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• In the consultation document on population policy released in October 2013, the Hong Kong Government pointed out a need for greater flexibility in the manpower policy in order "to fill the gap of the local manpower shortage" in certain sectors. The consultation exercise ended in February 2014. In its response to the consultation report issued in July 2014, the Government noted that while there was no consensus on importation of labour, there were suggestions that "importation of labour should focus on the less attractive industries which experienced manpower shortage, for example the construction and care services industries".
• Singapore has one of the largest foreign workforce in the world, serving to enhance the adjustment flexibility of the labour market towards cyclical economic developments. Foreign manpower not only can boost production during economic upswings, but it can also act as a buffer to shield Singaporean workers from job losses at times of downswings. Notwithstanding its economic contribution, the Singaporean government has recently taken progressive steps to reduce reliance on foreign manpower. This issue of Essentials reviews the latest developments of the foreign manpower policy in Singapore.

Foreign manpower policy in Singapore

• The Ministry of Manpower in Singapore issues various types of work visas for foreign workers with different skill levels. They include (i) professionals with a monthly salary of at least S$3,300 (HK$20,460); (ii) mid-skilled workers with a monthly salary of at least S$2,200 (HK$13,640); and (iii) unskilled workers without explicit salary floor.
• The size of foreign workforce in Singapore is regulated through quota and levy. Quota is in the form of dependency ratio ceiling ("DRC"). The ratio of foreign workers to the total workforce of a company cannot exceed a prescribed ceiling, depending on sectors and visa types. As an illustration, DRC for unskilled workers is now fixed at 60% in manufacturing, 87.5% in construction and 40% in services.
• Employers also need to pay foreign worker levy for mid-skilled to unskilled workers. The levy rates are tiered and vary with the size of foreign workforce. For instance, the monthly levy for unskilled worker in manufacturing is S$370 (HK$2,294) if the dependency ratio is below 25%, and rises to S$650 (HK$4,030) if the dependency ratio is 55%.

Economic contribution of foreign workforce in Singapore

• Total foreign workforce in Singapore has increased by a total of 25% over the past five years, from 1.05 million at end-2009 to 1.32 million at end 2013. It now accounts for 38% of the total workforce in Singapore.
• By comparison, foreign workforce in Hong Kong was estimated to be just around 400 000 by end-2012, comprising 312 000 foreign domestic helpers, 87 000 professionals and talents, as well as 2 400 low-skilled workers under the Supplementary Labour Scheme. Altogether they took up only around 11% of total workforce in Hong Kong.
• The massive size of foreign workforce enables Singapore to overcome labour shortage and stretch out its potential GDP. Partly due to this factor, the Singapore economy has been able to grow at a trend rate of 5.4% in real terms since 1997, faster than the 3.5% growth in Hong Kong.
• More specifically in manufacturing, foreign workers take up half of the workforce, enabling Singapore to uphold its global competitiveness and to maintain a more diversified economic structure. In construction, foreign workforce accounts for four-fifths of the workforce and has contributed significantly to the timely completion of a host of big infrastructural projects in Singapore (e.g. Marine Bay and expansion of Changi Airport) in recent years. These projects have laid a solid foundation for subsequent economic growth in Singapore.

Tightening of the foreign manpower policy

• There is a concern that the importation of foreign manpower might cause job displacement effects on the local workers. In 2013, the unemployment rate for Singaporean residents stood at 2.8%, higher than the respective estimate of 0.5% for foreigners. Likewise, it restrains salaries of certain segment of local workers, resulting in stagnant wage movement of unskilled workers over the past decade. Furthermore, easy availability of unskilled foreign workers has slowed the pace of productivity enhancement and economic upgrading in Singapore.
• The presence of massive foreign population exerts pressure on public facilities and services in Singapore, resulting in congestion in public healthcare and transportation. It is reported that some Singaporean residents have strong views about the immigration and foreign manpower policies. In addition, foreign workers with lower skill levels occasionally complain about the low pay and poor working environment, as manifested in the outbreak of a labour strike in 2012 and a riot in 2013.^{1Legend symbol denoting On 26 November 2012, 171 imported bus drivers employed by a public bus company took "collective leave", complaining about the unequal pay structure amongst drivers of different ethnicity and poor living conditions in their dormitories. The two-day strike was cited as the first strike in Singapore in almost 30 years. One year later on 8 December 2013, a crowd gathered after a fatal traffic accident in Little India which led to vehicle attacks by passerbys. Few hundreds of migrant workers were reported to be involved in the two-hour riot. This was alleged to be the first riot in Singapore in over 40 years.}
• In response to the above concerns, the Singaporean government has taken a more cautious stance in its foreign manpower policy since 2012. In its Population White Paper released in January 2013, the Singaporean government announced that it "will continue reviewing foreign manpower policies to reduce reliance on foreign labour in the long run". Over the past three years, the Singaporean government has put forward the following key tightening measures:
  
  

  (a)	raising the minimum salary of foreign mid-skilled workers and foreign professionals by 10% in July 2013 and January 2014 respectively;
  (b)	raising foreign worker levies annually;
  (c)	lowering quota ceiling for most of the sectors; and
  (d)	requiring employers who wish to hire foreign professionals to first advertise such vacancies to Singaporean citizens for at least 14 days.

Observations

• As a result of these tightening measures, annual growth in foreign workforce in Singapore has slowed steadily, from 7.6% in 2011 to 4.2% in 2013. In the first half of 2014, the growth moderated further to only 1.1%.
• As an offset to the effect of slower growth in workforce, the Singaporean government is keen to expedite productivity enhancement. In the 2014 Budget, it has introduced more tax incentives for business investment in innovation on the one hand, and promoted adoption of information technology amongst small to medium sized firms on the other. The policy target is to lift the annual growth in productivity in Singapore to 2-3% up to 2020, from 1.8% during 2000-10. This shows a shift in policy emphasis from importation of workers to productivity upgrading.

Prepared by Kari CHU
Research Office
Information Services Division
Legislative Council Secretariat
9 January 2015