FMG INSIGHTS THE SINGAPORE LABOUR FORCE: GETTING AHEAD OF THE CURVE 60 Paya Lebar Road #05-02 Paya Lebar Square Singapore 409051 +65 6386 5638 contactus@future-moves.com www.future-moves.com ISSUED: 10/07/2017
HIGHLIGHTS The Labour Force in Singapore 2016 report released by the Manpower Research and Statistics Department revealed that the recovery of the job market has yet to take off. Employment growth remains flat, amidst an uncertain outlook for the global economy and the increasing role of disruptive technology transforming the labour market. The Singapore labour market is dealing with a mismatch between jobs and skills and will require long-term tailored plans from the Government that cater to both enterprises and workers. A two-step process needs to take place. First, identifying the direction and skills for the future and second, designing specific interventions aimed at labour force transformation. ABOUT THE AUTHORS DEVADAS KRISHNADAS CEO, FMG Devadas has extensive experience in both the public and private sector and is an expert on strategy, foresight, public policy and economic policy. During his time in the Singapore public service, he successfully led efforts in long-term planning, Whole-of-Government budget coordination at the Ministry of Finance where he was the Deputy Director of Fiscal Policy, Strategic Planning and Lead Foresight Strategist. ELENA LOPEZ Economist, FMG Elena has experience in data, and macro and microeconomic analysis. She has conducted technological market research and led projects in applied economics, mathematical economics and economic impact analysis.
The Labour Force in Singapore 2016 report released by the Manpower Research and Statistics Department reinforces the perception that the Singapore labour force is facing long-term pressure to transform its skill base. Job Market Getting More Challenging The employment rate for residents aged 25 to 64 has decreased slightly to 80.3% in 2016 from 80.5% in 2015 amid anemic economic growth and a modest increase in supply of foreign workforce. The nominal median monthly income (including employer CPF contributions) of full-time employed residents rose at a slower pace in June 2016, from $3,949 to $4,056. The education profile of the labour force has been improving over the years (Figure 1). The number of Singaporean people with a degree, diploma or other types of higher education qualification has increased from 38.8% (2006) to 53.1% (2016). This is higher than the average of 33% for Organization for Economic Cooperation and Development (OECD) member states and also higher than that in South Korea (45%), and the United States (44%). Diploma & Professional Qualification Highest qualification attained of resident labour force 11.5% 8.6% 19.4% 15.4% Figure 1: Highest qualificaton attained of resident labour force Source: Ministry of Manpower, Labour Force in Singapore 2016 report The occupational distribution amongst employed residents reflects the continued shift to a services concentrated economy (Figure 2). The share of Professionals, Managers, Executives and Technicians (PMETs) increased from 49% in 2007 to 55% in 2016. The industries with a higher percentage of PMETs are information & communications (82.8%), professional services (79.8%) and financial and insurances services (79.2%). Degree Post-Secondary (Non-Tertiary) Sec ondary Below Secondary 17.2% 18.2% 23.4% 24.3% 28.3% 33.7% 0% 5% 10% 15% 20% 25% 30% 35% 40% 2016 2006 Occupational distribution of employed residents by industry, June 2016 Administrative & Support Services 30.4% 33.3% 36.3% Real Estate Services 63.5% 16.5% 20.0% Financial & Insurance Services 79.2% 16.9% 4.0% Information & Communications 82.8% 13.3% 3.9% Accomodation & Food Services 17.1% 48.2% 34.7% Transportation & Storage 31.0% 20.5% 48.5% Wholesale & Retail Trade 50.6% 37.0% 12.4% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Professionals, Managers, Executives & Technicians (PMETs) Clerical, Sales & Service Workers Production & Transport Operators, Cleaners & Labourers Figure 2: Occupational distribution of employed residents by industry, June 2016 1 Source: Ministry of Manpower, Labour Force in Singapore 2016 report
At the same time, training participation rate has edged up to 42% for the 12-month period ending June 2016, resuming the uptrend after a moderate drop in the previous year. This rate was higher in the services industry than the national average. The resident unemployment rate continued to rise for the fourth consecutive year, reaching 3% in 2016. Unemployment was highest in the information & communications (5.5%), and accommodation & food services (5.2%) sectors. Worryingly, job seekers are taking longer to find jobs. The proportion of unemployed residents still looking for work after 6 months rose to 20% in 2016. Cyclical and Structural Strains An uncertain outlook for global economic growth, characterised by geopolitical uncertainties, sluggish performance in advanced economies toggled with unresolved debt-crisis in the Eurozone, continue to dampen sentiments. This has impacted external demand for the Singapore economy. The Singapore economy is impacted by both cyclical and structural factors. Cyclical factors are clearly visible. Companies are slowing down hiring because they are being affected significantly by the weak external and internal demand. Clear examples can be found in the oil and gas, marine and banking and finance sectors that have the highest number of layoffs in 2016. The structural factors are long-term factors underlining seasonal and cyclical effects. Technology change is the most significant structural factor at play. It is disrupting industries from financial services, ride hire, to hospitality and professional services. 2
