Published on 04 Feb 2022

Budget must address urgent foreign worker crunch but stay firm on long-term weaning

Assoc Prof Angie Low notes that the pandemic merely exacerbated an existing manpower shortage in industries – such as hospitality, food, and beverage – that “have always been reliant on foreign labour to plug the labour shortage and to keep cost low”.

The immediate shortage of foreign labour will likely be tackled in upcoming Budget measures, watchers told The Business Times, although policymakers are expected to keep weaning businesses off foreign manpower in the longer term.

That's as employers clamour for more warm bodies in a labour market where vacancies now far outstrip job seekers. There were 2.09 openings for each unemployed person in September 2021, the latest period for which data is available.

"The exceptionally high ratio... reflects both a recovery in demand as well as the shortfall of foreign manpower due to border restrictions on inflow," noted Terence Ho, an associate professor at the Lee Kuan Yew School of Public Policy.

The foreign workforce shrank from 1.43 million workers in December 2019, before the pandemic, to 1.2 million in mid-2021, the latest data period available. The fall includes declines in Employment Pass (EP) and S Pass holders, as well as work permit holders in construction, marine shipyard and process (CMP) sectors.

As such, Maybank Securities economists Chua Hak Bin and Lee Ju Ye said in a report the government may have to delay CMP foreign worker quota cuts slated for 2023.

While the share of S Pass workers in the manufacturing and CMP sectors is expected to be capped at 15 per cent of the workforce from Jan 1, 2023 - down from 18 per cent now - the Maybank economists believe that the tightening may now be postponed, by 1 to 2 years.

"Construction and process and marine are some of the worst-hit sectors in the pandemic and the recovery remains sluggish," they wrote, adding the industries are still burdened by labour shortages.

The Covid-19-related foreign manpower crisis began early in the pandemic, when Singapore put a freeze in end-January 2020 on new work permits from mainland China and a 14-day leave of absence for workers returning from there.

More setbacks soon followed, including strict limits on entry approvals for work pass holders in March 2020; the unprecedented closure of the Singapore-Malaysia land border; a widespread, months-long outbreak in foreign worker accommodation that year; and the closure of the borders to all long-term pass holders from South Asia from May to October 2021.

The shortage has taken a tangible toll on business operations.

Morgan Stanley economists recently observed that wage levels in sectors such as construction appear to have been pushed up "even though sector GDP still trailed".

Granted, Ho said, the border reopenings now under way should help to alleviate the labour crunch.

The government also extended a foreign worker levy (FWL) waiver for workers' on-arrival isolation period. That waiver will last 1 more year, until end-December 2022.

Meanwhile, a S$250 levy rebate for CMP work permit holders was extended by 3 months - to end-March 2022 - and will be reviewed again closer to the expiry date.

But the Singapore Business Federation still cited member feedback that virus-related safety measures mean it costs about S$5,000 to bring in a CMP worker from abroad.

And Ho added that, if entry restrictions continue, "there may be a need to extend support measures... to help employers retain experienced foreign workers in Singapore, especially for the most affected sectors". He cited the ongoing temporary leeway in work permit renewals for CMP workers who are otherwise ineligible, based on their age or period of employment.

Some industry players are calling for the Budget to go even further in relaxing manpower curbs.

The Singapore Retailers Association has said that freezing FWLs for 2 years and axing the minimum qualifying salaries for foreign staff would help to manage business costs and "contain artificial salary inflation of local workers".

The trade group also asked for looser foreign worker quotas in retail jobs under the progressive wage model, which sets minimum wages for local employees. The S Pass ceiling has been 10 per cent for the services sector since 2021.

Staff shortages are also reported on the high end of the wage spectrum, with firms lamenting a lack of talent for specialised roles.

"During the height of the Covid-19 pandemic, there was certainly a perception of a mass exodus of expats returning to home countries," Christina Karl, global immigration leader at professional services firm Deloitte, told BT.

And the British Chamber of Commerce found in a recent poll that difficulty obtaining work passes or renewals for foreign talent was the second-biggest concern for members, after staff welfare.

"We track recruitment data for each vacancy and there is definitely a reduction in the average number of applicants per vacancy," one chamber member recounted.

"This reduction is almost entirely explained through the reduction in foreign applicants."

Given this trend, Karl said what employers like large multinational corporations want is "more clarity on the work pass criteria to make it more transparent and allow companies to hire the best candidates".

That's as the National Trades Union Congress and Singapore National Employers Federation last year recommended a points-based system to assess EP applications.

On top of that, Karl also proposed publishing a list of roles for which there are not enough resident workers to fill the job openings.

"For jobs on the Shortage Occupation List, employers should not be required to demonstrate that they have applied the resident labour market test in order to bring in foreign talent," she suggested.

But temporary relief for employers' manpower woes in the Budget is still likely to play second fiddle to longer-term goals for a more sustainable foreign labour policy.

Singapore has made efforts to recruit high-demand foreign talent, such as the "Tech Pass" visa launch in late 2020. But salary bars for EP holders were also raised that year - up to S$4,500, from S$3,900 before - and a floor of S$5,000 was introduced for the finance sector. Similarly, the S Pass minimum salary went up, from S$2,400 to S$2,500.

Angie Low, associate professor of finance at Nanyang Technological University, noted that the pandemic merely exacerbated an existing shortage in industries - such as hospitality and food and beverage - that "have always been reliant on foreign labour to plug the labour shortage and to keep cost low".

Urging a revamp of such a business model, she reiterated that it might be "time to think about how we can retool the business to attract locals to these jobs that are often thought of as 'low pay,' 'long hours,' and 'low prestige'".

And, compared with Singapore's large foreign workforce in 2019, Deloitte's Karl said: "As the government focuses on rebuilding the economy and ensuring that Singapore citizens are in employment, it is unlikely that foreign employment will reach the levels of what we observed before the pandemic."

Source: The Business Times