MANY firms here have not yet accepted the reality that they need to shape up in the face of shrinking manpower resources.

And for those continuing to believe that supply of manpower remains strong, they will be in for a rude shock when the supply tapers off, warned Manpower Minister Tan Chuan-Jin.

The Government has been urging firms to become more efficient by tightening rules on hiring cheap foreign labour in recent years.

But instead of becoming more productive, Mr Tan said some firms are hiring more Singaporeans who are re-entering the workforce, such as the elderly and housewives.

"What it means is that I'm able to find more bodies coming in to do these things that I need to do, instead of perhaps really revamping the way I do business and becoming a lot more productive," he said in an interview last Thursday.

Overall productivity figures have been dismal.

In 2010, the Government embarked on a 10-year economic restructuring drive with the target of achieving an ambitious 2 to 3 per cent productivity growth per year.

However, the numbers averaged just 0.1 per cent from over the past three years.

Mr Tan cautioned firms against relying heavily on locals re-entering the workforce - it is not sustainable as their numbers will shrink in the future.

Government estimates show that overall labour force growth will plateau in about 10 years as more baby boomers retire and fewer younger workers replace them.

"It is not just about having fewer foreign workers. It's about being leaner in operations because the reality is that your own local labour market is going to be small," Mr Tan added.

He predicted that the pressure on firms to adapt to a manpower-lean economy will mount.

"I think it will be about survival. It will be about whether they are able to transit and I think we will see perhaps more consolidation. We might see more mergers in companies," he said.

AMELIA TAN