More locals employed amid tighter foreign hiring

[SINGAPORE] Restructuring pains at the centre of the government's productivity drive are showing up in Singapore's most recent employment numbers.

It appears that the hiring of locals grew more quickly in 2013, as the growth in foreign workers continued to moderate from the tightened foreign manpower hiring measures.

Higher-wage workers were also found to have borne the brunt of the stricter regulations for employing foreign labour.

These were revealed in the Ministry of Manpower's (MOM) Employment Situation, 2013 report released yesterday, as well as in the analyses of various economists.

Total employment grew 134,900 or 4 per cent over 2013, mostly driven by the hiring of Singaporeans. Of this, foreign employment contributed 1.6 percentage points to the growth.

By stripping out foreign domestic workers and construction workers, foreign employment contributed just 0.6 percentage point to the milder overall employment growth of 3.5 per cent, Citi research economists Kit Wei Zheng and Brian Tan found - suggesting that most of the foreign labour hired were lower-paid workers.

As at last December, locals accounted for about two-thirds of people employed in Singapore (excluding foreign domestic workers). Foreigners made up the rest.

Meanwhile, unemployment stayed low and in line with economists' expectations, while income growth of Singaporeans strengthened over last year.

The annual average overall and citizen unemployment rates dipped to 1.9 per cent and 2.9 per cent respectively, while the resident rate stayed unchanged at 2.8 per cent.

Income growth - which MOM measured using the nominal median monthly income of full-time employed citizens - also strengthened last year, amid the tight labour market.

It rose 7.1 per cent to $3,480 last June, better than the 5.8 per cent gain to $3,248 in the preceding year.

After adjusting for inflation (which eased to an average of 2.4 per cent in 2013, versus 4.6 per cent in 2012), growth in real median income went up to 4.6 per cent in 2013, from 1.2 per cent in 2012.

Several recent job surveys have pointed to weaker hiring intentions, but market watchers put this down to growing acceptance among companies that foreign worker tightening is here to stay.

CIMB analyst Song Seng Wun added that hiring may be weak in sectors such as capital markets and manufacturing, but should remain brisk in the health sciences, hospitality, sales, marketing and the consumer clusters.

Unemployment is expected to stay below 2 per cent this year while the local labour force's employment rate nudges higher. Companies are also likely to have to remunerate workers with higher salaries in the tight market.

Citi's Mr Kit and Mr Tan believe more pro-productivity schemes may be needed, and the upcoming Budget in February is likely to extend and enhance the Productivity and Innovation Credit (PIC) scheme to help ease the pain of higher labour costs.

"We do not expect further foreign worker levy hikes as the current schedule already involves further hikes and quota cuts through 2016 - though further tightening on employment pass holders is possible," they said.