Statement on Labour Market Developments

Introduction

1. In the first half of 2015, the Ministry of Manpower (MOM) continued its policies to strengthen the Singaporean Core and support restructuring towards a manpower-lean economy driven by productivity. These policy objectives remain relevant as the Singapore economy transits towards sustainable and quality growth. With labour supply expected to tighten further, businesses must step up efforts to adopt less labour-intensive practices.
2. MOM is guided by the following considerations in calibrating labour market policy: (i) a sustainable rate of labour force growth; (ii) real income growth for a broad base of Singaporeans; (iii) productivity growth; and (iv) the economic outlook.
   
   Review of First Half of 2015
   
   Employment
   
   Unemployment remained low
3. The unemployment rate remained low and stable amid the tight labour market. The seasonally-adjusted citizen unemployment rate was 2.9% in June 2015, comparable to the unemployment rate in June 2014 (2.9%).¹ The resident long-term unemployment² rate also remained low at 0.7% in June 2015.
   
   Total employment growth has continued to slow amidst weaker economic conditions
4. Total employment in 1H 2015 contracted by 1,000 (excluding Foreign Domestic Workers (FDW)), a significant decline from the growth of 52,200 in 1H 2014, translating to a lower year-on-year growth of 2.1%³ in June 2015, compared to 3.8% a year ago.⁴ The moderation in total employment growth took place amidst slower growth of the Singapore economy, which grew by 2.3% year-on-year in 1H 2015, slower than 3.4% in 1H 2014.
   
   Hiring of locals slowed after high growth in 2014, largely due to exit of young casual workers
5. Local⁵ employment declined by 8,900 in 1H 2015. The employment decline largely reflected the exit of young casual workers (below the age of 25) from the workforce, after a significant entry of such workers occurred in 2H 2014. At the same time, there was continued growth in the employment of older local workers.
   
   
   
   Foreign employment growth was the lowest since 2009
6. Foreign employment continued on its downward growth trajectory and moderated to 8,000 (excluding FDW) in 1H 2015, registering the lowest half-yearly growth since 2009. The Services sector accounted for a majority of the 1H 2015 growth in foreign employment, and Work Permit Holders (WPH) accounted for the largest proportion of foreign employment growth.
   
   
   
   
   
   Income
   
   Broad-based income growth for Singaporeans
7. In 2014, the real gross monthly income⁶ (including employer CPF contributions) of full-time employed citizens increased by 1.4% at the median and by 2.1% at the 20^th percentile⁷. Real income growth has been broad-based and sustained over the past five years, growing by 2.1% per annum at the median and 1.5% per annum at the 20^th percentile.⁸
   
   Productivity
   
   Labour productivity remained weak
8. For 1H 2015, labour productivity fell by 0.5% year-on-year, following declines of 0.4% and 1.2% in the first and second half of 2014 respectively. The Manufacturing and Construction sectors saw productivity decline by 2.0% and 0.1% respectively. Within the Services sector, Finance & Insurance (3.2%) and Wholesale & Retail Trade (2.5%) registered the strongest productivity growth in the first half of 2015. In contrast, Accommodation & Food Services (-3.7%), Business Services (-2.8%) and Transportation & Storage (-2.5%) sectors saw the sharpest declines in productivity.
   
   
   
   Sectoral Performance and Outlook
   
   Construction
9. Total employment growth in the Construction sector slowed significantly in 1H 2015 (4,000) compared to the same period a year ago (1H 2014: 9,100), registering the slowest growth since 1H 2011. However, employment still outpaced construction value-added (VA) growth, resulting in a 0.1% decline in productivity in 1H 2015.
   
   
10. Construction Outlook. Compared to 2014, total employment growth in the Construction sector for the whole of 2015 is expected to moderate, in tandem with slower year-on-year growth in construction activities. However, employment growth in 2H 2015 is likely to be supported by more infrastructural projects, taken on by larger civil engineering contractors. Changes to foreign worker levy announced in March 2015 will encourage the sector to retain and rely more on experienced, higher-quality workers, thereby improving productivity and moderating employment growth.
    
    Manufacturing
11. Total employment in the Manufacturing sector fell in 1H 2015 (-11,300), with declines in both local and foreign employment. A significant decline was observed in the Petroleum, Chemical & Pharmaceutical Products, and Transport Equipment industries. In addition, with the fall in manufacturing output on the back of a sluggish global economy, productivity declined by 2.0% in 1H 2015.
    
