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Oral Answer by Mr Lim Swee Say, Minister for Manpower, to Parliamentary Question on the Objective of Foreign Worker Levies, and Help for Businesses

Foreign manpower
Notice Paper No. 207 Of 2015 For The Sitting On 14 Jul 2015 Question No. 710 For Oral Answer

MP: Mr Yeo Guat Kwang

To ask the Minister for Manpower (a) whether foreign worker levies no longer serve their original objective but only erode companies' margins; (b) whether reducing or doing away with the levies will benefit the Singapore workforce; and (c) what plans does the Ministry have to help our businesses, particularly SMEs, cope with their manpower challenges.

Answer

  1. Foreign worker levies, together with other measures such as the sector-specific Dependency Ratio Ceiling (DRC), serve three purposes  – (i) manage the demand for foreign workers (FWs), (ii) encourage productivity gains, and (iii) level the playing field for Singaporeans rank-and-file workers to sustain real income growth.
  2. DRC alone is not sufficiently responsive to the diverse needs across industries and companies. Set it too high and we will not be able to moderate the inflow of FWs. Set it too low and it will be rigid, and we will hit SMEs the hardest. Hence, we need to complement the DRC with FW levies to strike a better balance between a rigid quota cap and a flexible price mechanism.
  3. Reducing or doing away with levies would not benefit Singaporean rank-and-file workers. Employers may prefer to hire cheaper FWs to maximise their quota. The salary of local workers may also be suppressed due to lower cost of hiring FWs. In addition, this could deter investment in manpower-lean technology and solutions. 
  4. The challenge faced by all firms, including SMEs, is to adapt to our new economic and manpower landscape.   The Government has various schemes in place to support firms in making this transition.  SPRING, for example, has the Innovation and Capability Voucher (ICV) to help SMEs to invest in productivity improvements.  Since 2012, about 16,000 vouchers had been awarded and 90% of which were given to very small businesses.
  5. On MOM’s part, we lower the foreign worker levy for skilled work permit holders. This is to encourage employers to upgrade the skills of the workers, including work permit holders, so as to achieve higher productivity.