SINGAPORE – Record job losses are testing Singapore’s openness to global talent, magnifying local unease with foreign job seekers that was already apparent before Covid-19 drove the wealthy city-state into its deepest-ever recession.
Under pressure to revive the economy and create jobs, policymakers are responding cautiously with new measures to shore up local hiring while leaving the door open to skilled foreign workers needed to compete in various advanced industries.
Total employment in the city-state fell 129,100 in the first half of 2020, while the overall unemployment rate rose to 2.8% as of June. Retrenchments rose sharply to 11,350 in the first half of the year, with the likes of Singapore Airlines recently announcing plans to cut 4,300 jobs, or around 20% of its staff.
Earlier this month, Prime Minister Lee Hsien Loong stressed in an address to Parliament that while his government would “always be on the side of Singaporeans”, the city-state must resist pressures to “turn inward” as policies to safeguard Singaporean jobs are adjusted in the wake of the pandemic-induced economic crisis.
The ruling People’s Action Party (PAP), which won re-election in July with promises to prioritize job creation, now must mount a response to long-standing workforce grievances without burdening employers or cutting out foreign labor and investment needed to bolster the island nation’s longer-term economic recovery.
“Many Singaporeans are feeling anxious and pressured about their jobs. Their sense that foreigners are competing with them for jobs is palpable” said Lee. “We must be careful not to give the wrong impression that we are now closing up, and no longer welcoming foreigners. Such a reputation would do us great harm.”
Singapore’s success as a global business hub has hinged on its openness to global capital and labor flows, a formula that is under unprecedented strain in the Covid-19 era. The pandemic has put a spotlight on low-wage migrant workers often employed in the construction sector who account for around 95% of the city-state’s recorded 57,500 infections.
Issues related to rising immigration and skilled foreign labor have, on the other hand, stoked a polarizing debate and stirred exclusionary sentiments, particularly toward professional migrants from India who some critics and netizens view as being overrepresented in well-paid sectors such as information technology and banking.
“Attitudes towards middle-class migrants are similar to global sentiments under these pandemic conditions and are characterized by heightened xenophobia in many cases, seeing migrants as competing for scarce jobs and resources with citizens,” said Laavanya Kathiravelu, a sociologist at Singapore’s Nanyang Technological University.
Opposition parties notably increased their vote share at the polls after pressing the PAP on immigration and foreign worker issues on the campaign trail. At the first session of Parliament since the polls, Leader of the Opposition Pritam Singh called for laws to punish companies whose hiring practices discriminate against Singaporeans workers.
Prior to that, in August, the government said it would raise the minimum monthly salary threshold required for companies to obtain a work permit for foreign professionals, known as an Employment Pass, to S$4,500 (US$3,310) from S$3,900. For expatriates in the finance sector, the minimum salary was raised to S$5,000 ($3,680) in a sector-specific first.
While some observers have welcomed moves to incentivize hiring local talent, others say the minimum salary thresholds for foreign workers could saddle employers with extra expenses in already challenging economic circumstances should there be too few suitable Singaporean candidates available for hire.
“This will complicate the operating environment and increase operating costs,” said Yu Liuqing, a country analyst at the Economist Intelligence Unit (EIU). “It indeed will encourage employers to hire locals instead of foreign talents, especially when factoring in the government’s wage co-funding scheme for the new local hires.”
Under the S$1 billion ($737 million) Jobs Growth Incentive scheme unveiled last month, businesses that hire local employees over the next six months will be eligible to receive offsets amounting to 50% of the salaries of those aged 40 and above and up to 25% for younger local hires over the next 12 months, subject to a cap.
“But, some specialized talents might not be adequate in Singapore and businesses will have to spend more to bring them in. The new salary threshold can be prohibitively high for graduate program positions, where multinational businesses tend to look globally for candidates,” Yu added. “Singapore’s hub economy model will be affected.”
Song Seng Wun, an economist with CIMB Private Bank, said that while raising salary requirements to discourage companies from hiring from abroad would, from a political standpoint, earn the government “a few brownie points”, the measures are “reflective of the demand that there are jobs here, that jobs are being created.”
Recently unveiled plans by Chinese technology conglomerate Tencent Holdings to open a new office in Singapore show “companies are still using Singapore even though this is not the cheapest place to operate from,” said Song. “Therefore, because there is this want by businesses to use Singapore, raising the salary threshold also comes along that line.”
Chinese technology firms like Alibaba Group Holding and ByteDance are also reportedly expanding their operations in the city-state amid heightened tensions between Washington and Beijing. Investment plans worth billions of dollars could see the recruitment of hundreds of employees in Singapore, observers say, helping to stem the tide of Covid-19 retrenchments.
