PSP’s foreign talent policy proposals will hurt Singapore’s competitiveness, drive costs up, say SMEs, economists

20-Sep-2021 Intellasia | Today | 10:32 AM Print This Post

The Progress Singapore Party’s (PSP) proposals on foreign talent policy and ways to reduce competition for jobs will hurt the country’s competitiveness and increase costs for firms, said small- and medium-sized enterprises (SMEs), business associations and economists.

The proposals, which were laid out in Parliament on Tuesday (September 14), are: Higher qualifying salaries for Employment Pass (EP) and S Pass holders, levies and quotas on foreign hires, and a 10 per cent cap on nationalities in any company.

During a debate which turned fiery at times and stretched till past midnight, the party’s Non-Constituency Members of Parliament (NCMP) Leong Mun Wai and Hazel Poa had contended that the government’s open-door foreign talent policy has led to a large displacement of Singaporean workers.

EPs are issued to foreign professionals who need to earn at least S$4,500 a month and have acceptable qualifications. S Pass holders are mid-level skilled workers who have to earn at least S$2,500 a month.

Leong also said that the minimum qualifying salaries of S$2,500 and S$4,500 a month for S Pass and EP holders respectively are relatively low.

PSP has called for them to be raised to S$4,500 and S$10,000, respectively.

Views from SMEs, associations

Leong Chee Tung, co-founder of human resource tech provider EngageRocket, said that the proposals are “impractical and counterproductive” to the PSP’s intent to restore “balance” in the job market.

Higher qualifying salaries will increase wage costs against global norms, he told TODAY, while imposing a nationality cap would limit a company’s ability to hire openly and without bias.

His firm currently employs 27 staff in Singapore, with about 20 per cent of them foreigners.

“Often, especially in the technology sector, foreign talent bring in skills that have not yet been developed widely locally because of the maturity of our talent ecosystem they contribute greatly not only in creating new jobs but also in imparting new tacit knowledge and skills to Singaporeans,” he added.

He suggested strengthening Singapore’s talent supply to serve the country well in the long term.

Nick Lee, chief executive officer of information technology and support services firm AIT Technologies, noted that the current EP qualifying salary is already high, with the sector unable to even attract foreign professionals with the minimum S$4,500 monthly wage.

He said that an increase to S$10,000 would lead to Singapore companies heading overseas, which would “indirectly again affect local livelihoods”.

Sim Gim Guan, executive director of the Singapore National Employers Federation, said that any adjustment should be gradual, and that SMEs would be harder hit by a hard cap on a single nationality as their sources of labour are usually from nearby economies.

He noted that the Ministry of Manpower regularly adjusts EP holders’ qualifying salaries to ensure employers hire foreign professionals, managers and executives (PMEs) of the right quality.

“If the increase is from S$4,500 to S$10,000 in one step, employers would either have to overpay their foreign PMEs or not operate in Singapore as they could not access their required manpower,” Sim said.

Kurt Wee, president of the Association of Small and Medium Enterprises, called the proposals “not feasible”, saying it would drive costs up artificially for businesses and leave them “even less competitive”.

On another level, Sim added, it would be difficult to determine what the right proportion of foreign and local talent is for multinational corporations (MNC).

“As a talent hub for MNCs, Singapore is also a place where both local and foreign employees are developed. The foreign employees, in a way, are transient.

“Overall, the proposals would hurt the competitiveness and sustainability of businesses, which will be detrimental to Singaporeans.”

As for PSP’s call for a standard monthly levy of S$1,200 to be immediately imposed on all EPs, Leong from EngageRocket said this would add an “additional tax” to operating costs, and possibly lead to firms reducing wages across the board or reducing increments in the future.

Economists say…

Selena Ling, OCBC Bank’s head of treasury research and strategy, said that a broad-brush approach may be “counterintuitive” as different sectors could have different skill requirements, which may not be immediately met by local workers.

She cited the construction industry as an example, noting the numerous project delays due to border closures which restrict the flow of foreign manpower. Local workers are reluctant to take on these jobs as well, she added.

“A higher salary criteria and hard quota would definitely add to manpower costs, and may be difficult for affected firms to accept given that the borders largely remain shut due to the pandemic.”

Song Seng Wun from CIMB Private Banking said that in the medium to longer term, the “significantly higher cost” of doing business in Singapore may affect its relevance as a business hub for many kinds of goods and services.

He added: “As it is, Singapore is surrounded by cities and towns where the costs of business are significantly lower. With digitisation of supply chains, the ageing population will be bypassed completely.”

On the other hand, associate professor of economics Walter Theseira from the Singapore University of Social Sciences said there is seemingly not much evidence available on what the PSP expects would happen when qualifying salaries are raised, and what impact the government’s own raising of the EP wage floor has had in recent years.

Dr Theseira also believes that raising EP holders’ qualifying salaries “closer to S$10,000″ would exclude foreign nationals from the majority of junior-level and many mid-level PMET jobs.

This means that companies’ ability to expand would be restricted, as they have to rely entirely on Singaporeans and permanent residents, and the population is growing at a “very slow rate”.

“As for whether this is good or bad for the economy, it would likely reduce top-line economic growth, but it is unclear how this would affect per-capita economic growth, because it will likely result in a shift away from less productive or lower value-added business activities in Singapore,” he said.

As for the nationality cap, he again stressed that there is no publicly available data to show what kind of effect such a policy would have at the PMET level.

He added: “We have to remember that even in the case of a firm that appears to have a high concentration of foreign nationals in a particular role, that firm also employs Singaporeans and contributes to the economy.

“So the real issue is how to reduce that concentration while not destroying the value the firm generates for its Singaporean stakeholders.”

https://www.malaymail.com/news/singapore/2021/09/20/psps-foreign-talent-policy-proposals-will-hurt-singapores-competitiveness-d/2006862

 

Category: Singapore

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