Short-term cost spike as foreign workers switch to employers starved of labour

Singapore

FOREIGN workers in several industries are enjoying greater bargaining power due to a supply crunch caused by the Covid-19 pandemic, and employers said they are facing higher labour costs as new schemes allow those on work permits to move more easily from one employer to another. But industry players do not expect the situation to have a significant long-term impact on foreign worker salaries.

Since The Business Times (BT) reported early in December that construction firms are struggling with manpower costs due to a slowdown in incoming labour supply as well as new rules facilitating transfers of workers among companies, firms in other industries have voiced similar frustrations.

The re-circulation of the current pool of workers has caused fierce competition for labour, said David Leong, managing director of human capital solutions company PeopleWorldwide Consulting.

The rule changes were introduced to allow firms to manage manpower needs. For instance, the Ministry of Manpower (MOM) and the Singapore Business Federation (SBF) jointly introduced the SBF ManpowerConnect Scheme in March, allowing companies in the manufacturing and services sectors to hire existing work permit holders (WPHs) who are Chinese nationals. This allowed workers who might have had to return to China otherwise to remain in Singapore.

In April, MOM expanded the scheme to allow companies in all sectors to hire existing WPHs in Singapore from other sectors, and allow transfers of WPHs whose work permits were within 40 days of expiry.

Nearly 5,000 experienced workers primarily from the manufacturing and services sectors in Singapore - who would otherwise have been repatriated by employers who no longer needed them - have been retained through the SBF ManpowerConnect Scheme, a spokesperson from MOM told BT.

But Dr Leong of PeopleWorldwide Consulting said although "all the intent" of the scheme "is good", the unintended side effect is increased labour costs. He said workers in the marine and process sectors now draw salaries that are 10-15 per cent higher than their usual wages. In the construction industry, Frankie Ciah, agency director of recruitment firm HRS Holdings, had earlier told BT his agency has been receiving requests for more workers with salaries of up to 30 per cent higher from the average daily wage range of S$28-S$35.

Nevertheless, organisations BT spoke to said the current situation is likely to be temporary. The impact on salaries will be limited in the long run as labour conditions normalise.

Kurt Wee, president of the Association of Small and Medium Enterprises, said: "Sometimes, you may have certain policy changes that may have a short term impact on wage levels. But I think the market will eventually price itself out... because the market has the supply and demand factor in place."

PeopleWorldwide Consulting's Dr Leong agreed. He said when incoming foreign workers from various countries can travel freer without current restrictions, "the supply-and-demand equation will shift again and salaries will be adjusted somewhere between the pre-Covid level and Covid-induced increments".

MOM has been processing the entry of a greater number of new migrant workers in the manufacturing and services sectors since October, its spokesperson said, and expects manpower tightness in these sectors to ease in the coming months.

MOM is "currently in discussion with SBF about the usefulness of the scheme and whether it should be extended" beyond next February.

It is highly unlikely that industries heavily reliant on foreign workers - such as the construction, marine and process sectors - will see an increase in local hires.

Kirtan Patel, co-founder and chief executive of Sama, which runs a digital platform that matches migrant workers to jobs, said he is "generally quite pessimistic" of such a possibility unless salaries are three to five times what they are today.

Singapore Indian Chamber of Commerce and Industry (SICCI) chairman T Chandroo said although attracting local hires is the preferred long-term scenario, "the aspirational nature of the Singaporean workforce will mean that the job scope would have to be modified and elevated so that they are not seen as replacing foreign workers".

To mitigate labour shortages in the near term, Sama's Mr Patel suggested shortening the stay-home notice periods or allowing exemptions under certain conditions - such as for those who have Covid-19 antibodies or are able to produce a certificate of vaccination.

This would reduce costs and ease the process for employers looking to bring in new workers, he said.

SICCI's Dr Chandroo said that another way could be to "open the doors wide to neighbouring countries in South-east Asia for workers to be trained and deployed in confined and gated areas in Singapore", adding that "this would also help suffering economies in the region to recover through remittance earnings".