‘Raising foreign talent wages will hurt Singapore’s business competitiveness’

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Raising wages and levy on issuing employment pass to reduce competition for jobs will hurt Singapore’s business competitiveness and increase costs for companies, according to small- and medium-sized enterprises, business associations and economists.

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, Singapore’s digital TODAY newspaper quoted Song Seng Wun from CIMB Private Banking as saying.

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, Song cautioned.

In a way to control the employment of foreigners, the opposition Progress Singapore Party (PSP) has called for wages of foreign talent to be raised to 4,500 Singapore dollars (USD 3,330) and 10,000 dollars (USD 7,400) respectively.

PSP’s Non-Constituency Members of Parliament (NCMPs) Leong Mun Wai and Hazel Poa had contended during last Tuesday’s debate in Parliament that the government’s open-door foreign talent policy has led to a large displacement of Singaporeans.

Nick Lee, chief executive officer of information technology and support services firm AIT Technologies, pointed out that the current Employment Pass (EP) for executives qualifying salary is already high, with the sector unable to even attract foreign professionals with the minimum 4,500 dollars (USD 3,330) monthly wage.

He said that an increase to 10,000 dollars 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 4,500 to 10,000 dollars 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 said 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, Sim said.

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 said.\

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, she said.

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 10,000 dollars 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, Dr Theseira 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 said: 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 .