Review on Effectiveness of Foreign Worker Levies

Mr Yeo Guat Kwang asked the Minister for Manpower (a) whether foreign worker levies no longer serve their original objective but only erode companies' margins; (b) whether reducing or doing away with the levies will benefit the Singapore workforce; and (c) what plans does the Ministry have to help our businesses, particularly SMEs, cope with their manpower challenges.

The Minister for Manpower (Mr Lim Swee Say): Mdm Speaker, foreign worker levies, together with other measures such as the sector-specific Dependency Ratio Ceiling (DRC), serve three purposes: manage the demand for foreign workers (FWs); encourage productivity gains; and level the playing field for Singaporean rank-and-file workers to sustain real income growth.

DRC alone is not sufficiently responsive to the diverse needs across industries and companies. Set too high, we will not be able to moderate the inflow of foreign workers. Set too low, it will be rigid and will hit SMEs hardest. Hence, we need to complement the DRC with foreign worker levies to strike a better balance between a rigid quota cap and a flexible price mechanism.

Reducing or doing away with levies would not benefit Singaporean rank-and-file workers. Employers may prefer to hire cheaper foreign workers to maximise their quota. The salary of local workers may also be suppressed due to lower cost of hiring foreign workers. In addition, this could deter investment in manpower-lean technology and solutions.

The challenge faced by all firms, including SMEs, is to adapt to our new economic and manpower landscape. The Government has various schemes in place to support firms in making this transition. SPRING, for example, has the Innovation and Capability Voucher (ICV) to help SMEs to invest in productivity improvements. Since 2012, about 16,000 vouchers had been awarded and 90% of which were given to very small businesses.

On the part of the Ministry of Manpower (MOM), we lower the foreign worker levy for skilled work permit holders. This is to encourage employers to upgrade the skills of the workers, including work permit holders, so as to achieve higher productivity.

Mr Thomas Chua Kee Seng (Nominated Member): Mdm Speaker, while the increase of foreign workers has moderated from about 80,000 in 2011, to about 26,000 in 2014, which are the specific sectors that foreign workers had gone into and what portion of this increase goes to SMEs in 2014?

Mr Lim Swee Say: Mdm Speaker, later on, there is a PQ on growth of foreign workers, maybe I can answer that.