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Written Answer by Mr Tan Chuan-Jin, Acting Minister for Manpower & Senior Minister of State, National Development, to Parliamentary Question on the Impact of Changes in Minimum Salaries on Foreign Workers and Businesses

Mr Zaqy Mohamad: To ask the Acting Minister for Manpower (a) what is the Ministry's assessment of the impact of the changes in minimum salaries on foreign workers and businesses; (b) which are the sectors most affected by this change; (c) what proportion of foreign workers have been given a wage increase that is more than the National Wages Council's recommended increase upon renewal of their contracts; (d) whether this measure has resulted in an increase or decrease in foreign manpower since it was implemented; and (e) how have Singaporean wages improved since the implementation of this measure.

Mr Tan Chuan-Jin:

The government does not prescribe any minimum salary or salary increase for foreign workers.

This is how the system works. Foreigners can come in on Work Permit, S Pass and Employment Pass (EP). There is a range of criteria that they must meet before being eligible. We have essentially tightened up the EP and S Pass salary criteria in July 2011, followed by more tightening in January 2012. What it means is that to be able to bring in foreigners, you must be prepared to pay more for their services, rather than pay a lesser amount at the previous levels. We have also tightened up the qualifications criteria. This protects our Singaporean core because it would make it harder for foreigners to come in at significantly lower wages. It recognises the rising qualities of our local workforce and it is the right direction to go. The age factor has also been worked into the EP framework - older applicants would have to command higher salaries to qualify, commensurate with the work experience and quality they are expected to bring. This would help ensure that we would not disadvantage our older Singaporeans. We have provided a transition period for existing EP and S Pass holders, so that businesses can have time to adjust to the changes.

This is not the same as prescribing a minimum salary for foreigners, because companies can choose to recruit a Singaporean instead, or bring the foreigner in on a lower work pass, such as a Work Permit, for which there is no qualifying salary requirement, but subject to the usual dependency ratio ceilings and levies. We also encourage businesses to leverage on the many Government support schemes to raise productivity and reduce dependency on labour over time.

The full impact of these foreign manpower policy changes can only be seen over a longer period of time, especially as some of them have just been implemented. Nevertheless, there are encouraging signs that the tightening measures have had an effect in moderating demand for foreign manpower. Many businesses and organisations across all sectors have provided feedback to me that the tighter policies are constraining their business growth. While they may not like it, I am glad that many also understand that we cannot grow our foreign manpower population indefinitely, have accepted this reality and are proactively adjusting their businesses to embrace the change. And the Government will support our businesses, especially our SMEs, fully to make this transition.

It is still too early to definitively determine the effect of these policy changes on local wages. Preliminary results will be available when the 2012 annual wage change data is published next year. We are tracking the impact of our policies closely.