Foreign firms have larger reach, require more high-skilled workers in S’pore: Experts

SINGAPORE – Foreign-owned firms often make investments in Singapore to build the capacity to serve customers in larger overseas markets from here.

The scale of their work, in turn, gives rise to a need to create high-skilled jobs in Singapore in greater volume, which economists and labour experts identified as a key reason behind foreign-owned firms accounting for an outsized share of high-earning jobs here.

Their comments come after the Ministry of Manpower (MOM) revealed on Sept 17 that

foreign-owned firms made up some 20 per cent of all firms with at least one employee

, but employed 60 per cent of Singapore residents drawing above $12,500 in gross monthly salary.

Singapore residents comprise both citizens and permanent residents.

These numbers were released for the first time in Singapore’s second-quarter labour market report.

“Bearing in mind that Singapore is a small, resource-scarce economy, the foreign direct investment (FDI) that comes here is really not targeting the domestic market,” said OCBC Bank chief economist Selena Ling.

Likewise, UOB associate economist Jester Koh said much of the FDI inflows here are associated with multinational corporations, which arguably have a much larger scale in terms of operations and target markets relative to domestic firms.

“Thus, they are able to create good jobs for locals, not only in the sense of better remuneration but also in terms of skills transfer and exposure to global markets,” he said.

Ms Ling said: “It is probably unrealistic to expect to create the same number of good jobs with reduced FDI without a very big base of dynamic local companies that have international reach.”

Mr Richard Bradshaw, chief executive for Asia and Europe at executive search firm Ethos BeathChapman, said foreign-owned firms that dominate in high-paying roles here tend to operate in sectors requiring advanced expertise, offering compensation to match.

“By attracting global talent and leveraging cutting-edge technologies, they create high-earning opportunities for local talent.”

He added that roles that pay above $12,500 tend to involve specialised skills that are difficult and time-consuming to pick up, and deeply impact company strategy.

These include roles in investment banking, wealth management, data science, cyber security, artificial intelligence, and professional services such as consulting and law.

Mr Bradshaw also called for more work to be done to ensure foreign-owned firms galvanise local small and medium-sized enterprises to become larger and more sophisticated businesses.

On the churn in the labour market, he said he has seen many employers taking much longer than average times to fill vacancies as they hold out for the ideal candidate.

“Counter-offers, declined offers and the like have also been very high still in 2024, which further perpetuate vacancies staying vacant,” he added.

Mr Bradshaw also said Singapore has made significant strides in developing its talent pool, but the demand for high-skilled roles will still almost always outpace the supply of qualified candidates, even with robust training and foreign talent schemes in place.

Nonetheless, he said, Singapore is in a good position compared with many other leading employment markets, with lower talent deficits, very strong and still-improving infrastructure such as its universities, and the amount of foreign investment that spurs job creation.

Meanwhile, a growing proportion of older residents took more than six months to re-enter employment post-retrenchment, according to the latest data.

On this, Ms Ling said it is not unusual for re-employment periods to extend as the domestic labour market cools and employers become more selective in the hiring.

“The question is whether there are certain segments, such as older workers or PMETs (professionals, managers, executives and technicians), who are disadvantaged, but at this juncture the overall unemployment rates remain relatively low and the labour market conditions still relatively tight,” she said.

In a Facebook post, labour MP Patrick Tay said one of the key findings in the latest report was the decline in the overall number of Employment Pass and S Pass holders.

“This was the result of firms adjusting to economic changes and adapting to MOM’s workforce policy changes to uplift the quality of our foreign workforce,” said Mr Tay, who is assistant secretary-general of the National Trades Union Congress.

Labour and transport economist Walter Theseira of the Singapore University of Social Sciences said economic evidence and theory generally show that foreign investment is associated with higher-skilled and higher-wage jobs than average.

Countries tend to invite more-advanced foreign firms to enter, and firms would also find it easier to raise capital for entry if they have a relative advantage, he noted.

The latest data report reignited calls from some quarters to disaggregate employment data for permanent residents and citizens.

On this, Associate Professor Theseira noted that PRs generally have lower unemployment rates, and higher incomes, than Singaporeans.

“Such data is not published but can be inferred from occasional reports by MOM on the differences between resident and Singapore citizen data.”

He added: “This is a feature of selection, and is because it makes more sense to add highly skilled PRs than to add PRs who are only similarly skilled as Singapore citizens.”