Ministry of Manpower Statement on Labour Market Developments

15 September 2015

Introduction

1. In the first half of 2015, the Ministry of Manpower (MOM) continued its policies to
strengthen the Singaporean Core and support restructuring towards a manpower-lean
economy driven by productivity. These policy objectives remain relevant as the Singapore
economy transits towards sustainable and quality growth. With labour supply expected to
tighten further, businesses must step up efforts to adopt less labour-intensive practices.
 
2. MOM is guided by the following considerations in calibrating labour market policy:
(i) a sustainable rate of labour force growth; (ii) real income growth for a broad base of
Singaporeans; (iii) productivity growth; and (iv) the economic outlook.

Review of First Half of 2015

Employment 

Unemployment remained low

3. The unemployment rate remained low and stable amid the tight labour market. The
seasonally-adjusted citizen unemployment rate was 2.9% in June 2015, comparable to the
unemployment rate in June 2014 (2.9%).1 The resident long-term unemployment2 rate also
remained low at 0.7% in June 2015.

Total employment growth has continued to slow amidst weaker economic conditions.

4.  Total employment in 1H 2015 contracted by 1,000 (excluding Foreign Domestic

Workers (FDW)), a significant decline from the growth of 52,200 in 1H 2014, translating to a
lower year-on-year growth of 2.1% 3 in June 2015, compared to 3.8% a year ago. 4 The
moderation in total employment growth took place amidst slower growth of the Singapore
economy, which grew by 2.3% year-on-year in 1H 2015, slower than 3.4% in 1H 2014. 

Hiring of locals slowed after high growth in 2014, largely due to exit of young casual
workers

5. Local5 employment declined by 8,900 in 1H 2015. The employment decline largely

reflected the exit of young casual workers (below the age of 25) from the workforce, after a
significant entry of such workers occurred in 2H 2014. At the same time, there was continued
growth in the employment of older local workers.
                                                            
1
Unemployment data are from Labour Market Second Quarter 2015, MOM.
2
Refers to long-term unemployed residents (i.e. those unemployed for at least 25 weeks) as a percentage of
economically active residents.
3
2.1% refers to the change in employment levels in June 2015 compared to employment levels in June 2014.
4
Employment data are from Labour Market Second Quarter 2015, MOM.
5
Refers to Singapore Citizens and Permanent Residents.

 
Foreign employment growth was the lowest since 2009

6. Foreign employment continued on its downward growth trajectory and moderated to

8,000 (excluding FDW) in 1H 2015, registering the lowest half-yearly growth since 2009.
The Services sector accounted for a majority of the 1H 2015 growth in foreign employment,
and Work Permit Holders (WPH) accounted for the largest proportion of foreign employment
growth.

 
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Income

Broad-based income growth for Singaporeans

7. In 2014, the real gross monthly income6 (including employer CPF contributions) of
full-time employed citizens increased by 1.4% at the median and by 2.1% at the 20th
percentile7. Real income growth has been broad-based and sustained over the past five years,
growing by 2.1% per annum at the median and 1.5% per annum at the 20th percentile.8

Productivity

Labour productivity remained weak

8. For 1H 2015, labour productivity fell by 0.5% year-on-year, following declines of

0.4% and 1.2% in the first and second half of 2014 respectively. The Manufacturing and
Construction sectors saw productivity decline by 2.0% and 0.1% respectively. Within the
Services sector, Finance & Insurance (3.2%) and Wholesale & Retail Trade (2.5%) registered
the strongest productivity growth in the first half of 2015. In contrast, Accommodation &
Food Services (-3.7%), Business Services (-2.8%) and Transportation & Storage (-2.5%)
sectors saw the sharpest declines in productivity.

                                                            
6
Gross monthly income data are from Labour Market 2014, MOM.
7
Real gross monthly income for full-time employed residents increased over the year by 0.7% at the median and
3.6% at the 20th percentile in 2014.
8
Deflated by Consumer Price Index – All Items at 2014 prices.

 
Sectoral Performance and Outlook

Construction

9. Total employment growth in the Construction sector slowed significantly in 1H 2015

(4,000) compared to the same period a year ago (1H 2014: 9,100), registering the slowest
growth since 1H 2011. However, employment still outpaced construction value-added (VA)
growth, resulting in a 0.1% decline in productivity in 1H 2015.

10. Construction Outlook. Compared to 2014, total employment growth in the

Construction sector for the whole of 2015 is expected to moderate, in tandem with slower
year-on-year growth in construction activities. However, employment growth in 2H 2015 is
likely to be supported by more infrastructural projects, taken on by larger civil engineering
contractors. Changes to foreign worker levy announced in March 2015 will encourage the
sector to retain and rely more on experienced, higher-quality workers, thereby improving
productivity and moderating employment growth.

 
Manufacturing

11. Total employment in the Manufacturing sector fell in 1H 2015 (-11,300), with
declines in both local and foreign employment. A significant decline was observed in the
Petroleum, Chemical & Pharmaceutical Products, and Transport Equipment industries. In
addition, with the fall in manufacturing output on the back of a sluggish global economy,
productivity declined by 2.0% in 1H 2015.

12. Manufacturing Outlook. For the rest of 2015, the hiring outlook for Manufacturing
remains modest. In particular, the marine & offshore engineering segment is likely to
experience further weakness in employment growth, as global demand for oil rigs has fallen
significantly, amidst sustained low oil prices.

