Growing pains

Singapore needs to strike a fine balance between local and foreign hires if it is to maintain its economic growth.

Singapore has an enviable location. An island at the heart of a collection of exciting Asian economies, the tiny state is well placed to act as a hub for its bustling corner of the world, and its reputation as a business-friendly centre of commerce has played a key role in attracting talent from overseas. There is good reason that multinationals such as Google, BP and Procter & Gamble use the city-state as their regional headquarters.

However, recent labour laws have added a layer of complexity to successful and international approaches to business, by prioritising local talent over foreigners, particularly for middle-income jobs. That’s prompted a rethink for many industries, as Singapore’s market for highly skilled roles has been accustomed to a steady stream of talent – something that its small population and educational facilities struggle to keep up with.

Alongside this is the Singaporean government’s recent focus on growing the population – a decision influenced by the economic success of densely populated Hong Kong, across the South China Sea, and the findings of a Population White Paper in 2013 predicting that Singapore’s rapidly ageing workforce would naturally shrink from 2020.

In response, the state has called for a massive increase in population from 5.4 million to 6.9 million in 2030, with nearly 45 per cent of those new citizens coming from overseas. This led to public protests from opposition parties and Singaporean citizens, who complained that high living costs and insufficient state support discouraged young local couples from having children, and that an increased population – immigrant or otherwise – would overstress the 716km2 island’s limited urban infrastructure.

The migrant balance

While it remains committed to population growth, the government has placed emphatic preference on local candidates over foreign talent.

One recent change is the Ministry of Manpower’s new ‘Fair Consideration Framework’. It says that, when recruiting for roles worth up to S$12,000 pa, any business employing over 25 staff must only search for Singaporean candidates for the first two weeks of a position becoming available, before widening the talent pool to foreign workers.

These vacancies need to be advertised on the Jobs Bank, the Singapore Workforce Development Agency’s (WDA) new public job portal, which has been created to match local job seekers and employers.

For jobs that remain unfilled, foreign workers must apply for access through a tiered work pass system, with more specialised jobs affording higher covering passes for spouses, children and parents too. There are no limits on the number of passes an employer can hold, but the acceptance of an application can depend on the financial state of the employer and the business’s ratio of foreign to local employees.

Foreigners make up 38 per cent of Singapore’s 3.7 million workers, so while these regulations are not as restrictive as many other nations’, any barriers to hiring foreign workers risk economic growth. In the 31 countries surveyed in the 2014 Hays Global Skills Index, Singapore’s labour market slackened the most – a trait the Index correlates with low GDP growth.

The search for skills

Around 20 per cent of the 1,700 people Hays places in Singapore each year are brought in from overseas. Rising wage pressures in both high-skill occupations and high-skill industries illustrate how recruiters are being forced to look overseas and offer higher salaries to secure talent.

Unemployment is at just under two per cent (one of the lowest rates worldwide) and there’s a clear skills shortage in the main industries of finance, oil and gas, shipping logistics, manufacturing, tourism and hospitality, technology and IT.

Moreover, while Singapore’s educational performance is among the best in the Hays Global Skills Index, placing it second only to Hong Kong, its educational institutions seem unable to produce the scale of talent needed to meet the government’s ambitious growth targets.

Hot sectors

Accounting and finance is the largest sector in Singapore and is seeing 30 per cent year-on-year growth in jobs, particularly as Singapore sheds its back-office image and begins to attract the front-office and private banking work that was previously the preserve of Switzerland.

The growth of the financial sector promises to bring in trillions of Singaporean dollars in assets from high-net-worth individuals and private banks, and its reliance on international expertise is an example of why Singapore needs to keep looking outward to maintain its strong reputation in the region, even if that is only attracting the returning diaspora of well-educated and professional Singaporeans.

Another industry facing an acute skills shortage is life sciences, which has grown from nothing into a pillar of the economy in the past decade. While the state has created specific life science-focused degrees, they have only produced graduates in the past five years, meaning local candidates remain too junior and without the regional exposure many roles require.
The frustrating thing for many businesses in Singapore is that the skills shortage is acting as an anchor on an otherwise unrestrained economy.

Singapore is one of the world’s most attractive places to work, ranking second in the 2014 World Economic Forum Global Competitiveness Report. It boasts the third-highest GDP per capita in the world and the strongest overall environment for institutions, infrastructure, macroeconomics, health, and education. Notably, it scored highly for its transport infrastructure – an important feature for any country relying so heavily on trade.

Three and a half hours’ flight from Singapore can take you to eight countries, it remains an easy place to do business and the Singapore Straits means it will remain an important centre for shipping.

But facing such stiff competition from the growing economies around it, Singapore cannot afford to rest on its laurels. Its role as a local business hub depends on its global perspective, and unless it can resolve the tension between the local labour market and its need for outside labour, that role will be under threat.