For­eign worker crunch hits firms

Singapore Business Review - - CONTENTS -

The for­eign work­ers in Sin­ga­pore’s ser­vices sec­tor face the height­ened risk of los­ing their jobs after fi­nance min­is­ter Heng Swee Keat an­nounced in his bud­get ad­dress that the govern­ment will be re­duc­ing the de­pen­dency ra­tio ceil­ing (DRC) for the ser­vices sec­tor from the cur­rent 40% to 38% by Jan­uary 1, 2020 and to 35% in Jan­uary 1, 2021. The S Pass sub-drc for the ser­vices sec­tor has also been tight­ened from the cur­rent 15% to 13% on Jan 1, 2020, and to 10% from Jan 1, 2021.

Ac­cord­ing to a Bloomberg anal­y­sis, when the DRC was at 45% in 2013, a busi­ness with 20 full-time lo­cals could em­ploy 16 for­eign­ers. In 2015, the ra­tio was re­duced to 40%, so for the same 20 lo­cals, three for­eign­ers had to be cut. With the re­cent move to fur­ther lower the ra­tio to 35% by Jan­uary 2021, two more for­eign­ers need to be let go whilst keep­ing the same 20 lo­cals in em­ploy­ment, and adding more lo­cals to make up for the dif­fer­ence.

What it means for busi­nesses

The move didn’t come as a sur­prise to an­a­lysts, which have ob­served that the govern­ment’s call for a firmer for­eign worker pol­icy is mo­ti­vated by eco­nomic re­struc­tur­ing amidst a mod­er­at­ing GDP growth.

The rapidly age­ing city has long tried to plug its thin­ning work­force with for­eign em­ploy­ees who in turn were ea­ger to seek ca­reer and so­cial mo­bil­ity op­por­tu­ni­ties in sleek Sin­ga­pore. The to­tal for­eign work­force has inched up steadily from 1.32 mil­lion in 2013 to 1.37 mil­lion in June 2018, data from the Min­istry of Man­power show.

The ser­vices sec­tor has been the key driver of net em­ploy­ment adds over the last three years, ac­cord­ing to Jef­feries Sin­ga­pore. S-pass and work per­mit hold­ers have risen 3% an­nu­ally over the pe­riod ver­sus 0.6% an­nual growth for the to­tal labour force.

The stricter rules of for­eign work­ers would also deal a blow to labour­in­ten­sive ser­vice com­pa­nies like Sheng Siong, Jumbo, Raf­fles Med­i­cal, SMG, HMI, Com­fort­del­gro, Sin­ga­pore

Post, and SATS where labour cost is a ma­jor ex­pense, ac­count­ing for around 20-50% of their to­tal rev­enue, ac­cord­ing to UOB Kay Hian. “[The] tight­en­ing of for­eign man­power pol­icy will in­crease labour costs,” the firm said. “our back of the en­ve­lope cal­cu­la­tion in­di­cates that labour costs for the com­pa­nies un­der our cov­er­age could in­crease by 0.4% in 2020 and 0.6% in 2021. This is based on the key as­sump­tion that the to­tal ex­penses of a lo­cal worker is around 20% more than a for­eign worker.”

With this in mind, Sin­ga­pore is ac­tively ex­pand­ing the use of tech­nol­ogy to plug the chronic tal­ent short­age as Min­is­ter Heng also an­nounced the planned ex­ten­sion of the Au­to­ma­tion Sup­port Pack­age (ASP) by two years in an ef­fort to help firms de­ploy robotics and IOT tech­nolo­gies amongst other ini­tia­tives to up­skill the lo­cal work­force.

In this sce­nario, how­ever, for­eign work­ers like Jean lose out as they re­main in limbo about how longer they can still stay in Sin­ga­pore. After ap­ply­ing for per­ma­nent res­i­dency twice and be­ing re­jected on both counts, she ex­presses hope that the govern­ment can start to value the con­tri­bu­tions of for­eign work­ers like her­self to Sin­ga­pore’s pros­per­ity. “I am very grate­ful to Sin­ga­pore as the host coun­try but I hope that they will do more for the for­eign work­ers who help build Sin­ga­pore. We are not just work­ers but we are hu­mans who have fam­i­lies to sup­port. What will be­come of us after the host coun­try cuts our jobs after we have served for 10 to 20 years? We can go home, but then who will hire us when we are al­ready in our late 30s and 40s?”

Lucky Plaza

Newspapers in English

Newspapers from Singapore

© PressReader. All rights reserved.