Services

13. 1H 2015 total employment growth in the Services sector (6,200 excl. FDW)
moderated significantly from a year ago (1H 2014: 46,300), largely due to a decline in local
employment. Seasonal employment patterns for the Wholesale & Retail Trade sector
accounted for the bulk of the local employment decline, particularly due to the exit of young
workers from casual employment. Weak business receipts in this sector would also have
contributed to reduced hiring. In the Real Estate sector, the softening of the property market
led to a significant decline in local employment. Although some Services sub-sectors
registered local employment decline, local employment grew in the Administrative &
Support Services, Professional Services, and Health & Social Services industries. Foreign
employment in the Services sector grew in 1H 2015. A substantial proportion of growth came
from WPHs in the Administrative & Support, Transport & Storage, and Accommodation &
Food Services sectors. A significant number were employed as cleaners, kitchen assistants,
and bus drivers.

14. Productivity in the Services sector, which has been on a downward trajectory since
1H 2014, further declined by 0.2% in 1H 2015. The employment growth in services sector
coupled with the negative productivity suggests that companies need to press on with efforts
to restructure towards manpower-lean growth.

 
 %

15. Services Outlook. There is likely to be a seasonal pickup in hiring during the year-
end festive period. The latest Business Expectations Survey by Department of Statistics
(DOS, July 2015) showed that firms in industries such as Retail, Food & Beverage Services,
Financial & Insurance and Recreation, Community and Personal Services are expected to
increase hiring activity in the near term. Employment in the Real Estate sector, however, is
expected to decline further due to continued weakness in the property market.

Overall Labour Market Outlook for 2015

16. The Ministry of Trade and Industry (MTI) expects the Singapore economy to grow by
2.0 – 2.5% in 2015. Barring unexpected shocks in the external economy, labour demand for
2015 is expected to remain firm, with hiring expectations cautious in some segments.

17. Labour supply will remain tight and will be felt more keenly by the more labour
intensive industries such as Retail Trade, Food & Beverage Services, and Accommodation.
Going forward, the tight labour market will continue to place upward pressure on wages9.
However, these wage increases can only be sustained through productivity growth, with the
upgrading of jobs and skills.

                                                            
9
Gross Monthly Income from work of full-time employed Singapore citizens in June 2015 will be published in
the Employment Situation, 2015 in end-January 2016, and covered in the March 2016 Statement on Labour
Market Developments.

 
18. Overall productivity growth is not likely to see a significant uplift this year.
Nonetheless, some sectors such as Finance & Insurance and Wholesale Trade, which have
performed relatively well to-date, could continue to see modest productivity growth.

Conclusion

19. MOM will continue with efforts to strengthen the Singaporean Core and reduce
reliance on foreign manpower. The Ministry will follow through with the implementation of
previously-announced foreign workforce tightening measures 10 , which have moderated
foreign workforce growth to a more sustainable pace. The recent enhancements to the Fair
Consideration Framework and Jobs Bank will also ensure that Singaporeans have fair
opportunities for quality jobs in the market.

20. Local employment growth is expected to moderate significantly this year. This
follows two years of strong growth, which was due to increases in the working-age
population, as well as significant gains in resident Labour Force Participation Rates (LFPR).
Moving forward, these effects will be much smaller given the slower growth of the local
working-age population, and limits to increasing the overall LFPR, which is already among
the highest in the world11. Taking these factors into account, MOM projects a lower local
workforce growth, coming down to an average of 20,000 per annum for the last part of this
decade.

21. Given the dynamics ahead in our labour market, firms should continue to shift
towards skills- and capital-intensive ways to grow. They will need to focus on the quality,
rather than the quantity, of their workforce as a key source of growth, productivity and
competitiveness. This will require not just automating tasks and improving processes, but
also making significant investments in developing their employees and rewarding them based
on their skills and contributions. The recently-announced Lean Enterprise Development
(LED) Scheme aims to support Small and Medium Enterprises (SMEs) to restructure to
become more manpower-lean and develop their Singaporean Core.

22. As the economy restructures, some consolidation and exit of less-productive

businesses is also expected. The Career Support Programme, to be launched in October 2015,
will help displaced mature PMEs find quality jobs and careers, in addition to existing
Professional Conversion Programmes. MOM and the Singapore Workforce Development
Agency (WDA) stand ready to help displaced local workers re-skill and upgrade so that they
are well-positioned to take on the new quality jobs created.

. . . . .
MINISTRY OF MANPOWER
15 SEPTEMBER 2015

                                                            
10
This included the: i) progressive increase in foreign worker levies for both S Pass and Work Permit Holders
for all sectors; ii) increase in minimum qualifying salaries for Employment Pass; and iii) continued
implementation of Services sector Dependency Ratio Ceiling reduction to 40%.
11
In 2014, Singapore’s LFPR for residents aged 20-64 (80.2%) is higher than that of the OECD average and that
of many economies, including the United States (76.3%), the United Kingdom (80.0%), Japan (79.8%), and
South Korea (72.5%).

 
 Contact list of academics/economists/analysts/employer representatives for
the media to approach for a response:

Name of Individual Description Contact details Interview Topics /

Area (s) of Focus
Mr Song Seng Wun Independent Mobile: 8121 0640 Economies of
Analyst Email: ASEAN-5 and
sengwun.song@cimb.com regional financial
markets.
Mr Francis Tan Economist, UOB Email: Macroeconomic
Francis.TanTT@UOBGroup.com trends
Mr Vishnu Varathan Senior Economist Mobile: 9066 7448 Macroeconomic
& Head Email: trends, treasury
Economics, vishnu.varathan@mizuho- market research
Mizuho Bank cb.com and forecasting.