Factors in Determining Foreign Worker Dependency Ratios for Industries

Ms Mary Liew asked the Acting Minister for Manpower (a) what is the basis for determining the dependency ratios for different industries; (b) how does the Government ensure that these ratios do not undermine the employment opportunity and career advancement of Singaporeans, particularly in respect of the S Pass policy which has a direct impact on fresh graduates from the Polytechnics and Universities.

Our purpose is to create jobs and to constantly ensure that there are better jobs with good wages for Singaporeans. For these to happen, our business environment must be attractive for companies to be here in Singapore and to stay here and not go elsewhere. They need to grow, prosper and achieve productivity gains.

Our foreign workforce policies – including the Dependency Ratio Ceiling (DRC), are instruments that help MOM attain these goals. The DRCs need to be open enough to give companies access to supplementary manpower to grow, start new ventures, obtain expertise not easily available. Yet, they have to be stringent enough so as not to compromise job and wage growth opportunities for Singaporeans.

At the same time, the needs of different sectors vary according to the way they operate, the willingness of Singaporeans to take up jobs offered, and prevailing economic conditions.

Hence, in determining the DRCs across sectors, we take into account both quantitative and qualitative factors. These include, but are not limited to, the mix of skills required in a sector, availability of local workers, the willingness of locals to do the job, and our overall need to manage foreign worker inflows. For example, the Construction sector has a more generous DRC given the physically strenuous nature of the work, while Services has the tightest DRC as many jobs there can be filled by locals.

Maintaining the right DRC is a delicate balance. It is not an exact science, and may have to be recalibrated from time to time. Most recently, we reduced the Services, Manufacturing and S Pass DRCs from July 2012 to moderate foreign workforce inflow and encourage companies to invest in productivity improvements, rather than rely on labour-intensive business models.

The DRC alone is insufficient in ensuring that locals enjoy good job opportunities and wage growth, and compete with S Pass holders on a level playing field. This is why we have other measures in place to complement the DRC. To compensate for the cheaper wage expectations of foreign workers, we are increasing Foreign Worker Levies until July 2013. To select quality candidates, we require S Pass holders to meet salary and other qualifying criteria, such as qualifications and work experience.

We are well aware of the need to carefully manage the balance between allowing businesses the foreign manpower they require to grow and safeguarding the interests of Singaporeans in the process. Over nine in 10 graduates from our polytechnics and universities last year found a job within six months from graduation1, while our overall unemployment rate remains well below that of most other countries2. Ultimately, our young graduates can only have good employment opportunities if our companies do well. Hence, we do not make changes lightly and will continue to monitor the impact of our policies closely.