News analysis

Reason for cheer as more locals find jobs

But contraction in overall size of workforce needs close watching

The good showing by the labour market last year is in line with Singapore's improved economic growth and, for locals, this was manifested in more people finding work.

All in, 21,300 more Singaporeans and permanent residents had jobs by the year end, compared with a year earlier. This is nearly double the growth in 2016, when local employment grew by 11,200.

The service sector provided much of the boost, including community, social and personal services, financial and insurance services, and transport and storage.

Other preliminary figures for 2017 released by the Ministry of Manpower (MOM) yesterday showed fewer retrenchments and better unemployment rates towards the end of the year that indicate a labour market on the mend.

But the overall size of the workforce shrank, for the first time in 15 years.

Not counting maids, it stood at 3,422,700 last December, a 0.3 per cent fall from the year before. The decline was because the foreign workforce shrank by 32,000, mostly due to the decrease in work permit holders in construction and marine sectors, said the MOM.

Locals make up about two-thirds of the workforce, and higher local employment is something to cheer, as it shows that more job seekers found work.

All in, 21,300 more Singaporeans and permanent residents had jobs by the end of last year, compared with a year earlier. This is nearly double the growth in 2016, when local employment grew by 11,200.
All in, 21,300 more Singaporeans and permanent residents had jobs by the end of last year, compared with a year earlier. This is nearly double the growth in 2016, when local employment grew by 11,200. ST FILE PHOTO

The growth is likely to continue this year, though with some unevenness across sectors, said the ministry.

United Overseas Bank economist Francis Tan also said the domestic service sector is recovering as stronger external demand filters through, and this is significant because the sector employs the most workers.

But with an ageing population, Singapore can no longer just add large numbers of local workers to the economy.

Coupled with policy restraints on foreign labour, overall employment growth in the coming decades is expected to be much slower.

For this reason, it may not be the best measure of the labour market's health in the future, said OCBC Bank economist Selena Ling.

She suggested including other indicators for a more holistic picture, such as local employment growth, starting salaries, and real wage growth across industries and across educational profiles.

But employment growth is one of the drivers of economic expansion - the other is productivity growth - so it must still be watched closely.

Aside from last year, Singapore's productivity growth has not been strong, so labour will continue to be needed for good gross domestic product growth, said UOB's Mr Tan.

Monetary Authority of Singapore managing director Ravi Menon said recently that while the share of foreigners in the workforce cannot increase without end, there must also be some flexibility in the local-to-foreigner ratio to match economic cycles, changing circumstances and opportunities.

But to maintain a dynamic economy, productivity improvements are needed alongside raising the quality of the workforce, enterprises and institutions, he said.

But can Singapore rely on productivity going up indefinitely, to make up for flat employment levels?

CIMB Private Banking economist Song Seng Wun believes it is not so straightforward: "If it becomes harder and harder to get workers, then companies will think twice about coming here."

For instance, how many robot servers and cooks can a restaurateur add before his expansion is capped, he asked.

Policymakers will need to strike a balance. Coaxing companies to set up shop here may involve allowing them to bring in foreigners if locals are hard to come by, he said.

This will hinge largely on the needs of business owners - who create jobs - and the needs of local voters, he added.

A version of this article appeared in the print edition of The Straits Times on January 27, 2018, with the headline 'Reason for cheer as more locals find jobs'. Print Edition | Subscribe