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Statement on Labour Market Developments

Review of 2015

  1. In 2015, unemployment remained low and citizen income growth was broad-based.

    Employment

    Unemployment remained low and stable since 2011
  2. Resident unemployment remained low despite the slowdown in local employment growth. The unemployment rate for residents in 2015 was 2.8% (from 2.7% in 2014), while that for citizens remained unchanged at 2.9%. Although job openings continued to outnumber job seekers, this ratio moderated to an average of 1.23 in 2015 (from 1.39 in 2014).

    Total employment growth has moderated amidst weaker economic conditions, slower local workforce growth and tightened supply of foreign manpower
  3. Total employment growth moderated significantly in 2015 compared to that in 2013 and 2014, in light of sluggish economic conditions and tightened foreign manpower policy. Excluding Foreign Domestic Workers (FDWs), total employment grew by 23,300 (0.7%) in 2015, considerably lower than the 122,100 (3.7%) growth in 2014 and the 131,300 (4.2%) growth in 2013.

    Employment of locals was flat after high growth in 2013 and 2014
  4. Similarly, local1 employment growth (net increase of 700 or 0%) moderated significantly after exceptionally high growth in 2013 and 2014 (96,000 or 4.4% in 2014, 82,900 or 4.0% in 2013; see Figure 1). The moderation reflected a confluence of structural and cyclical factors.
    Figure 1 - Local Employment Change
  5. Structurally, we are starting to see the effects of slowing local workforce growth. The strong local employment growth to meet labour demand in the earlier years was supported by continued increases in the size of our working-age population, as well as gains in the resident labour force participation rate (LFPR) with more women and older residents joining the labour force. However, these effects are expected to taper significantly in the medium term due to our demographic realities.
    1. Growth of the working-age local population is slowing. This is due to the shrinking size of successive cohorts of younger locals entering the workforce, and more from the “baby boomer” cohorts retiring and exiting the workforce. In 2020, for every 1 local exiting working-age, 1.1 locals are expected to enter, down from 1.4 in 20152.
    2. Further improvements to the LFPR are also likely to be muted. At 83.1%3, Singapore’s LFPR for residents aged 25 to 64 in 2015 is already higher than that of the OECD average and that of many economies. Singapore’s LFPR for resident males aged 25 to 64 (92.7%) is among the highest in the world, and the LFPR for females aged 25 to 64 (74.1%) has been catching up with that in developed economies.4
  6. Even as local employment growth is expected to slow down in the medium term, the moderation was intensified in 2015 due to cyclical weakness in certain sectors and the significant net decline of casual workers from the labour force. The slowdown was uneven across sectors – local employment declines in some sectors offset local employment growth in other sectors, resulting in the low net overall increase in local employment.
    1. The declines were mainly in externally-oriented sectors such as Manufacturing and Wholesale Trade, where employment declines were concentrated in the trade-related segments; as well as Real Estate Services, amid the lacklustre property market, and Retail Trade, with a slowdown in the increase in new retail space available in 2015 and a decline in retail sales (excluding motor vehicles) volume.
    2. On the other hand, local employment grew in Professional Services, Financial & Insurance Services, Information & Communications, Community, Social & Personal Services, and Administrative & Support Services.

    Foreign employment growth continued its downtrend since 2011
  7. Foreign employment growth (22,600 or 2.0%, excluding FDWs) has been moderated since 2011 (Figure 2), although this was uneven across sectors. The increase in foreign employment was driven primarily by the Services sector, which saw an accelerated pace of foreign workforce growth. Notably, there was a significant increase in the number of Work Permit Holders (WPHs), especially in Food & Beverage Services. In contrast, the number of foreign workers in the Marine, Process and Manufacturing sectors declined, amid low oil prices and weak external demand.
    Figure 2 - Foreign Employment Change (exclude FDW)

    Income

    Broad-based income growth for Singaporeans
  8. Median income grew strongly for citizens in 2015. The nominal median monthly income from work of full-time employed citizens (including employer CPF contributions) rose by 6.5% over the year to $3,798 in June 2015, or 7.0% in real terms5.
  9. There was a sustained rise in income at the median and 20th percentile over the last five years. The median income (including employer CPF contributions) of full-time employed citizens rose by 32% (5.6% p.a.) in nominal terms from 2010 to 2015, or 16% (3.0% p.a.) after adjusting for inflation. Amid on-going initiatives to boost income of low-wage workers, income at the 20th percentile of full-time employed citizens rose by a comparable 31% (5.5% p.a.) in nominal terms, or 16% (2.9% p.a.) in real terms, over the same period.

