Singapore work pass salaries, foreigner intake and rents in 2011

Just after increasing foreign worker levy in the budget, Singapore government is also fast to increase minimum fixed monthly salary bar for S-Pass and Employment Pass holders in Singapore. From July 2011 an Employment Pass (EP) will be granted to minimum salary of 2,800 SGD, 300 SGD increase from current level of 2,500 SGD.

Minimum fixed monthly
Work Pass Type	Type of Applicants	Before 2011	After 2011
Employment Pass P1	Professional, Managerial, Executive or Specialist jobs	7000	8000
Employment Pass P2	Professional, Managerial, Executive or Specialist jobs	3500	4000
Employment Pass Q1	Professional, Managerial, Executive or Specialist jobs	2500	2800
S-Pass	mid-level skilled workers (i.e. technicians and retail executives)	1800	2000

Fixed monthly salary refers to the total regular monthly payments to a foreign employee, including basic salary. According to Ministery of Manpower, the "fixed monthly salary" must not vary in quantum from month to month and must be paid to the foreign employee on a monthly basis, regardless of his performance.

According to The Straits Times, Manpower Minister Gan Kim Yong said:

"We need to raise the qualifying thresholds for Employment Pass and S-Pass applicants accordingly to keep pace with the local PMETs, and encourage companies to be more selective in hiring foreign talent."

These measures will make "foreign talent" more expensive and will make companies to consider locals over foreigners. This will also decrease the number of foreigners coming to work and live in Singapore.
This is a bad news for companies who intend to hire foreigners and foreigners who would like to work in Singapore. But for people already in Singapore, it will have positive results. I am very interested in the effects of these changes to rental prices in Singapore. Foreigners are very important for Singapore rental demand since 80% of the local population have their own flats. Now, take a look at the paragraph from The Straits Times (same news article):

"The number of Employment Pass holders has jumped by more than 20 per cent in the past year, from 115,000 in 2009, to 142,000 last year. For S-Pass holders, the number rose from 82,000 to 98,000."

The numbers are astonishing and very well inline with growth rate of 2010. It is not hard to see what was fueling the rents last 2 years. 43,000 new foreigner families more in a single year! Actually much more. We should also consider 29,000 PR approvals because these are no more EP or S-Pass holders but still in the island. Assuming a family of 3 for these 29,000 approvals, and add around 9000 families more. In 2010, 52,000 new rental unit demand emerged.

We have already written about the possibility of rental price correction in Singapore in 2011 due to increased rental unit supply. In 2011, demand outlook also looks weaker with slower growth and these new salary threshold will decrease the demand.

This is also good news for local PMETs since their salaries may increase at the end:

Association of Small and Medium Enterprises (SMEs) president Lawrence Leow said it could also lead to the salaries of locals going up, as companies would have to adjust the pay of their existing staff. 

“If I have a local worker who has worked with me for two years and he earns $2,000, and I hire a new S-Pass holder at the same salary, it’s only right to increase his pay to reflect his working experience,” he said. 

While Mr Gan stressed that the Government has and will continue to “tilt the balance in favour of local PMETs”, he cautioned against closing the door on foreigners. 

“Foreign talent continues to be critical for our growth and these talents will help grow the economic pie, so that everyone will have a bigger share. Otherwise we will lose our attractiveness as an investment destination and we will not be able to create good jobs for locals.”

Source: The Straits Times