Local PMETs face systemic challenges

More Singaporean PMETs are employed, but the larger number of foreign workers engender challenges

by Toh Han Shih

Currently, there is intense debate on the influx of foreign workers of the Professional, Manager, Engineer and Technician (PMET) class into Singapore. Some argue that the inflow of large numbers of PMETs take away jobs from locals. On the other side of the debate, others argue that foreign PMETs create more jobs for locals.

The unemployment rate among Singaporean male PMETs barely increased from 2.9 percent in 2010 to 3.0 percent in 2019, according to official Singapore statistics. The increase in unemployment among Singaporean female PMETs was somewhat greater, rising from 2.6 percent in 2010 to 3.2 percent in 2019, according to the same statistics.

At first glance, these unemployment numbers do not appear to be a cause for concern.

However, an article in Business Times on 9 February 2021 carried the headline, “Singapore Budget 2021; Underemployment a bigger issue than unemployment: Economists”.

There are two main types of underemployment: One is when individuals work fewer hours than is necessary or desired; the other is when individuals work in lower-paying jobs that do not match their skill set.

In the Business Times article, Irvin Seah, a DBS senior economist, said: “During this Covid-19 crisis, my observation is that underemployment is actually a much bigger problem in Singapore than unemployment, but it’s just that we don’t have the numbers to substantiate this.”

This is because there is currently no international consensus on how underemployment should be measured.

One clue is the number of qualified professionals who have taken “informal jobs” during this recession, such as those in the ride-hailing or food-delivery industries, the Business Times quoted Seah saying. According to Manpower Ministry statistics, 228,200 people were engaging in “own account work” — which may include other types of freelancing — in 2020, up 8 percent from 211,000 a year earlier. Among them, people engaged in such work for “non-preferred” reasons increased 74 percent over the year.

Singapore’s time-related underemployment rate rose to 4.1 per cent in 2020, from 3.1 per cent the year before, just shy of the 4.3 per cent seen during the 2009 Global Financial Crisis, says the Labour Force in Singapore 2020 report.

“While our economic shocks typically do not result in a substantial increase in unemployment, they can result in underemployment, when displaced workers choose to take up less preferred jobs, or jobs that require less skills than their last-held position,” the Business Times article quoted Walter Theseira, an economist at the Singapore University of Social Sciences, saying.

Not helping workers to get out of temporary and lower-skilled jobs as the economy recovers could result in “long-term scarring” of these workers, Theseira added. It could become more difficult for them to move to a more desirable or well-paying jobs later, since they would lack the experience for more senior positions, said the Business Times article.

If this phenomenon persists among significant numbers of Singaporean workers for a sufficiently long time, it will become a systemic problem. Although Singapore needs a certain number of foreign workers to drive its economy, the large number of foreigners who have moved to Singapore to work over the years have also created systemic challenges for Singaporean workers and job seekers.

In the past, if there was a mismatch between the labour pool and demand for workers in a certain industry, the job market in Singapore will readjust itself, allowing local PMETs to get desirable and good paying jobs in that industry, because the proportion of foreigners in Singapore’s workforce was smaller. That was before the advent of trade agreements like the Comprehensive Economic Cooperation Agreement (CECA) signed between India and Singapore in 2005, and before the enlargement of the PMET supply to Singapore from Eastern Europe, mainland China and South Asia.

The number of foreign PMETs in Singapore was substantially fewer in the past than now. The population of non-resident PMETs in the country have risen by 74.4 percent from 221,300 in 2010 to 385,900 in 2019, according to official Singapore statistics. In comparison, the number of PMETs who are Singapore citizens grew slower by 31 percent from 802,000 in 2010 to 1.05 million, while the number of PMETs who are permanent residents increased even less by 10.4 percent from 226,000 in 2010 to 249,500, according to the same statistics. The PMETs who are Singapore citizens include new citizens, so by stripping away new citizens, the growth in the number of PMETs who are Singapore citizens is even less.

It is worth comparing the job situation in the past when there were fewer foreign PMETs in the Lion City to now when there are more. For instance, a former senior executive of several major Singaporean companies recalled that during the early 1990s, it was difficult to attract local graduates and professionals from certain disciplines to join his industry. Hence, his company sought the top fresh graduates from Eastern Europe, China and India at relatively low salaries, which contributed to a new trend of professional expatriates who were willing to live in HDB flats, in contrast to PMETs from developed countries who normally live in private property in Singapore. But the number and percentage of foreign employees in his company at that time was small compared to the current situation, clarified the former senior executive who declined to be named. His employers encouraged these foreign PMETs to introduce more of their fellow countrymen to his company, but at that time, the application process was tedious and required rigorous due diligence and justification, with long approval periods, he recalled.

Fast forward to now, when trade agreements like CECA gave multinationals with offices in Singapore and government-linked companies, which are not in sensitive security-related sectors, increased opportunities to hire foreign professionals instead of locals, because the new generation of expatriates are willing to accept lower salaries or mentor Singaporean colleagues on their home markets. Many quality foreign candidates are now easily available in Singapore at short notice, due to their growing attendance in local part-time or short full-time postgraduate courses. As time goes by, some Singaporean managers would be inclined to favour foreign over local subordinates, because these foreigners are less likely to job-hop to competitors or other industries, and would be beholden to these managers who are responsible for writing favourable references for those foreign employees who want to become permanent residents or Singapore citizens.