    Productivity

    Labour productivity growth varied across sectors
  10. For 2015, overall labour productivity as measured by value-added per worker6 fell by 0.1 per cent, marginally improving from the decline of 0.5 per cent in 2014. The productivity growth of export-oriented sectors as a whole outperformed that of domestically-oriented sectors in 20157. Wholesale & Retail Trade, Financial & Insurance Services and Construction sectors registered increases in labour productivity over 2015. When measured by value-added per actual hour worked, productivity increased by 1.0% in 2015, similar to the 1.1% growth in 2014.
    Figure 3 - Overall Economy - YoY Growth

    Note: Employment change is measured year-on-year; GDP and productivity figures are annual averages.

    Redundancy and Re-entry into Employment8

    Redundancies continued its uptrend since 2010, with a decline in re-entry rates
  11. 15,580 workers were laid off in 2015, up from 12,930 in 2014, and the highest since the Global Financial Crisis in 2009. The increase in redundancies was accompanied by a decline in the rate of re-entry into employment among workers made redundant9, with both trends reflecting the weaker economic conditions in 2015.

    Sectoral Performance and Outlook

    Construction
  12. Total employment growth in the Construction sector continued to slow in 2015 (8,600) as compared to previous years (14,300 in 2014, 35,200 in 2013; see Figure 4). The slowdown in employment growth was largely due to a moderation in output growth. The sector saw continued growth in foreign employment. While productivity growth in the sector improved in 2015, there remains a need for firms to sustain the momentum for productivity gains and moderate foreign employment growth in the sector.
    Figure 4 - Construction - Employment Growth (YoY)
  13. Construction Outlook: Hiring for the Construction sector is expected to moderate this year, on the back of a fall in contracts awarded in 2015 and continued sluggishness in private sector construction demand.

    Manufacturing
  14. Amid weak external demand, total employment in the Manufacturing sector fell in 2015 (-22,100, Figure 5), the bulk of which was due to a decline in the number of foreign workers. Manufacturing value-added shrank by 5.2% in 2015 (a reversal from the 2.7% expansion in 2014), driven largely by a contraction in the transport engineering cluster (largely due to weakness in the marine & offshore segment).
    Figure 5 - Manufacturing - Employment Growth (YoY)
  15. Manufacturing Outlook: For this year, the employment outlook for the Manufacturing sector remains soft. In particular, hiring demand in the marine and offshore segment is expected to be weak. Lower oil prices have weakened the prospects for new rig orders for firms in the marine and offshore segment, and increased the risks of further deferments and cancellations of existing orders. In addition, there could also be negative spillover effects on firms in the precision engineering cluster that support the oil and gas industry, further weighing on employment growth in the Manufacturing sector.

    Services
  16. Services accounted for most of the employment growth in 2015, although growth has moderated compared to 2014 (Figure 6). Total employment (excluding FDW) in Services increased by 36,500 over the year (compared to 111,700 in 2014). Productivity declined in sub-sectors such as Accommodation & Food Services and Transportation & Storage, but increased in the Wholesale & Retail Trade and Finance & Insurance sectors. There remains more to be done by firms in sub-sectors where productivity improvements are needed, to accelerate the adoption of more skills- and capital-intensive processes and business models.
    Figure 6 - Services - Employment (exclude FDW) Growth (YoY)
  17. Services Outlook: Overall employment growth this year is expected to be supported by the Services sector. In particular, the domestic-oriented services sectors are expected to remain a major contributor to employment growth. Sectors such as Community, Social & Personal Services should continue to see firm demand for manpower, especially in the healthcare segment.

    Overall Labour Market Outlook for 2016
  18. In line with the Ministry of Trade and Industry’s (MTI) projected GDP growth of 1% to 3%, MOM expects labour demand to be modest in 2016. Some sectors such as Manufacturing, in particular the Marine segment, will continue to face softness in labour demand this year. We expect redundancies to continue to rise in sectors facing weak external demand and that are undergoing restructuring. On the other hand, domestic-oriented services sectors such as Community, Social & Personal Services and Food & Beverage Services are expected to continue to be labour reliant.
  19. Local workforce growth will remain modest due to demographic effects, while foreign workforce growth will continue to be moderated. We expect wages to rise at a more moderate pace than in 2015.
  20. Amid the cyclical weakness and as the economy restructures, some consolidation and exit of businesses is expected. With the number of redundancies at its highest level since the Global Financial Crisis in 2009, MOM is closely monitoring the current economic and labour market situation, and is strengthening employment support to help displaced locals re-enter employment.

FOOTNOTE

  1. Refers to Singaporeans and Permanent Residents
  2. Data from Department of Statistics
  3. LFPR statistics are from Labour Force in Singapore, June 2015
  4. See detailed analysis in MOM’s Statement on Labour Market Developments (Mar 2015), Annex
  5. Gross monthly income data are from the Labour Market Report, 2015, MOM
  6. Annual Economic Survey 2015, MTI
  7. Annual Economic Survey 2015, MTI
  8. Data on redundancy and re-entry into employment are from the Labour Market Report, 2015, MOM
  9. This refers to workers made redundant in the third quarter 2015, who secured re-employment by December 2015.