SINGAPORE — With the Republic’s economy seemingly impervious in the last decade to the Government’s unceasing prodding to raise productivity, Deputy Prime Minister Tharman Shanmugaratnam yesterday announced further measures to constrict manpower inflows while also dangling perks for firms — including an eye-catching move to directly subsidise pay increments for some workers — to intensify the Republic’s efforts to achieve “quality growth”.

The “Quality Growth Programme” unveiled by Mr Tharman in this year’s Budget will curb foreign workforce growth by imposing an across-the-board hike in foreign worker levies and stricter allowances for imported labour — those persistently dependent on foreign workers but lag furthest behind international productivity standards will bear the brunt of these.

Concurrently, Government aid to help ease firms through this period of restructuring will come in the form of cash bonuses for investments on productivity-enhancing measures, tax rebates, and most significantly, a S$3.6 billion Wage Credit Scheme that will see the Government co-funding 40 per cent of wage increases for Singaporean employees over the next three years.

The co-funding will apply to wage increases for workers who are earning up to a gross monthly wage of S$4,000.

The Government will co-fund any increase in wages given to an employee in between 2013 and 2015. Co-funding will apply not just for that year but for the rest of the three-year period.

Mr Tharman said the Wage Credit Scheme will be automatically paid out to employers annually. “There is no need to apply ... We encourage all employers to take full advantage of the (scheme) to share productivity gains with workers,” he added.

CIMB-GK regional economist Song Seng Wun said the Wage Credit Scheme represents “confirmation of the Government’s intent of not wavering on foreign worker policy”.

He said: “The Government is saying ‘We can’t give you all the foreign workers that you want but we’re willing to pay for some of the wage increases you will incur’.”

In his speech, Mr Tharman stressed that the economy must succeed in this “new phase of transformation” to become less reliant on manpower because it positions the country to achieve “quality growth”, which is the only sustainable way to raise incomes and provide better jobs for ordinary Singaporeans, he said.

He also vowed that the Government will “spare no effort” in resolving the immediate and pressing challenges in housing and transport.

“We have to shift gears for an economy and society that is in transition,” he said. “We are no longer a developing economy, but we have not achieved the level of productivity and income of an advanced economy. At the same time, our own workforce is growing more slowly, and is gradually getting older.”

More importantly, failure to boost productivity levels here will cause Singapore to lose ground, and good jobs, to emerging cities in Asia, he warned. Thus, Singapore must “make every effort” to achieve the admittedly “ambitious target” of 2 to 3 per cent per annum productivity growth.

The measures announced yesterday follow a rigorous debate in Parliament, and among the public, recently on the trajectory of foreign manpower growth as outlined in the Population White Paper, as well as the news last week that labour productivity slid 2.6 per cent last year.

Even as businesses and associations have recently bemoaned the woes attendant with slower foreign workforce growth, Mr Tharman announced measures to moderate the inflow of foreign labourers, through raising levies for all sectors in July next year and July 2015 - sharper increases for less skilled workers - tightening the dependency ratio ceilings for specific industries, as well as more stringent criteria in awarding employment passes and S passes.

For instance, from July this year, the minimum S Pass qualifying month salary will be increased from S$2,000 to S$2,200. The Ministry of Manpower will announce more details of the changes.

These measures will be weighted more heavily against sectors where growth of imported labour is significant but productivity growth remains stubbornly weak, such as the construction and services sector.

Mr Tharman stressed that the Government “can and will actively support all Small-and-Medium Enterprises (SMEs) that are willing to upgrade, so that they can retain their roots in Singapore and grow”. He also announced that businesses that invest more than S$5,000 annually on productivity enhancement measures will also get cash bonuses matching their outlay (up to S$5,000 per Year of Assessment from this year to 2015) under the Productivity and Innovation Credit Bonus.

During the same period, companies will also receive a rebate of 30 per cent of tax payable up to S$30,000 per year, he added.

At the same time, it will support projects by consortia of firms developing solutions to industry-specific productivity challenges, link up SMEs with public-sector research institutions and private sector technology providers to find more productive ways to do things, as well as provide wider help for individual workers for upgrading and training.

Parliament will debate the Budget from March 5 to 15.