Why Singapore’s foreign manpower policy needs to focus on skills

During the recent Budget debate, Minister for Manpower Lim Swee Say announced that the Government would be raising the S Pass salary criteria and extending the maximum period of employment for work permit holders from non-traditional sources, as part of ongoing efforts to boost the quality of foreign manpower here.

At a broader level, the changes announced by the government are necessary to help strengthen the transformation of the local workforce by continuing to shift the emphasis away from raw manpower to skills.

For our economy to remain competitive in an increasingly challenging global landscape, Singapore must have access to the necessary breadth and depth of skills.

We must also recognise the large extent to which the non-resident workforce has grown over the years and how the government’s foreign manpower policy has also evolved in tandem with Singapore’s economic advances.

In the early 1980s, for example, not all non-resident workers were subject to levy.

This changed when – with a workforce size that was about a third that of today’s and a seemingly insatiable appetite by almost every sector of the economy for more workers – a shift in policy expanded coverage of levies to all work permit holders progressively from April 1987.

At that time, there was already a skills-based distinction.

Higher-skilled non-resident workers, namely those on employment passes, were exempt from levies.

But the system was still relatively crude, with no allowance for non-resident workers with mid-level skills. This only changed in 2004, with the significant move to introduce S Pass.

By distinguishing a level of skills between the two extremes that had only been allowed for up till that point - namely work permits and employment passes - the S Pass laid the foundation for the hiring of foreign workers based on different levels of skills.

Over the years, the foreign manpower policy has been further refined.

In 2010, the policy took a decisive turn, with the increase of a number of levers enabling greater policy fine-tuning. This change introduced more layers to the tiers for both levies and dependency-ratio ceilings and distinguished these by sectors.

When the S Pass was first introduced, it attracted substantial concern that those who qualify would pose greater competition to Singaporeans. Similarly, the shift towards a comprehensive framework of levies and quotas in 2010 also worried businesses.

As it turns out, it took several years before the heavy inflow of foreign workers was finally brought under control.

Excessive reliance on foreign manpower is clearly not in the best interest of the economy, as it would severely weaken its skills foundation.

At the same time, employers need to have reliable access to new or emerging skills.

This benefits the workforce in ways which go beyond the mere use of foreign manpower skills.

For instance, workers will gain from exposure to new skills, increasing their scope for pursuing upskilling opportunities. Such exposure also increases the receptivity of the workforce to more efficient work processes.

The worst outcome is for fair hiring and free access to skills to be at odds with each other.

Policy makers therefore face the challenge of ensuring that such a conflict is minimised or better still, eliminated.

The Capability Transfer Programme (CTP) is a good example of how this can be done.

CTP is an important initiative to help businesses gain unhindered access to the skills that are not available in the domestic workforce.

First announced in October, it supports companies in either sourcing trainers from overseas or providing overseas on-the-job-training for local trainees in areas where skills and knowledge are lacking locally.

Instead of a one-size-fits-all approach, assistance is targeted at specific areas where skills deficiencies have been identified.

This focus on skills transfer rather than hiring of foreign manpower provides a significant boost to current efforts in strengthening our workforce’s skills.

Where possible, the objective of our national manpower policy should be to increase access to skill sets, and discourage excessive reliance on manpower.

Such a policy should build on the CTP, with a systematic and updated approach to identifying critical skills in short supply.

Naturally, such a system would be able to identify skills which the Singapore workforce is strong in, strengthening the value proposition of local workers and businesses to embark on internationalisation as well.

In his speech at this year’s Committee of Supply Debates, Minister Lim cited manufacturing and design of smartphones and handling of pharmaceutical cargo as two examples in which the CTP is working on.

There are many other examples of skills which Singapore employers have difficulties accessing, some of which have persisted for years.

One important case is healthcare.

As Minister for Health Gan Kim Yong said during the Budget debate, the healthcare workforce has grown by 25,000 or 36 per cent since 2011.

Despite this, the pace of growth in healthcare provision is set to continue, with corresponding impact on the demand for healthcare manpower.

Healthcare is just one of several cases where even with continuing growth in the size of the workforce in recent years, the shortages of specialised skills sets look set to persist in niche areas.

As an advanced economy, Singapore must be prepared for this to be the norm, as the country will always require access to a range of skills that is wider than that which the domestic workforce alone can provide.

Growing manpower numbers, while necessary, is not a solution to the long-term needs of the sector.

Our foreign manpower policy must be guided by the demand for a wide range of skills, rather than a voracious appetite for labour.

To this end, the industry transformation maps and the accompanying skills frameworks should identify and track the evolving skills landscape.

In sum, the manpower-related initiatives in Budget 2018 should not be seen merely as attempts to control foreign manpower numbers.

Instead, they should be seen against the wide arc of change that has been many years in the making, given Singapore’s size limitations and demographic changes.

ABOUT THE AUTHOR:

Associate Professor Randolph Tan is Director of the Centre for Applied Research at the Singapore University of Social Sciences, and a Nominated Member of Parliament.