Singapore’s economic restructuring has so far been focused on getting companies to be more innovative. Businesses have been urged to improve their business models, institute better human resource management and invest in training employees to increase productivity. But self-improvement cannot fall solely on the shoulders of companies.
The recently-announced SkillsFuture programme shifts part of the responsibility of improving productivity to the employee. It makes clear that they must do their bit to stay relevant in a changing economy. It is an ambitious national attempt – all Singaporeans aged 25 and above will be given $500 which they can use to upgrade their skills. Singaporeans above the age of 40 will enjoy subsidies of at least 90% if they take courses under the Education Ministry and Workforce Development Agency. There will be more funding to help Singaporeans develop the deep skills and competencies to drive Singapore’s future growth while students will get better training and internships leading to job placements when they graduate.
SkillsFuture is necessary for sustainable and quality growth. It can mitigate the reduction in foreign labour numbers without crimping the long-term prospects of Singapore’s economy. By placing emphasis on life-long learning, the government highlights the phenomenon of ever-changing job requirements due to rapid technology advancements and a more integrated world where the sources of production shift easily between economies. It sends the message that one cannot have a static set of skills and qualification to last one’s entire career, and makes clear that there is support available for individuals who want to remain in the workforce for as long as possible.
However, given Singapore’s persistently low total fertility rate (TFR) – in 2014 the TFR at 1.25 is well below the replacement level of 2.1 – it needs to rely on other avenues to support its long-term manpower needs. The local workforce is expected to grow at a slower pace of around 20,000 per year over the next few years, compared to 95,000 in 2014, according to Manpower Minister Tan Chuan-Jin at the ministry’s Committee of Supply debate. Older workers, especially those aged 65 and above, can help to expand the indigenous manpower base. Although the labour force participation rate for residents aged 65 and above have been growing over the years as shown in the table below, it is still significantly lower than that of other age groups.
With Singapore’s life expectancy today at around 82 years aexpected to edge higher in future, the older resident population will grow larger as the baby boomer generation retires. Hence, more policy measures to encourage the employment of older workers are desirable because: firstly, it unlocks a pool of available manpower supply that also offers value from their wealth of working experience; secondly, the additional years of employment supports active and meaningful ageing, and helps individuals accumulate more financial resources for old age needs.
To encourage employers to hire older workers, the government announced in Budget 2015 that it will provide an additional special employment credit (SEC) of up to 3 per cent of wages for workers aged 65 years and above in 2015. This will be in addition to the 8.5 per cent wage offset that employers will receive in 2015. By making it less costly for companies to hire older workers, hopefully more businesses will appreciate the experience that older workers can bring to their organisations.
More can be done. For example, the current Retirement and Re-Employment Act (RRA) mandates employers to offer re-employment to eligible employees who turn 62, up to the age of 65. Perhaps the RRA Act could be amended in the future to encourage employers to provide employment of up to 70 years since the pace of workforce population expansion under current trends is expected to decline drastically.
Singapore still has to be prepared for scarcer human resources in future though, due to the confluence of a low TFR and reduction in foreign manpower numbers. This means that some existing industries may not be able to attract sufficient manpower. These industries are likely to be inherently more labour-intensive than other industries. It is crucial that companies from these industries utilise available government support schemes when there is still time to reinvent their business models by offering higher value-add products, consolidating with other companies through merger and acquisitions to realise complementing synergies and economies of scale or relocating their labour intensive operations to other places among other things. Otherwise, many of them could risk being priced out of the local labour market in the near future and be forced to cease operations.
Companies who are trying to stay relevant for the future, especially small and medium enterprises (SMEs) at the core of economic restructuring, should use the SkillsFuture programme to attract talent. SMEs struggle to retain talent according to many business surveys, and this impedes their efforts to transform their business. The Association of Small and Medium Enterprises’ (ASME) Business Sentiment Survey, for example, found that while SMEs are keen to engage and employ students, many of them prefer to join bigger firms. SMEs can use the initiatives in SkillsFuture – such as Education and Career Guidance, which counsels youngsters on job opportunities and Earn and Learn, an internship and training scheme – to position themselves as employers of choice. Changing current ingrained perceptions that they are less attractive employers than larger firms is important for SMEs to flourish and transform into a more productive group of companies.
Dr Faizal bin Yahya is a Research Fellow, and Chang Zhi Yang is a Research Assistant with the Economics and Business Research cluster at IPS.
Top photo from here