Over the years, some of the foreign PMETs who have been working in Singapore have been promoted to mid-level or senior positions, so it was difficult for mid-career Singaporeans to find jobs at such companies, except at junior levels or lower salaries compared to industries with lesser mix of foreign PMETs. It is therefore understandable that Singaporean fresh graduates and mid-career PMETs would tend to avoid industries with relatively high proportions of foreigners and unattractive salary growth prospects.

In the services sector, the number of Singaporean PMETs in this nation have grown by 42.6 percent from 627,500 in 2010 to 894,600 in 2019, according to official Singapore statistics. In this sector, the number of PMETs who are permanent residents increased by 27.8 percent from 153,000 in 2010 to 195,600 in 2019, while the number of non-resident PMETs nearly doubled by 90.8 percent from 160,600 in 2010 to 306,400 in 2019, according to the same statistics.

Who will employers prefer?

It can be seen from these data that the number of local PMETs grew robustly from 2010 to 2019, but the number of foreign PMETs grew much more. One can argue that the double-digit growth of Singaporean PMETs in services is due to the enlarged intake of foreigners. But as another perspective on these statistics, the ratio of non-resident PMETs to local PMETs in the services sector has surged from 0.26 in 2010 to 0.34 in 2019. The much larger growth of foreign PMETs in the services sector, accompanied by the increased ratio of foreign PMETs to local PMETs, is having a profound impact on the job market and income of Singaporean PMETs in these affected sectors. The opportunity to hire greater numbers of experienced mid-level foreign PMETs at lower cost is beneficial for private business owners who seek to maximize profits, but will depress the wages of mid-level Singaporeans and reduce the motivation for Singaporean fresh graduates to seek internships or entry-level jobs in these privatized companies or affected sectors.

For privatized companies in affected sectors, sometimes shareholders’ short-term desire for profitability takes precedence over long-term considerations. As such, these privatized companies would have more incentive to hire lower-cost and experienced foreigners aged between the mid-twenties and early thirties.

As Singaporean students see diminished career prospects in a certain industry, they will likely shun courses catering to that industry and opt for other subjects like law and medicine which they perceive as leading to more lucrative jobs with less competition from foreign PMETs.

In time to come, the “chicken-and-egg” problem, where Singaporeans do not wish to study for a certain subject, will further fuel shortage of locals in industries which that subject caters to. In turn, employers in those industries will need more foreigners to fill the talent gap.

The problem is exacerbated by the fact that foreigners in their mid-twenties to early thirties need not do national service, which creates a better value proposition for employers. When companies in Singapore seek to hire people in their mid-twenties, foreigners will typically have a few years of work experience and many of them will have master’s degrees, while Singaporean men of the same age group would have only bachelor’s degrees with little or no work experience due to having spent 2 to 2.5 years in national service. Thus, businesses will prefer to hire foreigners aged from the mid-twenties to early thirties over locals of the same age range.

If fewer Singaporeans work in a certain industry, there will be a lack of Singaporeans with the requisite “hands-on” expertise for that sector, as more Singaporeans prefer to be in management roles rather than “hands-on” jobs, the former senior executive predicted. “If the government doesn’t do anything about it, there will be a dearth of Singaporeans who know how to operate things. In a crisis, there will be dangers.”

He cited a recent case of his ex-colleague, who interviewed a foreign engineer with years of experience in Singapore and whose resume includes the ability to “switch on and off” the electricity for power stations. To clarify, “switching on and off” the electricity of high-voltage power stations is not a trivial task like switching on lights in a room, but requires expertise and proper supervision. During the interview, the candidate clarified he performed the switching functions under the supervision of a Singaporean professional engineer, the senior executive related.

Hollowing out

As the earlier generation of local senior PMETs, typically from the Merdeka generation,  retire, with a fewer percentage of younger Singaporeans available or willing to replace them, who will be the people “switching on and off the power” and who will supervise them? It will be a growing number of foreigners.

If these structural problems are not addressed, Singapore risks a hollowing-out of local talent in certain sectors.  

It is already happening to some degree in some sectors. In manufacturing, the number of Singaporean PMETs have decreased from 121,800 in 2010 to 103,600 in 2019, according to official Singapore statistics. In contrast, the number of foreign PMETs in manufacturing have surged by 45.5 percent from 42,200 in 2010 to 61,400 in 2019, according to these statistics.

So two long-term trends are emerging in the makeup of the Singaporean economy. There is diminishing local PMET participation in manufacturing, while the number of local PMETs in services is growing. In addition, the ratio of foreign to local PMETs in both sectors continues to increase, giving rise to anxieties and cultural challenges at the workplace and society. For both manufacturing and services, the proportion of foreign PMETs is growing robustly. Looking ahead 10 to 30 years later, what are the implications of this?

In the face of these trends, the Singapore government should work with businesses and the education sector to ensure Singaporeans will have a decent chance of getting good jobs.

Find out more about the team driving the Progress Singapore Party

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