Jobs may stay below pre-Covid level even as labour market recovers: MAS
Strict border curbs, foreign worker policies likely to slow recovery in foreign employment, along with push towards tech, lean staffing: economists
Singapore
WHILE tighter labour market conditions will fuel faster wage growth and the resident unemployment rate will keep improving, overall employment may remain below its pre-pandemic level even by end-2022, the Monetary Authority of Singapore said in its Macroeconomic Review on Oct 28.
Strict border controls and foreign worker policies are likely to dampen the recovery in foreign employment next year, said Maybank Kim Eng senior economist Chua Hak Bin.
While the labour market recovery was interrupted by domestic curbs in Q2, remaining slack is expected to dissipate in 2022. But the MAS noted that sectoral disparities in labour market outcomes are widening, adding: "For the economy as a whole, labour market mismatch likely intensified in recent quarters."
Heightened alert measures took a greater toll on labour demand for consumer-facing segments such as food and beverage services and retail trade, while sectors such as construction and manufacturing faced labour supply constraints.
Affected workers in the former sector were unlikely to have moved easily to latter ones, said the MAS. This mismatch led to a rise in the resident unemployment rate in July, and higher job vacancy rates in Q2.
In 2022, the resident unemployment rate is projected to decline further, approaching its pre-Covid level within the year.
Wage growth is expected to strengthen as the labour market tightens, confidence recovers, and government policies result in higher wages at the bottom end.
Meanwhile, "some lingering mismatch" may put upward pressure on wages in some pockets of the market, with demand likely to keep rising in sectors such as information and communications; health and social services; as well as financial and insurance services.
"In these sectors, employment and job vacancies have both exceeded pre-Covid levels, suggesting tightening in labour market conditions."
Overall, resident employment is expected to keep expanding at a firm pace in 2022, if slower than in 2021.
Non-resident employment is expected to stabilise and then rise gradually, as an improved Covid-19 situation allows more migrant workers to enter.
Yet the overall level of employment may not be restored to its pre-Covid level even by the end of 2022, "in part because firms are expected to raise labour productivity, while demographic factors will continue to weigh on resident workforce growth", said the MAS.
In addition to border curbs and some industries having yet to recover to pre-Covid levels, there are structural factors such as the ageing population, the push towards technology and being manpower-lean, and the "still tight foreign manpower stance", said OCBC head of treasury research and strategy Selena Ling.
CIMB Private Banking economist Song Seng Wun is optimistic that border restrictions may be eased and labour policy "will be tweaked depending on labour demand conditions, especially if local employment conditions tightened".
But Maybank's Dr Chua is less sanguine. Although the recent relaxation of border controls and expansion of Vaccinated Travel Lanes will help address some of the labour mismatches, especially in the skilled segments, rising wages and foreign worker levy costs will force firms to make do with less labour, he said.
"Some sectors may struggle to find locals to replace foreigners with the tightening of dependency ratio ceilings," he added. "Wages will have to adjust and rise significantly to draw locals, and some firms will choose to shut down and relocate."
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