S Pass cut is latest shake-up as planners woo locals for factory jobs

Singapore

DEPUTY Prime Minister Heng Swee Keat made good on earlier plans to trim the foreign worker headcount in manufacturing - but fresh quota cuts alone are not enough to woo locals into industry roles, analysts noted.

More policy tightening could be in the cards for the mid- and higher-skilled foreign workforce.

Mr Heng moved on Tuesday to lower the maximum share of mid-skilled S Pass holders that manufacturers can employ. The reduction - from 20 per cent now, to 18 per cent next January, and 15 per cent on Jan 1, 2023 - will bring quotas in line with other industries, like construction.

Mr Heng had already said last year that the ceiling "would be cut when conditions allow". The move also came amid a redoubled call for local talent in manufacturing, with the Ministry of Manpower (MOM) reiterating a strategy of "drawing more Singaporeans to manufacturing roles and supporting Singaporeans who want to pursue manufacturing careers".

But OCBC chief economist Selena Ling doubted that tighter quotas alone would move the needle on resident employment and wages - even though manufacturing was relatively insulated from last year's recession.

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"It may raise manpower costs and potentially squeeze profit margins," she warned, referring to the tighter S Pass quota. "It is difficult to quantify the likely short-term impact on employment . . . but (manufacturers) may reallocate some of the planned wage increments to factor in the hike."

While the quota cut "has not come as a complete surprise", Singapore Manufacturing Federation (SMF) president Douglas Foo still cited industry concern at the change. "The SMF will continue to help our members relook their business models and implement digital solutions to soften the reliance on foreign manpower," he added.

Yet DBS senior economist Irvin Seah told The Business Times that manufacturers will not take too heavy a blow from the cuts, as the sector has invested significantly in automation and is less reliant on foreign workers than services and construction peers.

Indeed, the main driver of job and wage growth "will be the pace of economic recovery", Terence Ho, who used to be director of manpower planning and policy at the MOM, told BT.

Still, schemes that support wage increases, job redesign and skills training could help companies "retain or draw in locals", according to Mr Heng.

The Capability Transfer Programme will be kept in place until late 2024 to plug the talent crunch, especially in "new growth areas". The scheme, launched in 2017, brings foreign specialists in to train locals, and sends locals for overseas training.

Mr Heng also again extended the Wage Credit Scheme (WCS), which has covered part of local workers' pay raises since its launch in 2013. The level of public co-funding was kept at 15 per cent - the same as last year.

Meanwhile, the minister also said that Singapore will keep reviewing its S Pass regime, including salaries and levies, with an eye to "complementarity" between foreigners and locals.

Mr Ho, associate professor at the Lee Kuan Yew School of Public Policy, said that "I expect that all sectors will be monitored closely in terms of their foreign manpower reliance" across all major pass types.

Still, Mr Seah expects easing restrictions on work permits in the coming years, since Singaporeans tend to avoid such positions.

Stressing a "very calibrated intake of foreign manpower" in labour policy, Ms Ling said: "For key growth sectors, and highly talented foreign workers, there will still be manpower growth, but at a managed pace."

As Mr Heng acknowledged: "We cannot do without foreign workers, especially those with deep skills.

"But we should moderate further our reliance on them, and focus on creating good jobs for locals."

KEY POINTS

• Manufacturing S Pass quota cut to 18 per cent in 2022, 15 per cent in 2023.
• Wage Credit Scheme extended to 2021 with 15 per cent support.
• Capability Transfer Programme extended to end-Sept 2024.