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Labour market will tighten further, warns Chuan-Jin

SINGAPORE — With companies here already struggling with a manpower crunch, Manpower Minister Tan Chuan-Jin warned yesterday that the labour market will tighten significantly, as the baby boomers gradually exit the workforce and smaller cohorts enter.

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SINGAPORE — With companies here already struggling with a manpower crunch, Manpower Minister Tan Chuan-Jin warned yesterday that the labour market will tighten significantly, as the baby boomers gradually exit the workforce and smaller cohorts enter.

In the last few years of this decade, local employment growth will slow dramatically to about 20,000 per annum — dropping from a base of 95,000 last year. “If businesses do not become more manpower-lean, if they do not become more productive, they will have great difficulty in finding enough manpower — be it local or foreign — to run their operations,” Mr Tan said.

Speaking during the Manpower Ministry’s (MOM) Committee of Supply debate, Mr Tan noted that instead of optimising their manpower, many companies resorted to hiring more Singaporeans following the Government’s curbs on foreign manpower in recent years. As a result, last year’s local employment growth was more than twice the figure (38,000) in 2011.

The Government began tightening foreign labour in 2010. Mr Tan noted that its deliberate policies have moderated foreign workforce growth steadily and progressively, from about 80,000 in 2011 to 26,000 last year. “Having more jobs for locals is a good thing … They (women or older workers) contribute to augmenting household incomes. The data on that front have been very positive and strong. Unfortunately … this increase in local hiring will not last,” he said.

Noting that Singapore is still some distance away from the most advanced economies in terms of productivity, Mr Tan reiterated that the Government is not changing its stance on foreign manpower. It will continue to keep foreign workforce growth at the current pace, he said.

Apart from a tight labour market, businesses will also be increasingly affected by technology. Businesses must capitalise on technological advancements to innovate, so as to establish new areas of competitive advantage, keep ahead of the curve and also grow within our national manpower constraints, Mr Tan added.

Economists TODAY spoke to pointed out that in terms of getting the economically-inactive, such as housewives and older residents, to enter the workforce, the Republic has reached the peak. When the labour market tightens further, wages could go up, but this would be unsustainable in the long term, they said.

“Companies might not survive and move out and this could lead to unemployment,” said UOB economist Francis Tan.

SIM University economist and Nominated Member of Parliament Randolph Tan agreed that the labour participation rates of women and older Singaporeans are “nearing their natural limits, after the jumps we have seen over the past decade”.

“The tight labour market is a natural part of our changing demographic profile,” said Associate Professor Tan. He also raised the possibility that essential skills needed for a competitive economy could be in shortage, as the manpower pool shrinks.

Nanyang Technological University (NTU) economist Walter Theseira felt that higher wages could attract more people, including retirees, to return to the workforce. Fellow NTU economics professor Chew Soon Beng noted that in some cases, the pay for workers aged above 62 — the official retirement age which Professor Chew said was too low — is not appealing enough for them to continue working.

Ms Selena Ling, treasury research and strategy head at OCBC Bank, noted that the slower local manpower growth might also be due to businesses becoming more cautious in hiring amid the uncertain economic outlook.

In his speech, Mr Tan stressed that Singapore is in a strong position. Citing the positive economic data last year, he noted that the Republic is making steady progress towards its goals. “We have managed to achieve positive real income growth and avoid the wage stagnation that many developed economies are facing,” he said.

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