Friday, October 26, 2012

Further tightening of SPass work visa holder inflow

To further slowdown the increase of the number of foreign workers in Singapore, The Ministry of Manpower (MOM) is now looking at tightening the increase of S-Pass holders here. S Pass is a Singapore work visa type designed for mid-level skilled foreign workers employed by companies operating in Singapore.[1] Foreign workers earning more than $2000 per month in supervisory or junior PME (Professional, Managerial Executive) hold this type of work visa. The number of foreign workers holding S-Pass in Singapore has jumped by 14,200 in the past year and now there are 128,100 S-Pass holders in Singapore according to recently released population statistics.

While number of SPass holders jumped, number of Employment Pass holders slighttly went down from 175,400 to 174,700. This suggests that companies are applying SPass for new hires or renewing their employee passes with SPass instead of Employment Pass due to the restrictions introduced in Employment Pass category (salary lower limits for Employment Pass holders was increased in the beginning of the year):

"Acting Manpower Minister Tan Chuan-Jin said that it is likely that companies are using S Passes to bring in
more junior-level professionals, managers and executives (PMEs).  “The S Pass is a sector we are not totally comfortable with, because there’s a lot of transference of lower (level) Employment Pass into S Pass and we are now exploring measures to perhaps tighten that segment,” he added.[2]

The sentiment on the ground is that S-Pass holders are taking up decent paying jobs that could have gone to Singaporeans. Also as a more worrying trend, the work force is still increasing despite a significant slowdown in Singapore's economy which is resulting in productivity decline in Singapore. It seems like Singapore's economy is only expanding by adding more working age people to its population and excessive borrowing (especially the construction sector is running on near zero interest rate fueled mortgage spike), which is quite unsustainable and also reduces the wealth of man on the street while the GDP goes up, rather than increasing productivity.

Although the number of foreign workers is continuously increasing, super unproductive SMEs of Singapore seems to not get enough of them. A recent Association of Small and Medium Enterprises (ASME) survey
of some 200 companies found that eight in 10 currently face manpower shortages, following the tightening of
regulations on foreign labour.[2] A few weeks ago, an SME boss was telling "we cannot increase productivity in many cases since it is not feasible". He gave an example of small bakeries who needs automated baking machines to increase the individually because they do not have enough revenue to finance it. He basically told bringing more worker is the only choice and otherwise the bakeries will bankrupt. In my opinion this this is exactly what should happen: Let's say there are 5 bakeries like this. If the constant influx of cheap labour which is sustaining their unproductive business practices goes, some will definitely go out of business. But 1 or 2 out of these 5 (probably 2 of the 10 in ASME surveys) will survive and armed with an increased share in market, they will be able to finance a baking machine. They will also hire the locals working for the other companies with probably higher salaries thanks to the productivity increase. Is this process painful? Yes, it is but it is constructive destruction and after the initial pain it will be win-win for all Singaporeans and Singapore economy. Enter Joseph Schumpeter's creative destruction.

The Acting Manpower Minister, however, stressed that Singapore cannot continue to rely on low-cost foreign labor to grow the economy, as it is “a race to the bottom”:

“We will not be able to sustain our competitiveness against our neighbours, who will always have more ready access to lowcost labour,” he said, noting that textile firms in China are relocating to other countries with even lower labour costs.[2]

[1] - Singapore S-Pass
[2] - Govt may further tighten inflow of foreign workers

1 comment:

  1. Oh' that was a sad news! I wish they can make a better solution for this so that many unemployed people can get a job.

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