Implementation of Foreign Worker Dependency Ratio Ceiling for Certain Industries

Ms Kuik Shiao-Yin asked the Minister for Manpower (a) what studies have been done on the impact of manpower constraints on larger SMEs with annual sales turnover of $50-$100 million or which employ 50-200 workers as against smaller SMEs with annual sales turnover below $50 million or which employ less than 50 workers; (b) what is the proportion of larger SMEs versus smaller SMEs who have benefited from SPRING's productivity grants to mitigate the impact of manpower constraints; and (c) how many smaller SMEs have closed down over the last five years primarily because of manpower constraints.

Since 2010, MOM has been taking progressive steps to raise the quality of our foreign workforce and reduce over-reliance on foreign labour. This is in line with the Government's efforts to achieve quality economic growth driven by sustained productivity improvement.

Our foreign workforce policies aim to meet three key objectives. First, to moderate excessive growth of our foreign workforce. Second, to sustain real income growth for a broad base of Singaporeans. And third, to support our shift towards more productivity-driven growth.

Our efforts are starting to bear fruit. The overall foreign workforce growth in 1H 2014 was the lowest since 2009. Incomes of Singaporeans have also risen more in 2013 compared to previous years, especially for our low wage workers1.

Accordingly, MOM has also calibrated our foreign manpower policy stance. We did not announce new tightening measures this year, except for some focused on the Construction sector. However, this does not mean liberalising Foreign Workforce (FW) controls either. There remains much scope to boost productivity across all sectors in the economy. There was a net increase of about 14,000 companies per year over the last five years2, while more commercial facilities are slated to open, suggesting strong manpower demand over the next

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few years. So, we intend to maintain our current FW policy stance – neither liberalising nor having new measures to tighten foreign worker numbers further – to motivate adoption of manpower-lean business models and improve job outcomes for Singaporeans.

We know that there are industries facing difficulty in attracting Singaporeans. Sector-specific needs have already been catered for through the different Dependency Ratio Ceilings for the five sectors – Services, Manufacturing, Construction, Marine and Process. In general, we have applied a consistent set of rules across each sector, so that we allow firms that are more manpower-efficient and those that are better able to attract Singaporeans to grow. However, we do provide flexibility in industries where there is an essential economic or social need, such as healthcare and landscaping.

We do not rule out further flexibility where warranted. But such flexibility cannot be accorded simply to industries that claim they cannot find Singaporeans, because that will entrench reliance on labour-intensive business models and reduce the need for businesses to re-design their jobs to be more attractive to Singaporeans.

Restructuring is not easy for businesses, especially for SMEs. But all businesses in Singapore, whether large or small firms, will need to shift towards manpower efficient practices and create jobs that Singaporeans want. So that in the longer term, the economy as a whole will restructure to fit the realities of our limited size and the changing aspirations of Singaporeans.

The key to firms coping with tighter labour market conditions and sustaining higher wages is through productivity growth. This is why there are many policies targeted at helping businesses to restructure and raise the skills level of their workforce. For example, businesses can benefit from SPRING's capability development and productivity grants to mitigate the impact of manpower constraints. In 2013, the vast majority – almost eight out of 10 – of the SMEs supported by SPRING were micro and small SMEs with annual revenue of less than $10 million.

We will need to maintain such a balanced and judicious combination of policies – calibrated tightness in our foreign workforce policies, together with assistance in adopting technology and transforming business processes – to support our shift towards more productivity-driven and inclusive growth.

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