    
12. Manufacturing Outlook. For the rest of 2015, the hiring outlook for Manufacturing remains modest. In particular, the marine & offshore engineering segment is likely to experience further weakness in employment growth, as global demand for oil rigs has fallen significantly, amidst sustained low oil prices.
    
    Services
13. 1H 2015 total employment growth in the Services sector (6,200 excl. FDW) moderated significantly from a year ago (1H 2014: 46,300), largely due to a decline in local employment. Seasonal employment patterns for the Wholesale & Retail Trade sector accounted for the bulk of the local employment decline, particularly due to the exit of young workers from casual employment. Weak business receipts in this sector would also have contributed to reduced hiring. In the Real Estate sector, the softening of the property market led to a significant decline in local employment. Although some Services sub-sectors registered local employment decline, local employment grew in the Administrative & Support Services, Professional Services, and Health & Social Services industries. Foreign employment in the Services sector grew in 1H 2015. A substantial proportion of growth came from WPHs in the Administrative & Support, Transport & Storage, and Accommodation & Food Services sectors. A significant number were employed as cleaners, kitchen assistants, and bus drivers.
14. Productivity in the Services sector, which has been on a downward trajectory since 1H 2014, further declined by 0.2% in 1H 2015. The employment growth in services sector coupled with the negative productivity suggests that companies need to press on with efforts to restructure towards manpower-lean growth.
    
    
    
    
15. Services Outlook. There is likely to be a seasonal pickup in hiring during the year-end festive period. The latest Business Expectations Survey by Department of Statistics (DOS, July 2015) showed that firms in industries such as Retail, Food & Beverage Services, Financial & Insurance and Recreation, Community and Personal Services are expected to increase hiring activity in the near term. Employment in the Real Estate sector, however, is expected to decline further due to continued weakness in the property market.
    
    Overall Labour Market Outlook for 2015
16. The Ministry of Trade and Industry (MTI) expects the Singapore economy to grow by 2.0 – 2.5% in 2015. Barring unexpected shocks in the external economy, labour demand for 2015 is expected to remain firm, with hiring expectations cautious in some segments.
17. Labour supply will remain tight and will be felt more keenly by the more labour intensive industries such as Retail Trade, Food & Beverage Services, and Accommodation. Going forward, the tight labour market will continue to place upward pressure on wages⁹. However, these wage increases can only be sustained through productivity growth, with the upgrading of jobs and skills.
18. Overall productivity growth is not likely to see a significant uplift this year. Nonetheless, some sectors such as Finance & Insurance and Wholesale Trade, which have performed relatively well to-date, could continue to see modest productivity growth.
    
    Conclusion
19. MOM will continue with efforts to strengthen the Singaporean Core and reduce reliance on foreign manpower. The Ministry will follow through with the implementation of previously-announced foreign workforce tightening measures¹⁰, which have moderated foreign workforce growth to a more sustainable pace. The recent enhancements to the Fair Consideration Framework and Jobs Bank will also ensure that Singaporeans have fair opportunities for quality jobs in the market.
20. Local employment growth is expected to moderate significantly this year. This follows two years of strong growth, which was due to increases in the working-age population, as well as significant gains in resident Labour Force Participation Rates (LFPR). Moving forward, these effects will be much smaller given the slower growth of the local working-age population, and limits to increasing the overall LFPR, which is already among the highest in the world¹¹. Taking these factors into account, MOM projects a lower local workforce growth, coming down to an average of 20,000 per annum for the last part of this decade.
21. Given the dynamics ahead in our labour market, firms should continue to shift towards skills- and capital-intensive ways to grow. They will need to focus on the quality, rather than the quantity, of their workforce as a key source of growth, productivity and competitiveness. This will require not just automating tasks and improving processes, but also making significant investments in developing their employees and rewarding them based on their skills and contributions. The recently-announced Lean Enterprise Development (LED) Scheme aims to support Small and Medium Enterprises (SMEs) to restructure to become more manpower-lean and develop their Singaporean Core.
22. As the economy restructures, some consolidation and exit of less-productive businesses is also expected. The Career Support Programme, to be launched in October 2015, will help displaced mature PMEs find quality jobs and careers, in addition to existing Professional Conversion Programmes. MOM and the Singapore Workforce Development Agency (WDA) stand ready to help displaced local workers re-skill and upgrade so that they are well-positioned to take on the new quality jobs created.