DBS 'Economist' Irvin Seah: Labour costs is #1 driver of inflation in SG. True?

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An honorable member of the Coffee Shop Has Just Posted the Following:

http://www.businesstimes.com.sg/prem...notch-20130924


Published September 24, 2013



Foreign manpower tightening up a notch

Higher qualifying salary for those on employment permits
seen adding to labour costs




By

Teh
Shi Ning [email protected]


print |email this article















Acting Manpower Minister Tan Chuan-Jin said the minimum salary at which
foreign PMEs secure EPs would be raised to ensure that their typically lower
wages do not depress those of young Singaporeans - PHOTO:
SPH




























How Singapore's foreign
manpower regime has
changed











[SINGAPORE] The government is tightening the foreign manpower regime further,
with a 10 per cent hike to the minimum salary required to hire a young foreign
professional on an employment pass (EP) - the category of work passes not
subject to quotas and levies.

Also, under new rules to ensure Singaporeans get fair consideration before
foreigners are hired, employers will have to advertise job vacancies on a new
national jobs bank for two weeks before any applications for EPs for those
professional, managerial and executive (PME) jobs will be accepted.

While businesses do expect the higher EP qualifying salary to add to already
rising labour costs, reactions from representative bodies after yesterday's
announcement were more muted than has been the case for previous rounds of
measures to slow the influx of manpower from abroad.

After all, the move had been anticipated by many. "This was expected as we
have been warned that the (EP qualifying) salary would increase," said Singapore
National Employers' Federation executive director Koh Juan Kiat.

In April this year, Acting Manpower Minister Tan Chuan-Jin said the minimum
salary at which foreign PMEs secure EPs would be raised to ensure that their
typically lower wages do not depress those of young Singaporeans. Though he said
then that salary requirements for the upper P2 and P1 categories of EP would
rise too, MOM only announced a hike to the lowest Q1 tier of EPs yesterday.

From Jan 1 next year, businesses will only be able to hire young graduates
from "good educational institutions" on an employment pass if they pay them a
monthly salary of $3,300, up from $3,000 currently.

The minimum monthly salary for P2 and P1 passes remains at $4,500 and $8,000,
respectively. But older applicants will have to command higher salaries
commensurate with their work experience to qualify for an EP.

MOM said the $300 hike was "in line with rising salaries". The last revision
to EP salary thresholds took place in January 2012.

But Jonathan Asherson, a Singapore International Chamber of Commerce board
member and chairman of its manpower and productivity committee, said: "At first
glance, the increase seems to be above the average rate of salary rise in the
local labour market in the last couple of years."

He estimates that the latest hike adds up to an 18 per cent rise in the
minimum qualifying salary for employment pass positions since July 2011. "With
the overall global economic growth still uncertain, this increase adds on to the
cost of doing business in Singapore for employers," said Mr Asherson, who is
also Rolls-Royce's regional director for South-east Asia.

He expects manufacturing and financial services firms to be most affected by
the latest move, especially large companies which have greater need to fill EP
positions.

But Singapore Business Federation chief executive Ho Meng Kit reckons that it
is precisely because most EP holders are hired by larger companies that the
policy change "should not have a wide impact of increasing business costs".

"Companies could mitigate this increase by replacing EP holders with a local
PMET with a salary increase, of which 40 per cent would be covered through the
Wage Credit Scheme," Mr Ho added, referring to the government's pledge at the
Budget this year to co-fund 40 per cent of wage increases given to Singaporean
employees earning a gross monthly wage of up to $4,000, until 2015. "The
government is committed to helping businesses restructure with various schemes
available," MOM said.

SMEs, which have been hardest hit by the slew of cuts to the ratio of
foreigners a firm can hire for each local employee and moves to raise the levies
firms need to pay to hire less-skilled foreigners on work permits and S passes
over the past three years, may be relatively less affected by the EP
changes.

Said Chan Chong Beng, president of the Association of Small and Medium
Enterprises: "This will of course increase business costs, but should be
manageable for most businesses."

No additional labour costs are expected to arise from the new rules under the
fair consideration framework, which businesses yesterday expressed broad support
for.

As placing a job advertisement in the new jobs bank is free, the costs may
come in the form of missed opportunities to hire strong candidates during the 14
days the advertisement has to stay up for, said UOB economist Francis Tan.

What is clear is that any increase to business costs will feed into more
expensive goods and services and fuel further price inflation, said DBS
economist Irvin Seah. "Labour costs have been a number-one driver of inflation
in the last three years. And it will remain this way as long as tightening is in
place. It is part and parcel of restructuring," he said.

He believes that the number of EP holders - which has declined since the last
round of EP changes - will continue to fall. "Some of the workers may have been
reclassified under S passes," he said.

But S passes are also subject to dependency ratio ceilings and foreign worker
levies which are still on the rise, making it harder overall for employers to
hire foreigners.

UOB's Mr Tan thinks that at the margins some employers may be sufficiently
disincentivised by the hike in salaries to swap foreign professionals on Q1
employment passes for a younger Singaporean with slightly less experience.

Said SNEF president Mr Koh: "Recent surveys show that the starting median
gross salary of fresh university graduates is about $3,000. $3,300 for an EP
holder would be comparable to a basic salary of about $2,800 plus employer's
CPF. Employers will weigh these costs."

=> In other words, FTrash have been paid more than SGs like what forumners have been saying!

MOM said there will be a transition period for existing EP holders. Those
whose passes expire before Jan 1, 2014 will get a one-time renewal based on
existing criteria. For those whose passes expire anytime from Jan 1 to June 30
next year, a one-time renewal of up to a year will be granted. But after June 30
next year, all existing EP holders will have to meet the new criteria.




=> So nice to FTrash!


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