The labour force needs to adapt to the rapidly changing economic climate. The changing climate is rendering skills obsolete while creating demand for new skills and capabilities at a higher frequency. New knowledge and skill sets lead to the creation of new types of jobs. Knowledge of cloud and distributed computing, statistical analysis and data mining, web architecture and development, network and information security are now in-demand skills. This has led to the creation of Data Science as a fast growing field. However, these new occupations have high knowledge and skill barriers to entry. This makes it difficult for older workers to retool to fit in. Thus, in aggregate terms, technology change may mean jobless economic growth. This would have profound economic, social and political consequences. Early action to address this potential phenomena and sustained industry and government intervention to support up and re-skilling is necessary to avoid ripple effects which threaten social stability and capital labour relations. Relevance to the economy will demand ever higher levels of both hard and soft skills. The labour force needs to learn relevant skills to add value to the economy and to contribute to industry transformation; thereby joining the changing trend instead of resisting it. Industries must transform to adapt themselves to new market needs, seize new technological advances and offer attractive opportunities to workers who accept the challenge of change. 3
Getting Ahead of the Curve Ensuring economic competitiveness has always been a priority for the Singapore Government. It has consistently allocated policy and fiscal support to strengthen the profile of the local workforce and sector competitiveness with investments in technology and infrastructure. National policies and initiatives have included tax releases, financial schemes, educational training and business consultancies in order to encourage and facilitate Singaporeans to acquire deep skills and expertise. Specifically, recent examples include sectoral manpower plans, SkillsFuture Credit scheme, Professional Conversion Programme and Career Support Programme (CSP). The complexity of the job market requires long-term tailored plans to help workers and enterprises adjust to change and focus on the relevance and quality of training. This is a two-step process of first identifying the direction and skills for the future and second, designing targeted interventions to support industry and labour force transformation. 4
The long-awaited report by the Committee for the Future Economy (CFE), released in February 2017, was poorly received by industry. It was characterised by high level statements but an absence of practical details and a seeming lack of appreciation of the inherent difficulty in overcoming skill barriers and managing the transformation of an ageing labour force. However, the CFE indicated that it has initiated 23 sectoral transformation initiatives. These are expected to provide more granular clarity on the sector strategy and associated programme level support. It will be imperative that these sectoral plans are focused, practical and achievable and come with the assurance that government support will be both targeted and adequate. Alongside these sectoral plans is the urgent need to develop a comprehensive perspective on the digital future. We are already in an age which is not only driven by accelerating digitisation but is being defined by it. Rather than take a piecemeal, app by app, approach to making sense of this phenomenon, it is crucial to work from first principles. Significant and sustained policy support and investments in technology infrastructure and capacity for educational and political reform will be required to re-wire, not just retool, the economy from Lee Kuan Yew s digit economy, where disciplined but docile workers were the key, to a digital economy where creativity, flexibility, innovation and resilience will be determinative. Getting ahead of the curve must therefore mean more than strategies but mind-set and emotional re-setting on the part of the labour force. The re-set will be difficult but unavoidable. The pain factor from economic disruption must be allowed to stimulate workers to take the initiative. The government must manage the difficult balancing act between providing support without masking this natural stimulus. Succeeding will call for more than economic judgement but will require reserves of political courage and capital. The irony in the Singapore case would be if the Government proves capable of conceiving a compelling strategy and providing suitable support but the labour force proves unable to bring itself to make the transformation due to complacency. Devadas Krishnadas (CEO, FMG) Elena Lopez (Economist, FMG) 60 Paya Lebar Road #05-02 Paya Lebar Square Singapore 409051 +65 6386 5638 contactus@future-moves.com www.future-moves.com ISSUED: 10/07/2017