cloud service that can understand human language and context, and deliver insights, saving bank relationship managers at least two hours of reading each day, says Mr Olivier Crespin, managing director and head of digital bank at DBS, who initiated the project last year.

Before this, bankers had to identify investment ideas from a wide body of financial reports.

On Monday, Manpower Minister Tan Chuan-Jin mentioned Watson in Parliament as an example of how automation is changing jobs at a faster pace than before.

While there has been a push for automating blue-collar jobs, technology is seeping into white-collar ones, reducing the reliance on brainpower. For the latter, the trend is towards deeper co-existence between man and machine as such jobs require discretion and judgment.

"You still need someone to input information or check the finished product," says Frost & Sullivan analyst Mark Koh. He added that in most industries, users make the final call after consulting the likes of Watson.

Globally, machines are moving into white-collar roles. Last year, news outlets such as the Associated Press and Los Angeles Times started using algorithms to write financial, disaster and sports articles.

Artificial intelligence is also used to scour legal documents for anomalies, draft contracts and collate data for lawyers.

In the region, oncologists at Bumrungrad International Hospital in Thailand began using Watson last year to devise treatment plans based on patient profiles, medical evidence and published research.

At home, the medical sector, too, appears to be taking the lead. Insight understands that a local cancer centre will begin to use big data in its research later this year. Oncologist Iain Tan, from the National Cancer Centre Singapore, says: "The accumulated knowledge from thousands of like patients becomes available as powerful support tools for doctors to choose the best treatment for each patient."

Currently, oncologists rely mostly on their previous experience in treating similar patients. At Tan Tock Seng Hospital, nurses upload pictures of wounds and sizes into a software called eWound Clinical Decision Support System.

Set up in 2013, it provides diagnosis and suggests treatment options. Previously, the nurses would wait for a specialist to decide on treatment.

Nurse manager Betty Khong says: "This process lowers the risk of wound infection or deterioration."

In education, to prepare the country's labour force for the growing emphasis on data analytics, the Infocomm Development Authority piloted a training course in data sciences last year with online course provider Coursera.

Mr Deepak Ravindran, partner and managing director of The Boston Consulting Group, says humans will need to become more skilled and educated in order to use, programme and co-exist with machines: "Though machines can recognise pattern, there is huge effort required by humans to programme them."

Making drivers 'service partners' in road to success
By Amelia Tan, The Straits Times, 14 Mar 2015

WHEN school-bus company boss Roger Shin failed to attract drivers despite frequent newspaper ads and offering good salaries, he went for a different strategy.

In 2012, he implemented a new business model for his company, Kim Way: drivers would be made "service partners" who owned buses they could use for extra jobs with other companies.

They would pay for the buses either with their own savings or a loan from Kim Way. The vehicles are second-hand, costing about $15,000 each, and the drivers are guaranteed a monthly income from Kim Way of at least $3,000. If they were not tied to a firm, such drivers would have to rely on ad hoc jobs which bring irregular income.

Schools are also less ready to offer contracts to independent bus drivers as they are seen as less reliable.

The new business model was a hit. Kim Way has hired six "service partner" drivers who own buses. It also has seven drivers who do not own vehicles. The men are aged 50 to 63.

Having more workers has allowed the company to expand from serving four pre-schools in 2012 to eight now. "The drivers feel a sense of ownership because the vehicles are theirs. Importantly, they have the freedom to use the buses during their free time," says Mr Shin. Kim Way's model was adapted from Mr Shin's former employer, an international logistics company where he spent 10 years.

The company's courier staff owned the motorcycles and vans they used to deliver goods. Mr Shin says that they felt "they need to be punctual and help the business to do well so that they can earn more and cover the cost of their vehicles. The workers would also stay on longer with the company, too".

Indeed, tardiness of drivers and high staff turnover made it difficult for Kim Way to grow initially when it was set up in 2011. Mr Shin says he would receive frequent complaints from the pre-schools about drivers who were late or did not turn up. Now, Kim Way's drivers are generally on time. Some have been with the company for four years.

On top of offering fixed monthly salaries, the drivers also get commission for introducing clients to Mr Shin.

Kim Way "service partner" Tan Ngee Heong, 62, says being able to own a bus is a draw. He can use it during school holidays on extra jobs or to ferry his family members.

"Older workers like myself are looking for jobs which are flexible and can give us fixed income to cover our living expenses. We want to be financially independent," he says.

Diners adjust to self-service model
By Aw Cheng Wei, The Straits Times, 14 Mar 2015

AT CURRY Times Tingkat, it is possible to order a meal without human interaction.

A patron goes up to a self-service kiosk and taps in his order, choosing from some 15 dishes, including curry chicken, nasi lemak and dry laksa goreng. And with drinks, he can select options like kaw (thick), po (thin) and less sugar.

Then he pays with his Nets ATM or FlashPay card.

The decisive diner can complete his order in about 30 seconds. When Insight visited the eatery at Kallang Wave mall one quiet Thursday afternoon, food was served up in about three minutes at a counter.

Eateries such as Curry Times Tingkat can be a new reality in a tight labour market.

Old Chang Kee, which owns the Curry Times brand, decided to set up the self-service eatery because of the "manpower crunch and rising labour costs", says its marketing manager Ng Bee Lin.

She adds: "We developed the concept after conducting market research locally."

As an incentive, the eatery and its sister outlet at Alexandra Retail Centre - the first of the two to open, in May two years ago - give a $1 discount on set meals to patrons using the self-service kiosks, which cost $27,000 each. Those ordering and paying via a cashier pay the full price.

During busy periods at the Kallang Wave mall eatery - which opened in September last year - about three to five people man the 1,500 sq ft outlet which seats about 60 customers. If it were a full-service restaurant, the staff count would need to be three times more.

Meals are packed in takeaway containers to reduce the number of cleaning staff, and stickers on tables remind diners to clean up after themselves. The stickers exhort: "The simple task of returning your own tray is a gracious gesture for the benefit of the next diner."

Diner Jessica Lee says: "The concept is new and interesting. I thought I wouldn't get used to doing everything myself but it's okay and really convenient."

The 32-year-old accountant adds: "Everything, from chilli to cutlery, is within reach so I don't need to trouble anyone."

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