Measures to Tighten S Pass Numbers

Our foreign manpower framework aims to allow companies to access skills and manpower not available in the local workforce, so that companies can take root, grow and, ultimately, generate better jobs and rising wages for Singaporeans. Adjustments are made depending on our economic objectives.

The Economic Strategies Committee in 2010 recommended that we moderate our reliance on foreign manpower and raise productivity for sustainable and inclusive growth. In fact, it was clear that we had to move this way, and we had been taking a series of deliberate and calibrated steps since 2009 to slow down the pace of our foreign manpower inflow. The objective has been clear and consistent. Via the levers available, we have raised levies and tightened both qualifying criteria and Dependency Ratio Ceilings (DRCs) over the past two years.

We will be measured. We adjust, provide lead time, observe its impact and decide on further adjustments. This is being prudent amidst a volatile and uncertain world economy.

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These measures have had an impact. A more stringent quality threshold since January 2012 has been an effective lever to moderate growth at the Employment Pass (EP) level. The number of EPs fell in the first half of 2012.

While the S Pass stock grew by 14,200 in the first half of 2012, 7,800 (55%) of these additional S Pass holders could have qualified for Employment Passes (EP) under the old EP framework prior to 1 January 2012. This shows the impact of our EP tightening. Amongst this group of 7,800 "downgraders".

(1) 4,000 were new applicants who could have qualified for an EP under the pre-January 2012 framework, but were issued S Passes instead.

(2) 3,800 were existing EP holders who had to "downgrade" to an S Pass, as they did not meet the stricter EP criteria upon renewal.

We expect this work pass "downgrading" to continue, as all EP renewals after 1 July 2012 will be subject to the tighter EP framework.

I explained during the Committee of Supply Debate this year that this shifting of lower-end EP holders to S Pass is an intended outcome of our tighter EP framework. Their employers are now subject to the S Pass foreign worker levy and the Dependency Ratio Ceiling (DRC), which incentivises them to raise productivity, reduce their reliance on foreign manpower, and recruit and retain Singaporean talent.

It is also not a one-for-one shifting of EP holders to S Pass. Even if we added back the 7,800 "downgraders", it would result in a net growth of 7,100 EPs in first half of 2012 – less than half of the EP growth in the first half of 2011.

At the same time, the underlying demand for S Passes remains robust. After excluding those affected by the tighter EP framework, underlying S Pass growth would have been 6,400 in the first half of 2012, broadly comparable to the S Pass growth of 6,800 in the first half of 2011. In particular, S Pass growth in the construction sector has been strong due to various ongoing building and public infrastructure projects.

We are continuing to monitor the numbers closely as not all our S Pass tightening measures have taken effect. The S Pass DRCs were only reduced from July 2012, and employers are allowed to keep existing workers till July 2014. The S Pass levy is also scheduled to increase till July 2013.

Our objective remains fixed on restructuring towards a higher productivity-led economy that is further up the value chain and less dependent on low-cost foreign labour. Any further S Pass measures will have to strike a delicate balance between achieving this and granting companies needed access to manpower. At the same time, we must keep a level playing field for local workers. We will continue to give employers time to adjust to any changes, and support them as they restructure.

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