“As long as the new Chinese investors don’t ask for too many foreign employment passes, Singapore will give them a shelter to sit out the cold war” despite Singaporeans being “far less willing than before to accept a never-ending stream of overseas professionals in exchange for prosperity,” columnist Andy Mukherjee recently noted.
Non-residents, including foreign workers, accounted for 1.68 million out of a total population of 5.7 million, according to official statistics released in June 2019. Foreign employment growth has steadily risen over the past decade, apart from the period between 2016 and 2018 where the number of foreigners working in Singapore declined.
Foreign employment fell by 5.7% compared to a 2.7% decline in local employment in the first half of 2020, according to data from the Ministry of Manpower (MoM), underscoring government measures to prioritize the retention of local employees. Total employment contracted by 3.7% in the same period, the largest half-yearly reduction on record.
While local professionals, managers, engineers and technicians (PMETs) have borne the brunt of job losses, recent labor market data shows lower-wage workers accounting for 49.2% of retrenchments in the second quarter of the year, when a partial lockdown or “circuit breaker” was in force to contain the spread of Covid-19.
As a result, the second quarter from April to June saw a stunning 13.2% decline from a year earlier, making it the country’s worst quarterly contraction on record. Singapore eased coronavirus restrictions in mid-June after more than two months of restrictions, allowing small gatherings and the reopening of restaurants and shops.
But with private consumption down by 11.8% and border restrictions still in place, hospitality, tourism and recreation industries have been hard-hit. Resorts World Sentosa, one of Singapore’s biggest private sector employers with more than 7,000 full-time employees in 2019, recently announced an unspecified number of third quarter layoffs, expected to be in the thousands.
“We are seeing businesses still struggling many months on, despite government assistance schemes to reduce payrolls,” said CIMB’s Song. “In essence, employers just don’t see signs of their business turning around in a significant manner that would encourage them to retain their workers, even with government help.”
Tapping its strategic financial reserves to help businesses and households ride out the crisis, the government has allocated around $100 billion ($73.7 billion) in stimulus across four budgets and additional spending since February, with S$23.5 billion ($17.3 billion) put toward the Jobs Support Scheme (JSS) to help employers to retain local workers.
The scheme allowed for wage subsidies of between 25% to 75% of the first $4,600 of gross monthly wages, determined by the sector in which the employer operates. Offsets from September have been tapered to between 10% to 50% until March 2021. Over two million local workers in more than 150,000 firms have benefited from government co-funding.
“The Job Support Scheme has been a much-welcomed lifeline by the business community and employees, providing some measure of certainty in the shorter term as they work rapidly to address their challenges on manpower management,” said Peta Latimer, chief executive officer at Mercer Singapore, a human resource consultancy.
“It has helped companies think through other options before looking into redundancies and has set the tone for businesses to exhaust options such as hiring freezes, redeployment of talent, pay-cuts or even furloughs first, before moving to a drastic action of laying off staff,” she added. “It cannot, however, be an enduring solution.”
Latimer said that the pandemic has been an impetus for organizations to accelerate efforts to leverage technology and innovate their business models, efforts similarly supported by billions in government spending to help small and medium-sized enterprises (SMEs), in particular, to emerge stronger after the crisis subsides.
“Singapore businesses should be expected to pivot quickly by actively managing current and new revenue streams, repurposing operating models and accelerating digital transformation initiatives,” said Latimer. “The faster companies and employees can prepare themselves for new areas of demand, the faster new job offers can be made.”
Experts and observers say that the economy looks set to gradually recover, with stimulus measures allowing for a return to growth in 2021 – barring a new major upsurge in Covid-19 cases. Retrenchments are expected to rise into the first half of next year, with Maybank Kim Eng projecting full-year losses of between 180,000 to 200,000 jobs.
“Employment will continue to contact in the third quarter, but not as sharply as during the second quarter when the circuit breaker measures were imposed,” said Chua Hak Bin, senior economist at Maybank Kim Eng. “Some firms in the distressed sectors like travel, hospitality and recreation will have to face realities and rightsize their manpower needs.”
The government revised its full-year gross domestic product (GDP) forecast in August to -5% to -7% from a previous projection of a 4% to 7% decline, illustrating the depth of Singapore’s recession. The city-state’s downturn is set to be more prolonged than the 1997-98 Asian financial crisis and 2008-09 global financial crisis.
“Because of the unevenness of the impact and the many restrictions still in place, pressure on the labor market continues, as we can see from the various announcements of tightening hiring, cuts in pay and even reduction in payroll in some of those industries where they still don’t see much visibility on the recovery path,” said CIMB’s Song.
“Many of the businesses on the ground, because things are only slowly opening up, many may still look to trim their headcounts. I suppose it can get worse before it gets better.”