Graduates will continue to command a salary premium but a tight labour market is making employers raise the pay and job prospects of their non-graduate hires.
Employers and human resource experts say the time taken for a top diploma hire to close the pay gap with his graduate counterpart has shortened significantly.
Fresh poly graduates are typically paid around $500 less a month compared with new university graduates. A degree holder earns about $2,600 a month while a diploma holder draws about $2,100.
But after about two years on the job, top performing diploma holders can see their pay rise to match their graduate colleagues' salaries at the same level. Up until about five years ago, poly graduates had to work for about four years before their salaries caught up with those of graduates.
"If you don't pay better, you won't be able to find people to do the job," said Mr David Ang, a director at training and consultancy provider Human Capital Singapore.
Some companies, however, continue to have two separate career tracks for graduates and non-graduates but human resource experts are hoping this will change after the latest push by the Government to get firms to recognise skills instead of paper qualifications.
On Monday, the Education Ministry announced that it was working with schools and firms to provide structured on-the-job training for polytechnic and Institute of Technical Education (ITE) graduates to help them progress in their careers.
In fact, many firms simply do not have enough manpower, a situation exacerbated by foreign manpower curbs, said Mr David Leong, managing director of recruitment firm PeopleWorldwide.
"Being a graduate or non-graduate is not important. If you are local, bosses won't mind hiring you," Mr Leong said.
The graduate and non-graduate divide is narrowing even more rapidly in sectors such as manufacturing, aerospace and construction which cannot attract enough university graduates, said human resource experts.
Firms in these industries have opened up engineering jobs - which were traditionally for degree holders - to diploma holders with the relevant experience, said Human Capital's Mr Ang.
Mr Tay Cheng Hoo, human resource director of German electronics firm Rohde & Schwarz, agrees.
"I just can't find enough engineers. Rather than simply paper qualifications, it is more useful to look at experience and skills," he said.
Mr Tay hopes to hire about 40 diploma and degree holders to work as engineers this year.
Similarly, at Singapore Power (SP), fresh diploma holders start at lower salaries than their graduate colleagues.
But they can progress to the engineering track, which is offered to graduates, if "they display the ability and aptitude for the job", said a company spokesman.
SP pays fresh diploma holders annual salaries of $40,000 compared with their graduate colleagues who earn about $58,000.
Still, many polytechnic graduates prefer to go for a degree first rather than working to gain experience.
Mr Tong Yek Meng, the learning and development manager of logistics company YCH Group, said: "Most of our poly interns say they want to go to university . They think a degree is necessary to get a good job.
"If this mindset doesn't change, it will be hard for employers to attract diploma holders."