Stricter Quota for Foreign Workers and S-Pass Requirements

Mr Zaqy Mohamad asked the Deputy Prime Minister and Minister for Manpower (a) what is the impact of the stricter quota for foreign workers and S-Pass requirements on companies in Singapore; (b) which are the sectors that are most affected by the changes and whether our companies, especially the local SMEs, are able to cope with the changes; (c) whether the tightening of foreign labour has translated into more employment opportunities for Singapore citizens; and (d) whether more from the inactive workforce have been sufficiently engaged to bridge the workforce shortage.

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Mr Tharman Shanmugaratnam: The gradual tightening of our foreign worker policies has been effected principally through an increase in levies. We have not adjusted the overall Work Permit Dependency Ratio Ceilings (DRCs) or the S-Pass sub-DRC. Companies which need to hire foreign workers for their operations or for expansion are still able to hire foreign workers as long as they have the number of locals in their workforce as required by the respective sectoral DRCs. However, in order to moderate the growth of the foreign workforce, especially low-skilled workers, we have been increasing the Foreign Worker Levies for Work Permit and S-Pass holders progressively since July 2010. As announced previously, the levies are being raised in 6-monthly intervals up to July 2013.

These increases in the Foreign Worker Levies are more significant in the Services and Construction sectors, given the greater scope for productivity improvements in these two sectors. In the Construction sector, productivity levels are only one-third that of Japan; while the productivity level of the Services sector is only about 60% of the global leaders.

We recognise the difficulties many SMEs face in recruiting Singaporeans. At recent dialogue sessions between MOS Tan Chuan-Jin and the Singapore Manufacturers Federation (SMa) and the Association of Small and Medium Enterprises (ASME), they shared the challenges facing SMEs, such as the increase in business costs partly contributed by the rise in Foreign Worker Levies. Some Members, such as Mr David Ong and Er Lee Bee Wah, also raised similar concerns during the debate on the President's Address last month.

The Government recognises the challenges faced by SMEs and has in fact introduced specific initiatives to help them re-engineer their operations and reduce their reliance on labour. One example is the SME Productivity Roadmap, a joint initiative by WDA and SPRING Singapore. We have also taken into account feedback from the various business associations and made significant enhancements to the Productivity and Innovation Credit (PIC) during Budget 2011 to help SMEs benefit further from the PIC scheme.

SMEs can also approach WDA's career centres located at the Community Development Councils or the Employment and Employability Institute (e2i) to participate in job-matching schemes, post job vacancies on WDA's online job portal, JobsNet, or participate in work trials and job fairs. SMEs can also tap on the HR Capability Toolkit developed by WDA and SPRING, which helps them systematically manage their HR functions. Subsidised training specially designed for HR professionals under the Workforce Skills Qualifications (WSQ) framework is also available for SMEs that want to upgrade their HR capabilities. MOM is exploring other ways to help SMEs meet their needs.

The changes in our foreign manpower framework are aimed primarily at encouraging greater value-add and business growth with the same or less number of workers - this is what the productivity drive is about. With higher productivity growth, Singaporeans should also enjoy higher wage growth. The levies may not lead to increased employment of Singaporeans in every sector, but Singaporeans will ultimately benefit from higher productivity growth. We will continue to monitor the outcomes carefully.

More of our economically inactive workforce have joined the workforce in recent years. Hence, the resident labour force participation rate has continued to increase. Some companies are more successful than others in tapping the economically inactive. MOM has various schemes (such as Flexi-Works! and WoW!) to encourage companies to adopt flexible work arrangements. With greater flexibility at the workplace, individuals will be able to balance family and work responsibilities more effectively, and more economically-inactive Singaporeans will be able to return to the workforce.

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Much of the increase in local labour force participation has come from women and older workers. Since the formation of the Tripartite Committee on Employability of Older Workers in 2005, the tripartite partners have been working hard to raise the employment rate of older workers. We have seen positive results, with the employment rate for residents aged 55 – 64 rising to a new high of 59.0% in 2010. The Committee has set a target of 65% employment rate for workers aged 55 – 64 by 2015.