Singapore tightens rules for foreign workers amid local discontent | Business and Economics

Singapore – One of the world's most open economies is attempting a delicate balancing act.

On the one hand, the Southeast Asian city-state wants to attract the world's best and brightest to develop its workforce, one of Asia's most diverse.

On the other hand, we need to ensure that the system works for locals competing with foreigners for jobs, and nip any potential resentment or racism in the bud.

Starting next year, the government will reverse that calculation in favor of locals by raising the salary threshold for foreigners seeking work permits in the city-state.

Last month, Singapore's Ministry of Manpower announced that new applicants for the Employment Pass (EP) system must earn a minimum of 5,600 Singapore dollars ($4,140) per month, up from 5,000 Singapore dollars ($3,700).

Applicants working in the financial services sector must earn a minimum of 6,200 Singapore dollars ($4,600), compared to the current 5,500 Singapore dollars ($4,100).

„By regularly updating qualifying salaries based on set wage benchmarks, we ensure a level-playing field for local people,” Manpower Minister Tan Chee Leng said during the budget debate in Parliament.

Analysts said the changes came as no surprise to the government, which regularly tweaks rules for foreign workers, most recently in September 2022, raising the salary threshold by 500 Singapore dollars ($370).

Walter Tesira, associate professor and labor economist at the Singapore University of Social Sciences (SUSS), said the move was „telegraphed”. [for] many years”.

Although the EP system was originally aimed at importing high-skilled workers to fill gaps in the workforce, „the criteria seemed to have broadened and EP holders were increasingly seen in the middle of the market,” Theseira said.

„This was perceived by local workers as undesirable competition for jobs that could be done by many more skilled locals, so the government responded by re-calibrating the EP upwards again so that, in terms of salary, it now targets higher quality.” he said.

For decades, Singapore, an island without the natural resources of New York City, has built its reputation on openness to foreign talent.

The number of EP holders has grown significantly over the years, fueled in part by concerns about the country's rock-bottom birth rate and graying population.

As of December last year, the city had about 205,400 EP holders, up from 161,700 in the same month in 2021.

As early as 2021, Tan admitted that while Singaporeans recognize the need to attract foreign talent, they are concerned that the influx has come at the „expense” of local businesses.

A labor market report released by the Ministry of Manpower last month showed that employment growth in Singapore, which includes 88,400 jobs in 2023 – excluding migrant domestic workers – will be largely made up of foreigners.

The revision of EP eligibility criteria can be seen as „a strategic move” to ease old tensions in hiring foreign talent in a crowded job market, said Joshua Yim, CEO of talent acquisition consultancy Achieve Group.

The changes come as the Southeast Asian country prepares for the most politically significant changes in its history.

Singapore's ruling People's Action Party is set to contest the next general election in 2025 under new leadership as incumbent Prime Minister Lee Hsien Loong prepares to step down after nearly two decades in office.

The issue of foreign workers became prominent in the 2011 general election, as public discontent boiled over over competition for jobs and increased pressure on public infrastructure.

While most Singaporeans and permanent residents agree that immigration is generally good for the economy, more than half believe that immigrants take jobs away from locals, according to a 2021 survey by the Institute for Policy Studies.

Another survey by research firm Milieu Insight found Singaporeans almost evenly divided on whether the nation struck the right balance between bringing in foreign workers and protecting local jobs.

Sid Suhas, senior vice president and head of EMEA & APAC at talent acquisition firm Cielo, said the visa changes will help large employers „attract, develop and grow the local talent pool, particularly junior professional and mid-level low-skilled roles.”

With a higher salary range, companies are likely to adopt a „skills-first approach” when hiring foreigners, Suhas said, focusing on talent in fields such as AI, technology, engineering and healthcare.

„The trend towards restricting the sending of foreign talent to specific skills and industries is inevitable. In the past, foreign talent had the opportunity to develop their careers in Singapore in various roles, but now, the focus will be on senior and key positions,” Suhas told Al Jazeera.

Suhas said he has already seen companies in the Association of Southeast Asian Nations (ASEAN), such as Thailand, Malaysia and Indonesia, explore alternative locations as a means of relocating key talent while remaining close to Singapore.

“Most SMEs [small to medium-sized enterprises] Don't rely too much on EP staff as their core talent pool,” Uit told Al Jazeera.

„Select businesses may have EP hiring at a certain 5,000 or 5,500. [Singapore dollars] Limitation to specialized roles but usually, if it is in specialized sectors that rely on foreign talent pool due to limited time frame, project involvement or local workforce mismatch.”

But increased labor costs could hurt the profitability of SMEs with tighter budget constraints, said Achieve Group's Yim.

„Local SMEs are not very good in terms of their processes and operations compared to MNCs,” said Yim.

„They will feel the heat as they have to go up against bigger players with financial muscle who can offer higher EP salaries and attract better quality talent. They may feel talent is being stolen and thus, this group is at the short end of the stick.”

Xu Le, a lecturer in the Department of Strategy and Policy at the National University of Singapore's Business School, said the policy change would „prompt local companies to think and explore alternative methods to improve overall operational efficiency and labor productivity”. This in turn benefits the economy.

Beatrice Liu-Sheng, CEO of Oriental Remedies Group, said that while the high qualification threshold was a challenge for her Chinese medicine chain, it was also an „opportunity to further develop diversity and expertise” within its workforce.

Liu-Seng said the changes would encourage Singapore to seek and nurture talent through training programs, mentoring initiatives and partnerships with academic institutions.

While migration changes are set to raise the cost of doing business, Singapore's advantages, a business-friendly environment, its strategic location and world-class infrastructure, will continue to attract international companies, analysts said.

Singapore is expected to be the „preferred choice” for companies' regional headquarters, Cielo's Suhas said, even though it is more common to deploy smaller teams due to higher costs.

Suhas said the changes would also accelerate various government initiatives aimed at creating high-quality jobs for local people.

„As a result, we expect global companies setting up in Singapore to make it a high priority to hire Singaporeans,” he said.

Singapore ranks second behind Switzerland in the World Economic Forum's Global Talent Competitiveness Index for 2023.

Nicholas Sim, an associate professor at SUSS's business school, said businesses looking to establish a foothold in Asia may still prefer Singapore because of its „high-quality infrastructure, efficient and stable government and access to a high-quality talent pool”. .

Aside from the EP program, there are other ways for foreign talent to come to Singapore.

In 2023, the Ministry of Manpower introduced the Overseas Networks and Expertise Pass for „top talent” in business, arts and culture, sports, academia and research.

As of January, the ministry had approved nearly 4,200 applications for the pass.

„Going forward, this is a clear indication that the Singapore government wants to bring high-skilled people into the Singapore workforce – and companies should think very carefully about hiring talented and high-quality foreign candidates for Singapore's long-term competitiveness,” Yim said.

„Furthermore, MNCs will see Singapore as an ideal destination for crops.”